Search found 682 matches

by Park
Sat Dec 22, 2018 11:24 am
Forum: Investing - Theory, News & General
Topic: A Test of Warren Buffett's 90:10 Retirement Portfolio
Replies: 33
Views: 5805

A Test of Warren Buffett's 90:10 Retirement Portfolio

https://seekingalpha.com/article/3623346-optimize-warren-buffetts-asset-allocation-advice For the retirement portfolio of his wife, Warren Buffett has recommended 10% in short term government bonds and 90% in a very low cost S&500 index fund. An academic tested that portfolio using US stocks and Tre...
by Park
Fri Dec 21, 2018 5:41 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Investing In Short Time Horizons
Replies: 44
Views: 3425

Re: Larry Swedroe: Investing In Short Time Horizons

About VFMF, do you think it is possible to get exposure to the value and quality factors in US large caps? VFMF allocates roughly 1/3 of its assets to large cap, 1/3 to mid cap, and 1/3 to small cap. This provides exposure to the size factor, but also allows the fund to generate exposure to factors...
by Park
Fri Dec 21, 2018 3:47 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Investing In Short Time Horizons
Replies: 44
Views: 3425

Re: Larry Swedroe: Investing In Short Time Horizons

I believe I went with DLS over IJS after I did some digging for my INTL SCV. I was considering VFMF for my backdoor Roth monies at VG. Right now, DW and I have them all in their SCV fund. I am debating if I should switch all of them out and go to VFMF. What say you? Hard to say without taking a loo...
by Park
Fri Dec 21, 2018 2:56 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Investing In Short Time Horizons
Replies: 44
Views: 3425

Re: Larry Swedroe: Investing In Short Time Horizons

Embracing Factors depend completely on understanding and believing that past is prologue and you understand that relationship and the risk of under-performance..... Past data is certainly important, but also need the forward looking intuitive risk based or behavioral based explanation to expect the...
by Park
Fri Dec 21, 2018 1:28 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Investing In Short Time Horizons
Replies: 44
Views: 3425

Re: Larry Swedroe: Investing In Short Time Horizons

How is it possible to diversify market beta risk by adding a factor when market beta is the sum of the factors of the market ? I think Dave did a pretty good job of laying out a basic answer to your question, but I want to add one thing to address the quoted sentence. It's important to understand t...
by Park
Tue Dec 18, 2018 7:16 pm
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

There are literally hundreds (thousands?) of hedge fund that are very aware of small value tilts. DFA has about $600 billion in assets, and from what I can see, tilts to small and value play an important role in how those assets are invested. At the level of the retail investor, this board shows th...
by Park
Tue Dec 18, 2018 8:52 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

One argument I hear against overpricing is that small cap value should have done very well in the last 15 years, if it was becoming overpriced. Also, if small cap value was becoming overpriced, the disparity between in price ratios between growth and value stocks should have lessened. But those two...
by Park
Mon Dec 17, 2018 11:33 pm
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

I am not sure if we know that SCV is cheaper than history as we do not know the relative growth of the historical SCV firms versus the current SCV firms. If the market is getting more efficient then the relative growth rate should decline. I have not seen a relative growth analysis so IMO we do not...
by Park
Mon Dec 17, 2018 10:23 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

I do not think factor tilts increase idiosyncratic risk. Idiosyncratic risk generally is single stock risk. Most all the factor tilting discussed here is with cap weighted, passive/index funds that have hundreds or thousands of individual stocks. Single stock risk is effectively eliminated. Dave Se...
by Park
Sun Dec 16, 2018 2:02 pm
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

I'm not sure what you mean by idiosyncratic risk. In the past, small-caps have consistently had more risk, by various measures, than the market as a whole; and value stocks have had more risk, by various measures than the market as a whole. I don't think that's seriously in dispute. What tilters sa...
by Park
Sun Dec 16, 2018 1:52 pm
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

What tilters say is that if you look at the past statistics, despite having had higher risk, you could have used factor tilts to build portfolios that would have had the same return with less risk--or more return with the same risk--as total market portfolios. The controversial claim is that these ...
by Park
Sun Dec 16, 2018 12:40 pm
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

I'm not sure what you mean by idiosyncratic risk. In the past, small-caps have consistently had more risk, by various measures, than the market as a whole; and value stocks have had more risk, by various measures than the market as a whole. I don't think that's seriously in dispute. What tilters sa...
by Park
Sun Dec 16, 2018 11:49 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

VTI is concentrated in megacap/large cap stocks. The following is from someone else, not me: "As for the weaknesses of indexes: the megacap issue doesn't give me that much pause, because I view the megacaps as inherently more diversified; e.g. should you underweight Exxon vs a collection of small c...
by Park
Sun Dec 16, 2018 11:37 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

I do not think factor tilts increase idiosyncratic risk. Idiosyncratic risk generally is single stock risk. Most all the factor tilting discussed here is with cap weighted, passive/index funds that have hundreds or thousands of individual stocks. Single stock risk is effectively eliminated. Dave Le...
by Park
Sun Dec 16, 2018 11:11 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

VTI is concentrated in megacap/large cap stocks. The following is from someone else, not me: "As for the weaknesses of indexes: the megacap issue doesn't give me that much pause, because I view the megacaps as inherently more diversified; e.g. should you underweight Exxon vs a collection of small ca...
by Park
Sun Dec 16, 2018 10:31 am
Forum: Investing - Theory, News & General
Topic: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?
Replies: 52
Views: 2698

Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

An argument made on this board is that factor tilts increase diversification. Factor tilted portfolios have exposure to the market factor (beta), but also exposure to other factors. Two popular factors here are small and value. VTI (Vanguard Total Stock Market ETF) has 3641 stocks AVerage market cap...
by Park
Thu Dec 06, 2018 9:00 am
Forum: Investing - Theory, News & General
Topic: Question: When Bubbles Burst, Do Asset Prices Go Below Instrinsic Value?
Replies: 14
Views: 1664

Re: Question: When Bubbles Burst, Do Asset Prices Go Below Instrinsic Value?

I remember Grantham's description of his work (from interviews and articles published early in this century) covering the 20th century in many asset classes across many international markets. As I recall, GMO (his company) defined a bubble as a two standard deviation rise above the very long-term p...
by Park
Wed Dec 05, 2018 10:31 am
Forum: Investing - Theory, News & General
Topic: Question: When Bubbles Burst, Do Asset Prices Go Below Instrinsic Value?
Replies: 14
Views: 1664

Question: When Bubbles Burst, Do Asset Prices Go Below Instrinsic Value?

I thought that I read somewhere of a study (GMO?), that found when a bubble bursts, asset prices overcompensate and go below their intrinsic value.

I can't find it, so I thought that I would index the collective wisdom of the forum regarding this.
by Park
Sun Nov 25, 2018 12:45 am
Forum: Investing - Theory, News & General
Topic: Small Value: 15 years of underperforming
Replies: 143
Views: 13385

Re: Small Value: 15 years of underperforming

I do notice the shortfall between value indices and value funds. That does not make me optimistic about the new multifactor funds.
by Park
Sun Nov 18, 2018 10:49 am
Forum: Investing - Theory, News & General
Topic: Investing idea--what am I missing?
Replies: 13
Views: 1512

Re: Investing idea--what am I missing?

Newbie here: I'm an early-middle-age investor (age 40) with a high salary (appx 250K) I don't expect to necessarily be able to maintain forever and am treating as a windfall rather than a reason to upgrade my lifestyle. You have a high salary, and you don't expect to necessarily be able to maintain...
by Park
Sat Nov 17, 2018 10:51 pm
Forum: Investing - Theory, News & General
Topic: Investing idea--what am I missing?
Replies: 13
Views: 1512

Re: Investing idea--what am I missing?

Newbie here: I'm an early-middle-age investor (age 40) with a high salary (appx 250K) I don't expect to necessarily be able to maintain forever and am treating as a windfall rather than a reason to upgrade my lifestyle. I have been hoarding my cash for the past few years and now plan to start inves...
by Park
Thu Nov 15, 2018 9:53 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Momentum Distinctions
Replies: 29
Views: 2003

Re: Larry Swedroe: Momentum Distinctions

[OT quoted comment removed --moderator triceratop]

Dave, thanks for your posts. I hope you continue with your posts.
by Park
Sun Nov 04, 2018 2:22 pm
Forum: Investing - Theory, News & General
Topic: Buy Unpopular Stocks?
Replies: 9
Views: 1196

Re: Buy Unpopular Stocks?

The following is from the blog of Patrick O'Shaughnessy: http://investorfieldguide.com/will-you-be-the-gambler-or-the-house-in-the-stock-market/ It shows the distribution of returns for value and growth stocks. 53% of value stocks beat the equal-weight market return, compared to 34% of growth stocks...
by Park
Sun Nov 04, 2018 1:04 pm
Forum: Investing - Theory, News & General
Topic: Buy Unpopular Stocks?
Replies: 9
Views: 1196

Buy Unpopular Stocks?

http://tools.morningstar.ca/cover/videoCenter.aspx?region=CAN&culture=en-CA&id=887433 The above is a link from morningstar. It discusses the importance of popularity, when it comes to stock returns. Less popular stocks tend to do better than expected. Popularity helps to explain the value premium, t...
by Park
Tue Oct 30, 2018 6:53 pm
Forum: Personal Investments
Topic: Changing Asset Allocation Based On Market Forecasts - Market Timing?
Replies: 7
Views: 798

Re: Changing Asset Allocation Based On Market Forecasts - Market Timing?

The following is from an interview with Fran Kinniry of Vanguard; You can't really determine how much to save, what you may end up with, how you will allocate your assets [/u]without having some information of market outlook." I read the interview. The emphasis is yours not Kinniry's. If I were goi...
by Park
Tue Oct 30, 2018 7:41 am
Forum: Personal Investments
Topic: Changing Asset Allocation Based On Market Forecasts - Market Timing?
Replies: 7
Views: 798

Changing Asset Allocation Based On Market Forecasts - Market Timing?

https://www.morningstar.com/videos/888358/building-a-portfolio-for-a-lowreturn-world.html The following is from an interview with Fran Kinniry of Vanguard; "I think sometimes market forecasting gets a negative connotation, but there's really only a couple of ways you can do this. You can use histor...
by Park
Tue Oct 23, 2018 11:53 pm
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 40
Views: 8359

Re: Jason Hsu and William Bernstein Like Overbalancing

Regarding 'One way rebalancing' This paper, sort of, has a study on it in relation to the Buffett 90/10 portfolio: Buffett's Asset Allocation Advice: Take it ... With a Twist https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2680084 He compares the portfolio of a 90/10 regularly rebalanced to one...
by Park
Tue Oct 23, 2018 8:24 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 40
Views: 8359

Re: Jason Hsu and William Bernstein Like Overbalancing

https://www.morningstar.com/videos/887108/patience-needed-in-lowerreturn-environment.html My impression is that Joe Davis, Vanguard's chief economist might like overbalancing too: "If one is comfortable taking some, I'd call it, active risk relative to their policy or portfolio--let's just say with ...
by Park
Mon Oct 22, 2018 9:20 am
Forum: Investing - Theory, News & General
Topic: 50 Stocks Enough to Diversify Idiosyncratic Risk?
Replies: 26
Views: 1871

Re: 50 Stocks Enough to Diversify Idiosyncratic Risk?

As people in this thread have alluded to, median stock return is lower than mean stock return. That's because of the positive skew of stocks. But as market cap increases, that becomes less of an issue. That's why the 30 stocks of the Dow give similar results to the total stock market. But when you g...
by Park
Sun Oct 21, 2018 5:29 pm
Forum: Investing - Theory, News & General
Topic: 50 Stocks Enough to Diversify Idiosyncratic Risk?
Replies: 26
Views: 1871

Re: 50 Stocks Enough to Diversify Idiosyncratic Risk?

The following though is from an article by Rick Ferri, an indexing advocate, in Forbes. He's quoting work done by Research Affiliates. https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/#1828f91630ae "the company randomly selected 100 portfolios containing 30 stocks fro...
by Park
Sun Oct 21, 2018 3:39 pm
Forum: Investing - Theory, News & General
Topic: 50 Stocks Enough to Diversify Idiosyncratic Risk?
Replies: 26
Views: 1871

50 Stocks Enough to Diversify Idiosyncratic Risk?

"Investors need to hold only a small portion of the market to achieve market-like levels of diversification. According to a group of scholars that includes investment guru Burton Malkiel, in years past "[a] conventional rule of thumb...[was] that a portfolio of 20 stocks [attained] a large fraction ...
by Park
Sun Oct 21, 2018 3:05 pm
Forum: Investing - Theory, News & General
Topic: Strengths/Weaknesses of Market Cap and Value Strategies
Replies: 22
Views: 2796

Re: Strengths/Weaknesses of Market Cap and Value Strategies

When it comes to whether the value premium is risk based or not, I"ve tended to think it isn't risk based. But the following should be considered: http://www.efficientfrontier.com/ef/999/noise.htm From William Bernstein: "during the Great Depression value investing was indeed riskier than growth inv...
by Park
Tue Oct 16, 2018 1:03 am
Forum: Personal Finance (Not Investing)
Topic: When to stop putting money into an older vehicle
Replies: 90
Views: 6934

Re: When to stop putting money into an older vehicle

https://www.forbes.com/sites/jimgorzelany/2017/01/04/passing-the-test-of-time-cars-owners-keep-for-a-decade-or-longer/#4ba019eb5263 This article from Jan 2017 says a new car is kept on average for 6.5 years. 12.9% of new car buyers keep their car at least one decade. https://blog.mercuryinsurance.co...
by Park
Mon Oct 08, 2018 4:30 pm
Forum: Investing - Theory, News & General
Topic: Where is that value premium?
Replies: 57
Views: 4569

Re: Where is that value premium?

About the value premium, my concern is will it persist? One explanation for the value premium is that it is due to risk, and because of that, it will persist. Another explanation is that it is due to human behavior; human behavior will persist, and there are limits to arbitraging behavioral mistakes...
by Park
Thu Oct 04, 2018 12:42 am
Forum: Investing - Theory, News & General
Topic: You Can Market Time At Valuation Extremes
Replies: 128
Views: 14255

Re: You Can Market Time At Valuation Extremes

One justifiable criticism of valuation based market timing is that there is less reversion to the mean for stock markets. But at extremes of valuation, you don't need reversion to mean. Expensive stock markets or cheap stock markets can do worse or better respectively, even if there is no reversion ...
by Park
Mon Oct 01, 2018 2:22 pm
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

https://www.etf.com/sections/swedroe-understanding-financial-crisis?nopaging=1 "the Nikkei Index peaked at 38,916 on Dec. 29, 1989. It finally reached its low of 7,054 on March 10, 2009. And at about 23,400 (its level on Sept. 18, 2018), it is still down about 40% from its peak almost 29 years later...
by Park
Sun Sep 30, 2018 7:55 pm
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

Now here comes the problem. Those tails are derived from knowing the results of the ENTIRE data set to now. The guy in late 1990's only had the data UP to his time period. He did not have the resulting fall out AFTER the late 1990's showing PE>30's was a disaster. Totally agreed, way too many CAPE ...
by Park
Sun Sep 30, 2018 4:39 pm
Forum: Investing - Theory, News & General
Topic: CAPE-Based Robert Shiller Bought Italy and Spain Indexes in 2015
Replies: 62
Views: 2848

Re: CAPE-Based Robert Shiller Bought Italy and Spain Indexes in 2015

Basically, the CAPE is simply a mean reversion tool for earnings. There is nothing scientific about the choice of ten years, and the use of the ten year term actually makes the tool blunter and less precise rather than more prescient. One can (and most active investors do) look at the price-earning...
by Park
Sun Sep 30, 2018 3:04 pm
Forum: Investing - Theory, News & General
Topic: CAPE-Based Robert Shiller Bought Italy and Spain Indexes in 2015
Replies: 62
Views: 2848

Re: CAPE-Based Robert Shiller Bought Italy and Spain Indexes in 2015

He was 4 years early with the dot-com prediction. He predicted ten-year 0% real return in 1996, 4 years before the actual crash. The market more than doubled, then dropped 40%. It never got as low as it was in 1996. The average price of the S&P500 in 1996 seems like it was ~675. The price on March ...
by Park
Sun Sep 30, 2018 11:31 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

The following summarizes previous posts by me on this thread. https://www.starcapital.de/fileadmin/user_upload/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf See Fig. 6. When CAPE less than 10, historical real returns over the next 10-15 years have bee...
by Park
Sun Sep 30, 2018 9:58 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

The following is the second part of my market timing strategy. When the CAPE of a national or regional stock fund is more than 40, sell . Don't go to cash, but put it in other stock markets with CAPE lower than 40. If there are no other such stock markets, I don't know what to do. Should you get ba...
by Park
Sun Sep 30, 2018 9:43 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

The following is the second part of my market timing strategy. When the CAPE of a national or regional stock fund is more than 40, sell . Don't go to cash, but put it in other stock markets with CAPE lower than 40. If there are no other such stock markets, I don't know what to do. Should you get ba...
by Park
Sun Sep 30, 2018 9:18 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

The following is my market timing strategy. For further details and rationale, please see my previous posts in this thread. I like William Bernstein's overbalancing strategy. If you're invested in national or regional stock funds, instead of rebalancing every 3 years, overbalance. Go slightly more t...
by Park
Sat Sep 29, 2018 1:34 pm
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

https://www.morningstar.com/videos/353908/kinniry-data-doesnt-bear-out-a-tactical-approach.html Below is from a discussion between Frank Kinniry of Vanguard and Christine Benz of Morningstar in 2010, and is taken from the above link: Benz: ...But the tactical umbrella has a lot of different strategi...
by Park
Fri Sep 28, 2018 8:43 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

And the fundamental contradiction of using a long-term (blunt) indicator for short-term decisions. CAPE is considered to have its optimum predictive value at 10-15 years. That means that if you use it to market time, you should stick with that decision for at least 10 years, and not change it on a ...
by Park
Fri Sep 28, 2018 1:29 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

And the fundamental contradiction of using a long-term (blunt) indicator for short-term decisions. CAPE is considered to have its optimum predictive value at 10-15 years. That means that if you use it to market time, you should stick with that decision for at least 10 years, and not change it on a ...
by Park
Thu Sep 27, 2018 9:00 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

You mention appropriately that the oil crisis, when CAPE was low, was not a valuation crisis. Would you disagree that 1929 and 1999, when CAPE was high, were valuation crises? My impression is that the stock market has greater trouble dealing with overvaluation than undervaluation. When stocks are u...
by Park
Wed Sep 26, 2018 2:01 pm
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

Siamond, thanks for all your hard work. One conclusion that I draw is that there is almost always an equity risk premium. So I'm not entirely surprised by the results starting in 1925 and 1985, as they're associated with overall lower stock exposure. The results starting in 1965 do surprise me somew...
by Park
Wed Sep 26, 2018 8:46 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=251522 " Stocks have had remarkably consistent 5%-6% real returns over four centuries." The above is from a Bogleheads thread started by SimpleGift. Assume a PE10 of 10. That's an earnings yield of 10%. Assume the historical 1.5% annual growth i...
by Park
Wed Sep 26, 2018 8:37 am
Forum: Investing - Theory, News & General
Topic: My CAPE10 based IPS
Replies: 103
Views: 7011

Re: My CAPE10 based IPS

Where is the evidence that CAPE10 is predictive of short-medium run stock prices? I suppose the worst that could happen is you are underinvested in equities during a long bull run. I definitely think CAPE 10 can be useful for getting a general sense of intermediate-term stock returns. Of course, an...