Search found 691 matches

by Park
Thu Jan 23, 2020 8:41 pm
Forum: Investing - Theory, News & General
Topic: Lowest cost way to get leveraged equity exposure
Replies: 49
Views: 2940

Re: Lowest cost way to get leveraged equity exposure

I'm presently reading "The Sceptical Investor" by John Stepek: "If you use leverage, you are transforming volatility risk - risk that sceptical investors can ignore to their advantage - into a genuine risk, one that can cause the permanent loss of capital. That why so many people lose so much money ...
by Park
Sat Jan 18, 2020 12:39 am
Forum: Investing - Theory, News & General
Topic: Lowest cost way to get leveraged equity exposure
Replies: 49
Views: 2940

Re: Lowest cost way to get leveraged equity exposure

https://pbs.twimg.com/media/EN3Tg4IU8AAntJe?format=png&name=small The S&P500 assets to equity ratio is about 4. So there's lots of leverage when you buy an S&P500 index fund. The companies that make up the S&P500 can often borrow on better terms than the individual investor, and their borrowing cos...
by Park
Sun Jan 05, 2020 1:00 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 62
Views: 11027

Re: Jason Hsu and William Bernstein Like Overbalancing

I'm thinking about overbalancing between stock subasset classes... I can't predict when a stock subasset class will reach its relative peak or nadir. I would expect no more than modest benefit from this strategy, so I plan to make modest portfolio changes. I would plan to own a little more of what ...
by Park
Sun Jan 05, 2020 12:31 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 62
Views: 11027

Re: Jason Hsu and William Bernstein Like Overbalancing

If there are two stock indices with the same means and volatilities, and their correlation is less than 1.0, then rebalancing does not affect the arithmetic return, but it does reduce the volatility of returns, and therefore it boosts the geometric return and Sharpe ratio. https://awealthofcommonse...
by Park
Sat Jan 04, 2020 10:00 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 62
Views: 11027

Re: Jason Hsu and William Bernstein Like Overbalancing

https://www.aqr.com/Insights/Research/White-Papers/Portfolio-Rebalancing-Part-1-Strategic-Asset-Allocation The paper gives autocorrelations for asset classes between 1972-2014. Positive autocorrelation favors momentum. Negative autocorrelation favors reversion to mean. US stocks: 12 months 0.05, 3 y...
by Park
Wed Jan 01, 2020 3:34 pm
Forum: Investing - Theory, News & General
Topic: Why does rebalancing reduce total return?
Replies: 25
Views: 2753

Re: Why does rebalancing reduce total return?

If there are two stock indices with the same means and volatilities, and their correlation is less than 1.0, then rebalancing does not affect the arithmetic return, but it does reduce the volatility of returns, and therefore it boosts the geometric return and Sharpe ratio. https://awealthofcommonse...
by Park
Tue Dec 31, 2019 8:38 am
Forum: Investing - Theory, News & General
Topic: Getting deeper small-cap value exposure in taxable is almost free
Replies: 57
Views: 12673

Re: Getting deeper small-cap value exposure in taxable is almost free

The bid ask spread on RZV is not trivial, although that is less of an issue for a long term investor. But AUM in RZV is 208 million, and that number might be a little too close to closure risk territory for some. The last point is relevant to a long term investor in a taxable account.
by Park
Sat Dec 28, 2019 11:53 pm
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 62
Views: 11027

Re: Jason Hsu and William Bernstein Like Overbalancing

Rob Arnott likes overbalancing: "So you have to buy when people are selling, you have to buy what’s out of favor, unloved and legitimately creating fear. One way to do this, a simplistic way to do this is to set a policy mix and just rebalance back to it. Let’s go with the classic 60/40. Stocks rall...
by Park
Tue Dec 17, 2019 8:59 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 9954

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

https://www.kitces.com/blog/managing-sequence-of-return-risk-with-bucket-strategies-vs-a-total-return-rebalancing-approach/ About a rebalancing strategy versus a buckets strategy, I found the above link from Michael Kitces to be useful. The purpose of a buckets strategy is to decrease the risk of ne...
by Park
Wed Dec 04, 2019 12:33 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 9954

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

I'm not sure I understand the logic of the bucket approach. If I read you right, it sounds like you are draining your safe buckets as the market falls and holding your stocks because you think they will bounce back. This seems like market timing. Instead, why not determine your asset allocation and...
by Park
Tue Dec 03, 2019 12:38 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 9954

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

"The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?" Abstract: "A bucket approach, which broadly consists of parking a few years of annual withdrawals safely in cash and investing the rest of the portfolio more aggressively, is a popular strategy often recommended by financial plann...
by Park
Sun Dec 01, 2019 11:24 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 9954

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

A criticism of a buckets strategy is that because one's asset allocation varies depending on market conditions, it's market timing. And if it's market timing, that's a bad idea; few are successful at market timing. That assumes one considers cash and bonds as investments. But if a financial product ...
by Park
Mon Oct 14, 2019 12:11 pm
Forum: Investing - Theory, News & General
Topic: When Is The Bid Ask Spread Lowest During The Trading Day?
Replies: 20
Views: 1958

Re: When Is The Bid Ask Spread Lowest During The Trading Day?

I may have answered my own question. I've been reading "Muscular Portfolios" by David Livingston. Since I wrote the original post, I've come to a section of the book where it discusses bid ask spreads on ETFs. My conclusion is that for ETFs that invest in the US, the bid ask spread will be lower, if...
by Park
Sun Oct 13, 2019 6:40 pm
Forum: Investing - Theory, News & General
Topic: When Is The Bid Ask Spread Lowest During The Trading Day?
Replies: 20
Views: 1958

When Is The Bid Ask Spread Lowest During The Trading Day?

Many on this board invest in ETFs; some invest in individual stocks ( https://www.bogleheads.org/wiki/Passively_managing_individual_stocks ). Both of those have a cost in the bid ask spread. Does the bid ask spread change enough in a predictable pattern during a trading day that there are better tim...
by Park
Mon Sep 30, 2019 8:47 am
Forum: Investing - Theory, News & General
Topic: Why not use Margin Loan as eFund?
Replies: 63
Views: 4518

Re: Why not use Margin Loan as eFund?

You may very well be right about HELOC being changed only due to the change in value of the house. Perhaps my memory fails me, but I thought that I've read posts on this board from those who had the HELOCs revoked, rather than just changed due to the change in value of the house. About margin lendin...
by Park
Mon Sep 30, 2019 12:04 am
Forum: Investing - Theory, News & General
Topic: Why not use Margin Loan as eFund?
Replies: 63
Views: 4518

Re: Why not use Margin Loan as eFund?

Using a margin loan, HELOC, personal loan, 0% purchase APR credit card, or cash-out refi In a recent post, there is mention that in the last recession, many banks stopped offering 0%APR and many banks cut existing credit line limits. https://en.wikipedia.org/wiki/Home_equity_line_of_credit "In 2008...
by Park
Wed Sep 25, 2019 12:39 am
Forum: Investing - Theory, News & General
Topic: A Simple Market Timing Strategy That Works?
Replies: 19
Views: 2407

A Simple Market Timing Strategy That Works?

https://www.whitecoatinvestor.com/6-things-to-do-in-a-bear-market/ The above link is a good article on what to do in a bear market, and includes several strategies that are commonly suggested. However, it also includes a strategy, that is less often discussed: "Defer Major Purchases and Prioritize I...
by Park
Tue Sep 24, 2019 11:43 pm
Forum: Investing - Theory, News & General
Topic: One Reason Why Factor Investing May Continue To Work
Replies: 3
Views: 703

One Reason Why Factor Investing May Continue To Work

Some factors, such value, have both behavioral and risk arguments to support them. Others, such as momentum and quality, are thought to be primarily behavioral in origin. This raises the question, that if markets become more efficient with time, factor investing will be less successful. https://alph...
by Park
Tue Sep 24, 2019 9:44 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6633

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Many financial assets are hybrids of underlying assets. An example would be corporate bonds being a hybrid of government bonds and stocks. When you buy VBR (Vanguard small cap value fund), you're buying a hybrid. You're buying a market cap fund and a small cap value portfolio of stocks. This applies...
by Park
Sun Sep 22, 2019 8:14 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6633

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Maybe DFA, Bridgeway, and the creators of other factor products ought to fire all their managers and analysts and save money by hiring monkeys to throw darts...You are also pointing out that there are a whole lot more Mid/Small Cap stocks than Large Cap stocks, so darts thrown at a dartboard ought ...
by Park
Sat Sep 21, 2019 11:42 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6633

Re: Larry Swedroe: Individual Stock Investing Increases Risk

But the important point is that a random 30 equal weighted stock portfolio turned over every year beat the market on average by 1.7% on a precost basis. That's due to a tilt towards small and value. The tilt (compared to a market-cap weighted index) would be toward small; I don't believe that it wo...
by Park
Sat Sep 21, 2019 11:22 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6633

Re: Larry Swedroe: Individual Stock Investing Increases Risk

From Patrick O'Shaughnessy's blog: http://investorfieldguide.com/2014115how-concentrated-should-you-make-your-value-portfolio/ "I set up portfolios which bought the absolute cheapest stocks trading in the U.S. (including ADRs). Portfolios ranged from 1 stock to 100 stocks, and stocks needed to have ...
by Park
Sat Sep 21, 2019 11:16 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6633

Re: Larry Swedroe: Individual Stock Investing Increases Risk

https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/#7b9dc646630a The following though is from an article by Rick Ferri, an indexing advocate, in Forbes. He's quoting work done by Research Affiliates. "the company randomly selected 100 portfolios containing 30 stocks fro...
by Park
Tue Aug 20, 2019 12:21 am
Forum: Investing - Theory, News & General
Topic: Why Zero (or Negative) Interest Rates Could Someday Make Sense
Replies: 92
Views: 7095

Re: Why Zero (or Negative) Interest Rates Could Someday Make Sense

The following is from a financial neophyte, so please feel free to correct me. If I go short on investment products with negative interest rates, I can make a profit. There are costs to shorting, so interest rates have to be sufficiently negative to overcome those costs. Nevertheless, doesn't this p...
by Park
Fri Aug 09, 2019 11:28 pm
Forum: Investing - Theory, News & General
Topic: Small Value Tilting Increases Exposure To Unknown Risks?
Replies: 7
Views: 879

Small Value Tilting Increases Exposure To Unknown Risks?

Those who tilt to small and value make the case that such a tilt increases diversification. The argument is that the tilt increases exposure to different risks. The assumption is that just as there is risk associated with the market premium, there is also risk associated with the small and value pre...
by Park
Mon Jul 15, 2019 10:08 am
Forum: Personal Investments
Topic: What asset class is gold?
Replies: 41
Views: 3324

Re: What asset class is gold?

https://en.wikipedia.org/wiki/Gold "The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry."...my impression is that gold is valuable because people think it is valuable. If people stopped thinking gold was valuable, only the 10% used in industry...
by Park
Sun Jul 14, 2019 8:34 am
Forum: Personal Investments
Topic: What asset class is gold?
Replies: 41
Views: 3324

Re: What asset class is gold?

The IRS considers it a "collectible". So it's like Beanie Babies, baseball cards, stuff from the Franklin Mint, etc. That class has special capital gains rules, and they can be brutal. 40% of new gold production goes into investment. One can make the case that that 40% should be classified as colle...
by Park
Sat Jul 13, 2019 11:46 pm
Forum: Personal Investments
Topic: What asset class is gold?
Replies: 41
Views: 3324

Re: What asset class is gold?

https://en.wikipedia.org/wiki/Gold "The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry." Since 60% of gold is used, you can make a case that it's a commodity. The case is made that gold is a form of currency. To go back to the very basics, htt...
by Park
Sat Jul 13, 2019 9:51 pm
Forum: Personal Investments
Topic: Zero Coupon Bonds and TIPS In Taxable Account
Replies: 7
Views: 933

Re: Zero Coupon Bonds and TIPS In Taxable Account

Zero-coupon guy is reinvesting at the original rate of the bond purchased (kind of like CD) One can buy CDs in which interest is automatically reinvested at a predetermined rate. I hadn't thought about it before, but as mentioned above, such CDs are effectively zero coupon nominal bonds with less l...
by Park
Sat Jul 13, 2019 7:35 am
Forum: Personal Investments
Topic: Zero Coupon Bonds and TIPS In Taxable Account
Replies: 7
Views: 933

Zero Coupon Bonds and TIPS In Taxable Account

I may be stating the obvious in the following, but please point out if I"m missing something. Assume one is investing in individual zero coupon bonds. I used to think that was tax inefficient. Every year until the bond matures, you have to pay tax on income that you don't receive. Compare it to a co...
by Park
Tue Jul 09, 2019 8:21 am
Forum: Investing - Theory, News & General
Topic: Corporate Default Rates
Replies: 5
Views: 858

Re: Corporate Default Rates

https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp In 2008, there was the question of money market funds breaking the buck. That wasn't due to Treasury bill exposure, but due to exposure to the corporate sector. 1929-1932 returns US SCV -85.1% LCV -77.6% S&P500...
by Park
Sun Jul 07, 2019 5:29 pm
Forum: Investing - Theory, News & General
Topic: Corporate Default Rates
Replies: 5
Views: 858

Corporate Default Rates

http://eumaeus.org/wordp/wp-content/uploads/2019/05/Giseck-longstaff-schaefer-768x621.jpg The above figure comes from the paper, which is linked below: https://www.nber.org/papers/w15848.pdf "Corporate Bond Default Risk: A 150-Year Perspective Kay Giesecke, Francis A. Longstaff, Stephen Schaefer, a...
by Park
Sat Jul 06, 2019 5:09 am
Forum: Investing - Theory, News & General
Topic: Relative Importance Of Factor Investing
Replies: 15
Views: 1117

Re: Relative Importance Of Factor Investing

If GDP growth, inflation and real interest rates explain 85% of market returns (according to Mr. Ang), then all of the voluminous research and discussion about style factor premiums in recent years would appear to be "much to do about not so much" — unless I'm missing something crucial in Mr. Ang's...
by Park
Fri Jul 05, 2019 11:50 pm
Forum: Investing - Theory, News & General
Topic: Relative Importance Of Factor Investing
Replies: 15
Views: 1117

Relative Importance Of Factor Investing

https://ritholtz.com/2019/06/mib-blackrocks-andrew-ang/#more-227910 From an interview with Andrew Ang on Barry Ritholz's website: "Ang breaks the world of factors investing into 12 factors across 2 groups: Macro and Style factors. In Ang’s view, the big three under the Macro umbrella are economic gr...
by Park
Thu Jul 04, 2019 10:31 am
Forum: Investing - Theory, News & General
Topic: The Earnings Mirage
Replies: 1
Views: 742

Re: The Earnings Mirage

Thanks for posting this.
by Park
Wed Jul 03, 2019 8:50 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

A legitimate criticism of my tilt to value is that such a tilt implies that I think I"m better at valuing companies than the collective wisdom of the marketplace. But that criticism assumes a homogeneity of those who make up the marketplace. I invest in the stock market because I believe that the ca...
by Park
Tue Jul 02, 2019 8:32 am
Forum: Investing - Theory, News & General
Topic: Allan Roth: Probabilities, Truth, and Consequences
Replies: 40
Views: 4323

Re: Allan Roth: Probabilities, Truth, and Consequences

To some extent, this thread is about partial or complete destruction of financial assets. That's what William Bernstein's book "Deep Risk" was about. But historically, nominal bonds are more at risk of that than stocks. About leverage, that's another story. It's not easy to find good sources of leve...
by Park
Mon Jul 01, 2019 11:47 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

In an earlier post on this thread, I wrote "I've earlier raised the opinion that the market has more trouble with overpriced stocks than underpriced stocks, and speculated that may be due to the asymmetric difficulty associated with profiting from underpriced stocks (buying) versus overpriced stock...
by Park
Sun Jun 30, 2019 7:39 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

Value stocks returns are negatively skewed with more kurtosis. Most investors don't like those things and will avoid value stocks even if it costs them a premium to do so. That's not mispricing. That's investors with an s-shaped utility function making choices that best satisfy themselves, and you ...
by Park
Sat Jun 29, 2019 11:25 pm
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

Value stocks returns are negatively skewed with more kurtosis. Most investors don't like those things and will avoid value stocks even if it costs them a premium to do so. That's not mispricing. That's investors with an s-shaped utility function making choices that best satisfy themselves, and you ...
by Park
Sat Jun 29, 2019 5:42 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

However, even the most cynical counterargument against the persistence of factor premia would be be that they lose all of their explanatory power in the future. In that case, the excess factor returns should be zero and not negative. This would leave you with a single factor (market beta) and costs...
by Park
Fri Jun 28, 2019 10:41 pm
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

However, even the most cynical counterargument against the persistence of factor premia would be be that they lose all of their explanatory power in the future. In that case, the excess factor returns should be zero and not negative. This would leave you with a single factor (market beta) and costs...
by Park
Thu Jun 27, 2019 8:40 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

About multifactor funds, consider the following. Joel Greenblatt's Magic Formula is multifactor investing, and is an example of intersectional multifactor investing. A value metric (EBIT/EV) is combined with a quality metric (return on equity), and stocks are chosen based on the optimum of that comb...
by Park
Tue Jun 25, 2019 8:52 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

Obviously, just because a stock is a value stock doesn't mean it's underpriced. And just because a stock is a growth stock doesn't mean it's overpriced. To some extent, what a company is worth depends on its present cash flows, and the future growth or decline of those cash flows. Quantitative value...
by Park
Sun Jun 23, 2019 11:11 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

If one invests in multifactor funds for the long term, one assumes that those factors will make a noticeable improvement in performance over the long term. Is that a reasonable assumption? One can make the case that factor investing started 38 years ago with research on the small factor in 1981. Sin...
by Park
Sat Jun 22, 2019 10:18 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

A stock, or stocks in general, can be underpriced or overpriced. Eventually, the market gets it right. But my impression is that the market has greater trouble with overpricing than underpricing. When it's underpriced, buy. When it's overpriced, sell. But you can only sell what you own. If you reall...
by Park
Sat Jun 22, 2019 9:12 am
Forum: Investing - Theory, News & General
Topic: Small Value vs Multifactor
Replies: 58
Views: 5414

Re: Small Value vs Multifactor

Some comments, for what they're worth. If you keep on adding factors, couldn't you end up with a slightly more expensive market cap index fund? When I look at the data for value, it's persuasive. The data for small cap, less so. But the data for small value versus large value gets my attention. The ...
by Park
Sun Jun 16, 2019 10:38 pm
Forum: Investing - Theory, News & General
Topic: Can You Get A Meaningful Factor Tilt With Present Investment Products?
Replies: 26
Views: 1553

Re: Can You Get A Meaningful Factor Tilt With Present Investment Products?

I tried to add this to my previous post, but that didn't work. https://www.factorresearch.com/wp-content/uploads/Value-Smart-Beta-Factor-Correlations-1-Year-to-the-SP-500.png The above link shows the 1 year correlations of three large value funds (IWD iShares Russell 1000 Value ETF, IVE iShares S&P5...
by Park
Sun Jun 16, 2019 8:59 pm
Forum: Investing - Theory, News & General
Topic: Sweet Spot Between Short and Intermediate Term Bonds
Replies: 0
Views: 566

Sweet Spot Between Short and Intermediate Term Bonds

https://www.nytimes.com/2016/07/02/your-money/the-goldilocks-strategy-for-long-term-investment.html?rref=collection%2Ftimestopic%2FStocks%20and%20Bonds&action=click&contentCollection=your-money®ion=stream&module=stream_unit&version=latest&contentPlacement=31&pgtype=collection David A. Levine is a...
by Park
Sun Jun 16, 2019 3:24 pm
Forum: Investing - Theory, News & General
Topic: Can You Get A Meaningful Factor Tilt With Present Investment Products?
Replies: 26
Views: 1553

Re: Will You Get Increased Return From Your Factor Tilt?

With regard to the past, funds like Vanguard's small-cap value fund (VISVX) have generated higher returns than the market over their lifespan, in that particular case, by over 2% over the last 20 years. Since its inception in May 21/98, $10K in VISVX would have grown on a pretax basis to $53,155. T...