Search found 3432 matches

by Random Walker
Tue Dec 20, 2016 3:48 pm
Forum: Investing - Theory, News & General
Topic: ??? about the Three-Factor Model from Larry's book
Replies: 4
Views: 439

Re: ??? about the Three-Factor Model from Larry's book

Davidkw,

Market premium = return on equities - return on 1 month T Bills

Note that the size and value premia are long/short portfolios. So the market exposure cancels out and HmL and SmB have no net market exposure.

Dave
by Random Walker
Sun Dec 18, 2016 11:04 am
Forum: Investing - Theory, News & General
Topic: 100% Stocks, Huh? May I Suggest You Read This Thread
Replies: 55
Views: 8807

Re: 100% Stocks, Huh? May I Suggest You Read This Thread

I think these results show something that I've posted about several times before; volatility is a huge drag on the compounded return of a portfolio. Diversifying across asset classes with low (or negative) correlations improves portfolio efficiency dramatically. People look at standard deviations an...
by Random Walker
Sun Dec 18, 2016 10:33 am
Forum: Investing - Theory, News & General
Topic: Portfolio Construction using factor Funds
Replies: 3
Views: 565

Re: Portfolio Construction using factor Funds

I would say that core funds are the best way to start: some factor exposure, rebalance with other people's money. But if you aren't going to go the DFA route, I'd say this. Don't look purely at expense ratio, instead look at cost per unit factor exposure. Here's the reason. The mainstay of your port...
by Random Walker
Sat Dec 17, 2016 3:25 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's New Book is Available Now!
Replies: 164
Views: 23890

Re: Larry Swedroe's New Book is Available Now!

Question about the charts in the book. When the charts look at the "odds of under performance", they are talking under performance relative to what? Thanks,

Dave
by Random Walker
Wed Dec 14, 2016 9:21 am
Forum: Investing - Theory, News & General
Topic: Why risk slicing and dicing at all
Replies: 52
Views: 5897

Re: Why risk slicing and dicing at all

Alchemist, If all you look at is backtesting to evaluate factor investing, then I would agree with you. But investing is about looking forward, putting odds in your favor, sticking to a plan. A HUGE part of sticking to a plan is having a rational risk based or behavioral belief in the factor one is ...
by Random Walker
Wed Dec 14, 2016 9:10 am
Forum: Investing - Theory, News & General
Topic: Why risk slicing and dicing at all
Replies: 52
Views: 5897

Re: Why risk slicing and dicing at all

I highly recommend Larry's newest book. TSMers are making one big bet on a single factor, market beta. It's possible to diversify one's bets across multiple factors (at a price of course): market, size, value, momentum, profitability. In fact, the SHORTER one's time horizon, the more important it li...
by Random Walker
Sun Dec 11, 2016 12:30 pm
Forum: Investing - Theory, News & General
Topic: What is a good balance between US and international stocks?
Replies: 6
Views: 965

Re: What is a good balance between US and international stocks?

The world market cap weighting US/Int is about 50/50, so that is a good starting point. Reasons to weight more heavily to US include tracking error regret (not a very good reason), US investing cheaper and I believe more tax efficient. Reasons to weight more heavily to Int include currently higher e...
by Random Walker
Fri Dec 09, 2016 5:13 pm
Forum: Investing - Theory, News & General
Topic: SEARS: Reminder of Single Stock Risk
Replies: 5
Views: 1144

SEARS: Reminder of Single Stock Risk

http://www.foxbusiness.com/markets/2016/12/09/is-sears-dying-slow-death.html Just saw this headline: Sears company dying a slow death. Some companies we think will be around forever and we might view their stocks as buy once and hold forever. Just thought this story was a great reminder that in gene...
by Random Walker
Fri Dec 02, 2016 9:00 pm
Forum: Investing - Theory, News & General
Topic: How many books should i read for long term investing.
Replies: 22
Views: 1961

Re: How many books should i read for long term imnvesting.

I haven't read the thread, so I apologize if it's already been said. After you've had your fill of passive investing Boglehead books, I recommend you read one book on financial history. Knowing history helps build the strength to stay the course. Devil Take The Hindmost is excellent. Manias, Panics,...
by Random Walker
Thu Dec 01, 2016 8:43 pm
Forum: Investing - Theory, News & General
Topic: The "purity" of small value
Replies: 12
Views: 1795

Re: The "purity" of small value

Live soft, I disagree with your thought that all is equal if you just use more of the less small and less valuey VG fund to get same factor load as you can with less of funds with more exposure to small and value. I believe you can achieve the same loads on SmV and HmL, but you will need to take on ...
by Random Walker
Wed Nov 30, 2016 10:33 am
Forum: Investing - Theory, News & General
Topic: which factors matter to investors?
Replies: 10
Views: 1549

Re: which factors matter to investors?

In addition to all the often cited reasons to have a factor tilted portfolio, this essay makes me want to minimize CAPM beta market exposure to avoid the trappings of following the crowd.

Dave
by Random Walker
Wed Nov 30, 2016 10:20 am
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 4067

Re: "Sequence of returns risk"

Rbaldini, I disagree with your response to me above. If two portfolios have the same expected return, but different Sharpe ratios, I wouldn't call one portfolio more conservative. I'd call it more efficient. It's just more diversified across potential sources of return and types of risk. Dave
by Random Walker
Wed Nov 30, 2016 10:12 am
Forum: Investing - Theory, News & General
Topic: An interesting new value metric--maximum dividend
Replies: 20
Views: 3219

Re: An interesting new value metric--maximum dividend

Ive likely misunderstood the profitability premium, but this is the way my head has wrapped around value and profitability. A value company can have a high BtM ratio either because it's just not very profitable or because it carries more of some inherent valuey risk. By screening for profitability o...
by Random Walker
Wed Nov 30, 2016 12:44 am
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 4067

Re: "Sequence of returns risk"

Rbaldini, Sequence of returns is obviously a huge issue for someone in early retirement; the withdrawn money cannot recover after a bear. But there is something I believe one can do to minimize SOR risk. If one could construct a portfolio with the same mean expected return, but a narrower dispersion...
by Random Walker
Mon Nov 28, 2016 8:37 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 4067

Re: "Sequence of returns risk"

Lack_ey,
Summarized my thoughts pretty well. It's not just the higher expected returns of small and value though, it's also the lack of correlation between the factors.

Dave
by Random Walker
Mon Nov 28, 2016 8:33 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 4067

Re: "Sequence of returns risk"

Fire chief, By three fund portfolio you mean Total Stock Market, Total International, Total Bond? No I definitely do not mean that. Total market portfolios definitely have wide exposure to equities, but not net exposure to size and value. On the equity side, they are effectively exposed to a only a ...
by Random Walker
Mon Nov 28, 2016 7:53 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 4067

Re: "Sequence of returns risk"

I agree, the answer to your question is yes. I believe those first few years of retirement are critical. People frequently say things like "I'm retired, I can't afford to wait a long time for a tilted portfolio to outperform" or "I can't risk a long period of underperformance by tilting". I think th...
by Random Walker
Mon Nov 28, 2016 10:28 am
Forum: Investing - Theory, News & General
Topic: Commodities in your assets allocation
Replies: 22
Views: 2999

Re: Commodities in your assets allocation

From my reading, the stocks of commodity producers behave much more like stocks than commodities. They are just equities. The potential diversification benefit comes mainly from investing in the CCFs funds.

Dave
by Random Walker
Mon Nov 28, 2016 10:16 am
Forum: Investing - Theory, News & General
Topic: Commodities in your assets allocation
Replies: 22
Views: 2999

Re: Commodities in your assets allocation

I used to hold them. I'm a huge believer in the benefits of non / negatively correlated assets in a portfolio. See Gibson's Asset Allocation. But they don't have much of an expected real return and are best placed in valuable tax advantaged space. Now there are other portfolio diversifiers available...
by Random Walker
Mon Nov 28, 2016 9:33 am
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 4027

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Lieutenant,
FWIW, I'd start with Black Swan to get the general concept. Whether the investor is 100% equities or 10% equities, the point is to diversify the equity risks away from market beta alone with big doses of uncorrelated and higher expected returns small and value.

Dave
by Random Walker
Mon Nov 28, 2016 9:26 am
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 4027

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Lieutenant, The geometric return of portfolio is always less than the average annual return of the components because volatility is a huge drag on portfolio returns. Take the simplest and most extreme example. A portfolio goes up 100% in first year and declines 50% in next year. It's average annual ...
by Random Walker
Sun Nov 27, 2016 2:47 pm
Forum: Investing - Theory, News & General
Topic: Not DFA - what are the best Value and MOM funds?
Replies: 20
Views: 3962

Re: Not DFA - what are the best Value and MOM funds?

Stlutz, Thanks for that analysis. Good to know 60%VTI/40%VBR yields same tilt as one of the core funds. Of course a single core fund will have advantage of internal rebalancing rather than costs of rebalancing between the VG funds. As you suggest, I'd be surprised if the AUM fee and higher ER don't ...
by Random Walker
Sun Nov 27, 2016 12:16 pm
Forum: Investing - Theory, News & General
Topic: Creating my own target retirement glide
Replies: 57
Views: 5704

Re: Creating my own target retirement glide

I vote for somewhat developing your glide path as you go. Develop an IPS with an AA that you can stick with. Periodically, perhaps 2-4X per decade, see where you stand. Readdress your ability, willingness, need to take risk and decide whether to stick with current AA or cool it off a bit. Monte Carl...
by Random Walker
Sun Nov 27, 2016 12:11 pm
Forum: Investing - Theory, News & General
Topic: From a 20-fund indexed portfolio, to a simple one
Replies: 12
Views: 2147

Re: From a 20-fund indexed portfolio, to a simple one

I tell people I manage that when they've had more than one job, they develop an excellent sense of what's important and what's not. Things held in common between the jobs are important and things different not as much. Probably same with the investing books. They share huge overlying important theme...
by Random Walker
Sun Nov 27, 2016 12:04 pm
Forum: Investing - Theory, News & General
Topic: Not DFA - what are the best Value and MOM funds?
Replies: 20
Views: 3962

Re: Not DFA - what are the best Value and MOM funds?

Think it's worth noting that the value effect is greatest in the smallest equities. So I agree that ER alone is not the way to evaluate these funds.

Dave
by Random Walker
Sat Nov 26, 2016 8:34 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 4027

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Stlutz, Most people think of diversification in the equity realm as increased number of stocks. Some people believe that since adding another stock to an equity portfolio increases diversification that the natural extension of that is that a TSM equity portfolio is maximally efficient. But once a pe...
by Random Walker
Sat Nov 26, 2016 4:49 pm
Forum: Investing - Theory, News & General
Topic: Swedroe's Factor Based Investing expanded table
Replies: 2
Views: 950

Re: Swedroe's Factor Based Investing expanded table

Svensk Anga, Thanks for posting. I think the point you make that CAGR will be even closer than average annual returns is HUGE. Volatility drag on returns is potentially a portfolio killer. I think the biggest benefit of diversification (of all types) is to dampen portfolio volatility and get the CAG...
by Random Walker
Fri Nov 25, 2016 10:09 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 4027

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Hi Taylor, Thanks for your response. So you view portfolio efficiency as increased Sharpe ratio. But why is less volatility significant to you? I believe I've even read something by Bogle saying that he didn't really care much about volatility. But as I said above, I believe volatility is a huge dra...
by Random Walker
Fri Nov 25, 2016 9:13 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 4027

What do others mean by "Diversification Benefit" or Portfolio Efficiency?

There have been many threads concerning multi factor investing and the potential diversification benefit achieved by adding a certain asset class or style. I'm curious what "diversification benefit" means to others. Is it improved Sharpe ratio, cutting tails, bringing compounded return closer to ave...
by Random Walker
Fri Nov 25, 2016 8:48 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

Lack_ey,
I thought that was the answer. Thanks for a great explanation.

Dave
by Random Walker
Fri Nov 25, 2016 5:17 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

Larry,
Scaled to target 10% volatility; that means leveraged to different extents depending on recent volatility? Thanks,

Dave
by Random Walker
Fri Nov 25, 2016 12:49 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

For those not "buying the kool aid", do you believe the data? Do you think the benefit will be arbitraged away? Do you not trust it because it is a behavioral story rather than a risk story? Do you look at it in isolation rather than as a component of a multi-factor portfolio? Just looks too good to...
by Random Walker
Fri Nov 25, 2016 12:14 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

Lack_ey,
Thanks. Your explanation of TS Momentum just above clarified things for me greatly. So my next question is how often does the AQR fund reconstitute based on the prior months 2-12?

Dave
by Random Walker
Fri Nov 25, 2016 10:24 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

Larry, Is the AQR TS Momentum fund long/short? If so, would it have no exposure to market beta? Or can it be long and short to different extents at different times, thus changing its equity exposure over time? For example, doesn't QSPIX have no net equity exposure and give pure exposure to value fac...
by Random Walker
Thu Nov 24, 2016 11:48 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

I don't understand how TS Momentum results in shifting asset allocation. I thought long stocks going up and short stocks going down would eliminate stock risk and isolate TS Momentum premium. The long and short sides aren't equal? Thanks,

Dave
by Random Walker
Thu Nov 24, 2016 11:43 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 34
Views: 6316

Re: DFA vs Vanguard (I know, I know)

Just thought I'd give this post a bump. I believe anyone interested in DIY investing through VG, should at least actively consider the Advisor DFA route. Then if they choose DIY VG, they will have more conviction to stick to their plan. Interested to hear what others think.

Dave
by Random Walker
Thu Nov 24, 2016 11:37 am
Forum: Investing - Theory, News & General
Topic: Glide Paths : Help with Theory
Replies: 31
Views: 3142

Re: Glide Paths : Help with Theory

I would recommend a book that is probably right up an electrical engineer's alley. It's called Value Averaging by Michael Edleson. The book focuses on allocating a fixed sum of money over time, but the concepts are worthwhile for someone in accumulation phase as well. The book likely will not convin...
by Random Walker
Thu Nov 24, 2016 11:31 am
Forum: Investing - Theory, News & General
Topic: Glide Paths : Help with Theory
Replies: 31
Views: 3142

Re: Glide Paths : Help with Theory

I know you asked mainly for data, but I'll add my 2 cents anyways. I would not commit to an absolute glide path in your IPS. Instead I would only commit to a fixed AA that you readdress perhaps once or twice a decade as circumstances change. We can't control what markets will do, but we can control ...
by Random Walker
Thu Nov 24, 2016 11:10 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

Hi Larry, Can you straighten me out on this? Which is a better diversifier for an equity rich, value oriented portfolio, TS Momentum or CS Momentum? And why? I think I read a post of yours earlier that said CS Momentum negatively correlated with value, while TS Momentum most likely uncorrelated. Can...
by Random Walker
Tue Nov 22, 2016 1:08 pm
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 34
Views: 6316

Re: DFA vs Vanguard (I know, I know)

I made intentionally conservative assumptions to try to offset my confirmation bias. Still the difference between increased costs and increased expected returns put me over the edge.

Dave
by Random Walker
Tue Nov 22, 2016 10:41 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 34
Views: 6316

Re: DFA vs Vanguard (I know, I know)

I was a DIY VG Boglehead 2001-2009. As I read more and learned more I became interested in tilting. The overwhelming majority of my savings are taxable though, so I started thinking towards DFA tax Managed value funds. The problem is that the ER differences and Advisor AUM fee are certain, but the a...
by Random Walker
Mon Nov 21, 2016 10:15 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 34
Views: 6316

Re: DFA vs Vanguard (I know, I know)

A few brief comments: 1. Obviously there is the advisor and advisor fee issue 2. VG funds are not as deeply tilted, so will have to take more market risk with VG to get same factor exposures. 3. VG does not offer Tax Managed Value funds or Core funds. 4. ER is the easiest cost to measure, but by no ...
by Random Walker
Thu Nov 17, 2016 3:05 pm
Forum: Investing - Theory, News & General
Topic: Why are bonds dropping? They are supposed to be safe.
Replies: 171
Views: 27756

Re: Why are bonds dropping? They are supposed to be safe.

Saltycaper,
Completely agree. In my statement I was implicitly (perhaps subconsciously) assuming highest quality and short to intermediate term. As quality decreases, Equity like characteristics increase.

Dave
by Random Walker
Thu Nov 17, 2016 3:00 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 140
Views: 17713

Re: A look at the research and evidence on time-series MOM

I agree with grap that a person should only invest in a factor to the extent that he has conviction. I, like grap, have more faith in the risk based factors. But, wow, the strength of the data, the size of the premium, and the way TS Momentum mixes with other factors sure makes it intriguing. If any...
by Random Walker
Thu Nov 17, 2016 12:02 pm
Forum: Investing - Theory, News & General
Topic: Why are bonds dropping? They are supposed to be safe.
Replies: 171
Views: 27756

Re: Why are bonds dropping? They are supposed to be safe.

Dbr, How can "bonds are for safety" not be a good thought? The right way to see one's investments is from the perspective of the whole portfolio. Bonds dampen the risk of the portfolio as a whole. A typical 60/40 portfolio probably has at least 80% of the risk on the equity side. Although equities a...
by Random Walker
Wed Nov 16, 2016 3:09 pm
Forum: Investing - Theory, News & General
Topic: financial advisor core skillset
Replies: 18
Views: 2098

Re: financial advisor core skillset

Here's a short essay Larry Swedroe wrote on choosing a financial advisor.

http://www.cbsnews.com/news/11-principl ... n-advisor/

Dave
by Random Walker
Wed Nov 16, 2016 2:56 pm
Forum: Investing - Theory, News & General
Topic: Why total bond fund rather than short-maturity fund?
Replies: 30
Views: 3978

Re: Why total bond fund rather than short-maturity fund?

I would say take your risk on the equity side. Keep the bonds safe; that means short to intermediate duration and highest quality. As you move down in quality and up in term, the bonds take on more equity like risk. It's more efficient to take the risk on the equity side.

Dave
by Random Walker
Wed Nov 16, 2016 8:51 am
Forum: Investing - Theory, News & General
Topic: financial advisor core skillset
Replies: 18
Views: 2098

Re: financial advisor core skillset

I think it was William Bernstein who wrote that by the time an individual has the knowledge sufficient to choose a good financial advisor, he can probably do the investing himself. That being said, I chose to go the advisor route.

Dave
by Random Walker
Mon Nov 14, 2016 7:27 pm
Forum: Investing - Theory, News & General
Topic: Sudden Recent Jump in Russ 2K Compared to S&P 500?
Replies: 1
Views: 596

Sudden Recent Jump in Russ 2K Compared to S&P 500?

Has anyone else noticed how the Russell 2000 small cap index has had some huge days compared to the S&P 500 over the last week. Seems that generally all markets move pretty much together, but looks to my anecdotal eye that small caps have moved big since the election. I just find it interesting.