Search found 682 matches

by Park
Fri Jan 26, 2018 10:05 am
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

I am curious, though, what would be the risk/return difference between allocating a portion of my portfolio to a 2X S&P fund versus reducing my bond allocation. Let's say I am 80/20. Is there any difference in risk/return between these two portfolios? Portfolio 1: 80% Total US stock 20% Total US Bo...
by Park
Fri Jan 26, 2018 12:46 am
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

http://beta.morningstar.com/funds/xnas/ulpix/quote.html ProFunds has had a mutual fund whose precost goal is to provide double the return of the S&P500 each day. The start date was Nov 26/1997, so it has a bit more than a 20 year history, which includes two bad bear markets. Assume $10K at the start...
by Park
Thu Jan 25, 2018 10:09 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

I used portfolio visualize to compare SSO (2X S&P500) with Vanguard S&P500 fund. Since 2006, the maximum drawdown of the Vanguard fund was about 51%. The maximum drawdown of SSO was predictably worse at 81.35%, but that's still not double of 51%. Once again, I'm not advocating long term use of ETFs,...
by Park
Thu Jan 25, 2018 9:45 pm
Forum: Personal Investments
Topic: Domestic SCV? [Small Cap Value]
Replies: 50
Views: 9202

Re: Domestic SCV? [Small Cap Value]

With a mutual fund you only need to be concerned with liquidity of securities held by the fund. With an ETF you have to be concerned with liquidity of the ETF shares, which I believe will rarely be more liquid than the securities held by the ETF. Certainly, they can be less liquid. Perhaps I’m wron...
by Park
Thu Jan 25, 2018 8:52 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

I'm not saying that I"m in favor of long term use of leveraged ETFs, but I would like to look at the data, before drawing conclusions. http://quotes.morningstar.com/chart/etf/chart.action?t=SSO®ion=usa&culture=en-US&productcode=COM SSO (2X S&P500) goes back to June 20/06. Since then, it is up 251...
by Park
Tue Jan 23, 2018 5:36 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

I've looked at Direxion's monthly leveraged index funds and the returns historically are about equivalent to 2x less the ER for at least the 7-10 year treasury Bond and s&p 500 indexes. They use swaps and are pretty transparent about what they're doing and how it functions. The biggest advantage of...
by Park
Tue Jan 23, 2018 4:43 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

http://jii.iijournals.com/content/1/4/66 The above link tested whether using leverage selectively, depending on market volatility, could improve results. The author outlines a strategy where the VIX is used to predict volatility. The VIX average from January 1990 to December 2009 was 20.2%. He menti...
by Park
Tue Jan 23, 2018 3:04 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

http://www.aaii.com/journal/article/leveraged-etfs-multiplying-by-the-unknown#box The above link is about long term use of leveraged ETFs. A standard portfolio recommendation is 60% stocks and 40% bonds. This article discusses substitutes using 30% 2X ETF/70% bonds, 20% 3X ETF/ 80% bonds and 15% 4X...
by Park
Tue Jan 23, 2018 2:25 pm
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Re: Long Term Use Of A Leveraged ETF

http://www.aaii.com/journal/article/leveraged-etfs-multiplying-by-the-unknown#box The above link is about long term use of leveraged ETFs. A standard portfolio recommendation is 60% stocks and 40% bonds. This article discusses substitutes using 30% 2X ETF/70% bonds, 20% 3X ETF/ 80% bonds and 15% 4X ...
by Park
Tue Jan 23, 2018 11:00 am
Forum: Investing - Theory, News & General
Topic: Long Term Use Of A Leveraged ETF
Replies: 32
Views: 5409

Long Term Use Of A Leveraged ETF

Periodic investing, also called dollar cost averaging, is a well known stock buying strategy. An example would be buying equal dollar amounts of a security every month. With such a strategy, you can take advantage of volatility. You buy more when the security is down in price and less when it is hig...
by Park
Sun Jan 21, 2018 12:29 pm
Forum: Personal Investments
Topic: Domestic SCV? [Small Cap Value]
Replies: 50
Views: 9202

Re: Domestic SCV? [Small Cap Value]

I don't like the ETF/MF structure that Vanguard uses. If you're a long term buy and hold investor, for whom transaction costs are not a significant issue, I don't see the advantage of it, compared to a pure ETF structure. One advantage of an ETF over a mutual fund is the ability to increase tax effi...
by Park
Wed Jan 17, 2018 12:51 am
Forum: Personal Investments
Topic: Domestic SCV? [Small Cap Value]
Replies: 50
Views: 9202

Re: Domestic SCV? [Small Cap Value]

About RZV, I think it's a reasonable choice for a tax advantaged account. But when it comes to net assets, it's not that high, and not that far off asset numbers where ETFs get shut down. In a taxable account, I'd be worried that if RZV became unpopular, you'd end up paying some taxes that you would...
by Park
Thu Jan 11, 2018 9:38 am
Forum: Investing - Theory, News & General
Topic: Small cap value vs. total market?
Replies: 105
Views: 20109

Re: Small cap value vs. total market?

About tilting to small cap value, the investment products available to retail investors are designed for scalability. This results in an exposure to small and value that is not strong. With the available investment products, you have to have a high asset allocation to them, if you want exposure to s...
by Park
Sun Dec 31, 2017 6:06 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 227
Views: 42804

Re: How Much To Tilt To Small Value?

I'm in favor of tilting to small and value, but it's not a free lunch. https://www.marketwatch.com/story/8-lessons-from-80-years-of-market-history-2014-11-19 From 1930-39, 10-year annualized percentage returns for the S&P 500 Index, U.S. Large Cap Value, U.S. Small Cap and U.S. Small Cap Value are -...
by Park
Sun Dec 24, 2017 8:46 am
Forum: Investing - Theory, News & General
Topic: Energy sector time to turn around?
Replies: 45
Views: 4861

Re: Energy sector time to turn around?

And I'm sure someone will come up and give the railroad example when it comes to owning sectors. https://www.top1000funds.com/coverage/investment-think-tank-london/2015/03/04/historical-sector-returns-and-the-future-of-investing/ "In a bid to assess the performance of new technologies over the long...
by Park
Fri Dec 15, 2017 10:40 am
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 227
Views: 42804

Re: How Much To Tilt To Small Value?

I can't access the original Grantham paper, so this is from another paper that cites it: https://www.valuesignals.com/Content/Documents/Utility_of_Piotroski_F-Score_for_predicting_Growth-Stock_Returns.pdf "Grantham finds that value stocks performed vastly below market during the Great Depression and...
by Park
Thu Dec 14, 2017 2:57 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 227
Views: 42804

Re: How Much To Tilt To Small Value?

I'm bumping my own thread, but the following point of view isn't heard as much as it should be, so I thought that I should write this post. https://www.investingdaily.com/10884/buy-small-cap-stocks-before-they-grow-up Jeremy Grantham: "Value investing has always had a hidden but serious risk — the 6...
by Park
Wed Dec 13, 2017 10:23 am
Forum: Investing - Theory, News & General
Topic: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?
Replies: 27
Views: 2652

Re: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?

Thanks Swelfie for the post. The following is from Forbes Sept 2016: https://www.forbes.com/sites/greatspeculations/2016/09/21/irs-short-selling-rules-can-be-a-taxing-matter/#1fed8f78c00a Shorting against the box is when you own a stock, and then short the same stock to hedge the position. This is a...
by Park
Wed Dec 06, 2017 12:32 pm
Forum: Investing - Theory, News & General
Topic: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?
Replies: 27
Views: 2652

Re: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?

I implied upthread, that if you own an index ETF, and then effectively short the same index using futures or options, that you wouldn't be violating the shorting against the box rule.

Swelfie, who knows much more about this than me, implied that I'm wrong. I strongly suspect that I am.
by Park
Wed Dec 06, 2017 1:11 am
Forum: Investing - Theory, News & General
Topic: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?
Replies: 27
Views: 2652

Re: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?

When it comes to short selling an index ETF, the issue of "shorting against the box" ( short selling a security that you already own, which is not allowed) has to be considered. It may not be an issue, or you may have a way to get around it with a similar but different ETF, but it can't be ignored. ...
by Park
Thu Nov 30, 2017 10:10 am
Forum: Investing - Theory, News & General
Topic: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?
Replies: 27
Views: 2652

Re: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?

Thanks to all who responded for the feedback. I hadn't thought about options much. I have no experience with trading futures, and very little experience with shorting stocks; I have a little experience with options. Based on that, I thought a collar (buy a put for downside protection, sell a call to...
by Park
Wed Nov 29, 2017 1:02 pm
Forum: Investing - Theory, News & General
Topic: Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?
Replies: 27
Views: 2652

Hedge Market Risk By Short Selling Index ETF Or Selling Index Futures?

A general rule is that one should invest in stocks with at least a 5 year time horizon. But circumstances can change unexpectedly in one's personal life, such that at least temporarily, one doesn't want to be exposed to market risk. One could sell stocks, and that would remove the market risk, but a...
by Park
Sun Nov 12, 2017 3:31 pm
Forum: Investing - Theory, News & General
Topic: Value, and Slice and Dice - How Much?
Replies: 6
Views: 1132

Value, and Slice and Dice - How Much?

I'm reading "The New Wealth Management", written by Harold Evensky, Stephen M. Horan and Thomas R. Robinson. It comes from the CFA Institute, and was published in 2011. The following is from the chapter describing the practice philosophy of Harold Evensky's financial planning company. "We believe in...
by Park
Sun Oct 22, 2017 7:30 pm
Forum: Investing - Theory, News & General
Topic: Investing at Level 3 [any book reviews?]
Replies: 16
Views: 9418

Re: Investing at Level 3 [any book reviews?]

http://discuss.morningstar.com/NewSocialize/forums/t/194008.aspx 1968-1982 real returns S&P 500 -0.31% 5Yr Treas 0.26% Tbills 0.09% LT Treas -1.70% LT Corp -1.22% CPI-U 7.30% So you came out slightly ahead with 5 year Treasuries, compared to stocks, in 1968-1982. But the difference is small; bonds p...
by Park
Sat Oct 07, 2017 6:13 pm
Forum: Investing - Theory, News & General
Topic: CAPE As A Risk Management Tool
Replies: 7
Views: 1033

Re: CAPE As A Risk Management Tool

About the relevant importance of cyclical versus structural reasons for cheap stock markets, I think it may be important to differentiate between incidence and prevalence. When you look at the incidence of cheap stock markets, both cyclical and structural reasons will play an important role. However...
by Park
Sat Oct 07, 2017 5:02 pm
Forum: Investing - Theory, News & General
Topic: CAPE As A Risk Management Tool
Replies: 7
Views: 1033

Re: CAPE As A Risk Management Tool

About valuations predicting stock returns best over longer periods of time, the Japanese stock market illustrates how long bubbles can take to pop. http://investingforaliving.us/2017/10/01/taa-vs-buy-and-hold-in-overvalued-markets-cape-30-edition/ The above link gives a figure showing the relationsh...
by Park
Wed Oct 04, 2017 8:05 am
Forum: Investing - Theory, News & General
Topic: CAPE As A Risk Management Tool
Replies: 7
Views: 1033

CAPE As A Risk Management Tool

http://advisoranalyst.com/glablog/2014/07/19/valuation-based-equity-market-forecasts-q2-2014.html/print/ The above article looks at the predictive power of Q ratio, PE10, PE1 and market cap/GNP ratio among others. See Matrix 1. There is some predictive value at 5 years, which is increased at 10 year...
by Park
Sun Oct 01, 2017 12:29 pm
Forum: Investing - Theory, News & General
Topic: Use Price Book Ratios To Predict Stock Market Returns Instead Of CAPE?
Replies: 3
Views: 985

Re: Use Price Book Ratios To Predict Stock Market Returns Instead Of CAPE?

http://advisoranalyst.com/glablog/2014/07/19/valuation-based-equity-market-forecasts-q2-2014.html/print/ The above article looks at the predictive power of Q ratio, PE10, PE1 and market cap/GNP ratio among others. They some predictive value at 5 years, which is increased at 10 years. At 15 years, th...
by Park
Sun Oct 01, 2017 8:59 am
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 227
Views: 42804

Re: How Much To Tilt To Small Value?

https://blog.wealthfront.com/optimal-approach-smart-beta/ An essay from Burton Malkiel on smart beta. I'd like to thank Matjen for the link. "In the marketing of “Smart Beta” ETFs there has been inadequate recognition of the risks inherent in the technique. For example, the “Fundamental Index”TM ETF...
by Park
Sun Oct 01, 2017 1:25 am
Forum: Investing - Theory, News & General
Topic: Use Price Book Ratios To Predict Stock Market Returns Instead Of CAPE?
Replies: 3
Views: 985

Use Price Book Ratios To Predict Stock Market Returns Instead Of CAPE?

https://seekingalpha.com/article/3987114-predicting-stock-market-returns-using-shiller-cape-pb "...look at other key figures used for making long-term return forecasts, not just CAPE. The price-to-book ratio lends itself well to this since book values are less volatile than profits and cash flows, a...
by Park
Mon Sep 18, 2017 5:32 am
Forum: Investing - Theory, News & General
Topic: Market Timing
Replies: 2
Views: 706

Re: Market Timing

The reason that I posted it is as follows. William Bernstein, Jonathan Clements and Jason Hsu have endorsed mild forms of tactical asset allocation between stock subasset classes. This entails modestly overweighing and underweighing stock subasset classes based on valuation. I've never seen a study ...
by Park
Sun Sep 17, 2017 11:57 pm
Forum: Investing - Theory, News & General
Topic: Market Timing
Replies: 2
Views: 706

Market Timing

https://www.bloomberg.com/gadfly/articles/2016-01-28/good-luck-with-market-timing "Using Robert Shiller’s well-known cyclically adjusted price-to-earnings ratios (CAPE) for U.S. stocks, and returns for the S&P 500 Index and five-year U.S. treasuries since 1926, I devised two “market timing” portfoli...
by Park
Sat Sep 16, 2017 6:27 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 470
Views: 119558

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

On the book's website, the author gives mm@LivingOffYourMoney as an email address to contact him. For whatever reason, that email address doesn't work.
by Park
Sat Sep 16, 2017 12:01 pm
Forum: Investing - Theory, News & General
Topic: Equal Weighting (1/N) Versus Market Cap Weighting
Replies: 22
Views: 4640

Re: Equal Weighting (1/N) Versus Market Cap Weighting

I read the paper; thank you Nisiprius for providing the link. The following are some excerpts, that I understood, from the paper: "A second reason why the 1/N rule performs well in the datasets we consider is that we are using it to allocate wealth across portfolios of stocks rather than individual ...
by Park
Thu Sep 14, 2017 7:36 am
Forum: Investing - Theory, News & General
Topic: Equal Weighting (1/N) Versus Market Cap Weighting
Replies: 22
Views: 4640

Re: Equal Weighting (1/N) Versus Market Cap Weighting

This thread is really about how much you want to emphasize market cap indexing versus equal weighting. Nisiprius is pointing out that market cap indexing is when one decides N=1. Those who follow the Fama French model divide the market by small/large and value/growth. That generates 4 categories, an...
by Park
Tue Sep 12, 2017 7:42 am
Forum: Investing - Theory, News & General
Topic: Equal Weighting (1/N) Versus Market Cap Weighting
Replies: 22
Views: 4640

Re: Equal Weighting (1/N) Versus Market Cap Weighting

Equal weighting forces you to rebalance. Rebalancing will decrease your risk, and will probably modestly increase your return within an asset class. There are arguments about both the risks & returns of rebalancing. I would agree with that. Campbell Harvey is an author on a paper that found that re...
by Park
Mon Sep 11, 2017 8:24 am
Forum: Investing - Theory, News & General
Topic: Equal Weighting (1/N) Versus Market Cap Weighting
Replies: 22
Views: 4640

Re: Equal Weighting (1/N) Versus Market Cap Weighting

First of all, I haven't read the paper. As someone who could charitably be described as an amateur investor, I wouldn't understand it. I rely on others to interpret such publications for me. Why did I cite the paper? I noticed that a common strategy is equal weighting at the subasset class level. I ...
by Park
Sun Sep 10, 2017 12:46 am
Forum: Investing - Theory, News & General
Topic: Equal Weighting (1/N) Versus Market Cap Weighting
Replies: 22
Views: 4640

Equal Weighting (1/N) Versus Market Cap Weighting

For DIY investors, two common approaches to asset allocation are equal weighting (1/N) and market cap weighting in one's portfolio. The link below is to a review of an important paper that found that equally weighting assets, as an asset allocation strategy, compares favorably to much more complicat...
by Park
Thu Aug 31, 2017 8:47 am
Forum: Investing - Theory, News & General
Topic: Value Factor Investing is not Value Investing
Replies: 126
Views: 12874

Re: Value Factor Investing is not Value Investing

I have great respect for those who are successful at value investing. They deserve the alpha that they get. I'll never be able to do that. However, I think I may be able to value factor invest. Why be interested in this inferior form of investing? My greatest fear as an investor is a secular bear ma...
by Park
Thu Jul 13, 2017 8:06 am
Forum: Investing - Theory, News & General
Topic: Fundamental Indexing Is The Better Way To Value Tilt?
Replies: 23
Views: 4466

Re: Fundamental Indexing Is The Better Way To Value Tilt?

http://beta.morningstar.com/articles/815373/the-fundamentals-of-fundamental-indexing.html Link from morningstar.com on fundamental indexation. "The dynamic value orientation could be worth the higher fee that these funds levy compared with market-cap-weighted value funds. But timing the value factor...
by Park
Sat May 13, 2017 2:35 pm
Forum: Investing - Theory, News & General
Topic: Uses of Debt
Replies: 21
Views: 3243

Re: Uses of Debt

5)inflation hedge you can get a loan where the aftertax cost of interest is less than inflation That's not how the inflation hedge theory works. The idea is that you're borrowing money today, and you're paying it back with inflated dollars in the future. This also tends to work if you bought an ass...
by Park
Sat May 13, 2017 2:22 pm
Forum: Investing - Theory, News & General
Topic: Uses of Debt
Replies: 21
Views: 3243

Re: Uses of Debt

4)tax planning -tax deferral you defer tax on the sale of asset, assuming that the interest on loan is worth the tax deferral -tax savings the tax on the sale of an asset will be lower in the future I don't understand what you mean here. Are you talking about deductible interest? Most interest isn'...
by Park
Wed May 10, 2017 9:29 am
Forum: Investing - Theory, News & General
Topic: Uses of Debt
Replies: 21
Views: 3243

Re: Uses of Debt

I was thinking about other uses of debt, and came up with the following list:... 3)consumption it is important to note that I think you should have assets that could be used to fund consumption, but it is better financially to use a loan instead an example would be in the midst of a bear market, an...
by Park
Sun May 07, 2017 10:11 am
Forum: Investing - Theory, News & General
Topic: Uses of Debt
Replies: 21
Views: 3243

Uses of Debt

Debt can get someone in trouble. It's very difficult (impossible?) for an individual to go bankrupt, if they're not in debt. But debt used responsibly has its uses. There are few on this board who would disagree that a mortgage is often a good idea, and sometimes car loans can make sense (a car is n...
by Park
Sun Apr 09, 2017 9:43 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

Bear markets tend to occur, when a recession occurs. Of course, bear markets also occur outside of recessions. Nevertheless, bad bear markets tend to correlate with recessions/depressions. And bad bear markets are my greatest fear as an investor. Stock markets also tend to be 6-9 months ahead of the...
by Park
Sun Apr 09, 2017 7:14 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

There are few who would strongly advocate selling stocks during a bear market. This converts a possibly temporary loss into a permanent loss. Other than transaction costs and taxes, dividends and selling stocks are close to being functionally equivalent. There are transactions costs with selling sto...
by Park
Thu Apr 06, 2017 11:20 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

Thanks for the responses. The following are some thoughts on cash/fixed income and debt. As mentioned previously, investors want their portfolios to grow. They also view their portfolios as sources of liquidity and income. Debt for Growth One property of cash and fixed income is a low (negative?) ex...
by Park
Wed Apr 05, 2017 10:21 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

This thread is about generating cash flows to fund consumption. When you realize cap gains to generate cash flows, you're using principal to fund consumption. When you redeem bonds in a bond bridge, once again, you're using principal to fund consumption. In a stock bear market, the principal of bond...
by Park
Sat Mar 25, 2017 10:05 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

https://blogs.cfainstitute.org/investor/2014/03/04/warren-buffetts-90-10-rule-of-thumb-for-retirement-investing/ "I’ve told the trustee to put 90% of it in an S&P 500 index fund and 10% in short-term governments. And the reason for the 10% in short-term governments is that if there’s a terrible peri...
by Park
Fri Mar 24, 2017 11:37 pm
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 2299

Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

The stock market can go into significant drawdowns, such that matching assets to liabilities with stocks can be problematic on occasion. For cash/fixed income, this is less of an issue. With time, the drawdown risk of stocks decreases more than the drawdown risk of cash/fixed income decreases. At ar...