A Question for Folks Who Have Abandoned Slice&Dice/Tilting

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bogleenigma
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A Question for Folks Who Have Abandoned Slice&Dice/Tilting

Post by bogleenigma » Sun Apr 21, 2013 2:07 pm

Ladies and Gents,
So, at present I have been utilizing a total market approach with a small tilt to VCIT (inter-mediate term corporates) and VWEHX (high yield corporates) in my bond allocation for some time and have been quite happy with my returns. I'm not asking this question to validate my decision making process in that regard as I am quite happy with things as they are. I have, however, of late come to better understand the risks vs benefits of tilting to REITS and small cap value in domestic and international. We hear a great deal on this forum from folks who advocate this approach. What we don't seem to hear, often, is the voices of folks who have been previous tilters and have abandoned the strategy for a total market approach. Would some of you folks who have been in this situation please come forward, talk about your experience, and explain why you chose to do so? Thanks.

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momar
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by momar » Sun Apr 21, 2013 2:16 pm

I have owned both REIT and SCV in the past. I don't believe I am capable of placing a bet on something that may underperform for a decade or greater and then staying the course. It is more that I have gained more of an understanding of what holding for the long term really means. The other part is that I am not convinced the premiums will hold.

Incidentally, I don't believe most people aren capable of the former and don't understand the latter either. But they see everyone else doing it, see there are studies, and think it's an easy way to goose returns. I have similar thoughts when I see posts about 100% stocks because the poster is so young and just knows he is unemotional and cold blooded. With the caveat that I of course am not referring to some of the more seasoned investors and pros here.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by stevewolfe » Sun Apr 21, 2013 2:42 pm

Timely post for us...

We've slowly been simplifying over the last 3 years. We're set on our percentage of equities and we bought all through the downturn (both 2008-2009 and 2000-2002). However, as our accounts have grown, and we've begun to rearrange things to be tax efficient (e.g., shifting CD's to I-Bonds and into tax efficient stock funds in taxable while selling stocks and buying fixed income in tax deferred), we've encountered a problem that is probably not uncommon... That problem is how to make the tilts "fit" into our available accounts. We just don't have the options in our 401(k) to maintain a small cap value tilt, for example.

One thing we've learned over time is to open accounts in taxable very cautiously - presently we've reduced to just two taxable mutual funds: Vanguard Total Stock Market Index Admiral and Vanguard FTSE All World ex-US Admiral (after a TLH from Total International last May). This harvested loss was used to offset gains in the last two active taxable funds we owned, and sold last year. We're questioning the value of maintaining the small cap value tilt if it means having another fund in taxable. My wife has no interest in managing a portfolio - so I've been simplifying things to a reasonable level - US / International split, reducing the number of funds, etc so that the portfolio both meets our goals and will be manageable by both of us as we age.

We haven't yet decided to eliminate our small cap value position (yet) but it's one of the items on the table... We are waffling a bit on whether to keep it, which, frankly has me leaning towards eliminating it as there is no value to having it if we don't hold it long term. Looking forward to what others have to say...

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by bottomfisher » Sun Apr 21, 2013 2:54 pm

I started out with my core broadly diversified index fund approach. After a significant salary increase I started additionally investing in US REIT. I then placed other 'sector bets' outside of my core indexes. My portfolio was smaller and nimble then. The sector bets paid off and I was outperforming my personal benchmark Vg Target 2040. Everything is cyclical and I anticipated the risk of tilting toward sectors. But as I eventually started underperforming my personal benchmark I realized I dislike underperforming more than I like outperforming. So I'm gradually transitioning my portfolio toward a simpler portfolio. Goal now is TSM, intl TSM, REIT, intl REIT, muni for next few years then add more bonds further down the road

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Taylor Larimore
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Slicer & dicer is now a total market investor.

Post by Taylor Larimore » Sun Apr 21, 2013 2:57 pm

mdpsychcrnp:

We moved our investments from Merrill Lynch to Vanguard in April 1986 (our best-ever investment decision). At that time, I was an active slicer & dicer. There were no Total Market Index Funds. It is embarrassing, but my records show that at one time or another we invested in these thirty-four Vanguard funds (plus Intel and Microsoft stocks) in my attempt to "beat the market" (risk & return):

STAR
Windsor
Intermediate-term Municipal bond fund
Money Market Prime
Gold
International
Wellington
Short-Term Municipal Bond Fund
World International
U.S. World
Explorer
Municipal Money Market
Trustees International
Utilities
Convertible Securities
Asset-Allocation
U.S. Growth
Windsor II
Hi-Yield Bond Fund
Emerging Markets
Health
GNMA
Preferred Stock Fund
Equity Income
Tax-Managed Growth & Income (purchased 8-30-96)
Total Bond Market Index (purchased 8-30-96)
REIT
Tax-Managed Small-Cap (purchased 3-3-99)
Intermediate-term TIPS (VIPSX) (purchased (12-26-2000)
Short-term TIPS (VTAPX) (purchased 02-11-2013)
Energy
Life Cycle Moderate Growth
Small-cap Index
Limited-term tax-exempt bond fund
Intermediate-Term Treasury

If we could start over (we are locked-into our taxable equity funds with capital-gains which will be voided at death), this would be our basic portfolio:

The Three Fund Portfolio

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by SpringMan » Sun Apr 21, 2013 3:14 pm

Taylor,
Have you given up the idea of adding TIPS or the Vanguard TIPS fund? You used to like 50% TBM and 50% TIPS for fixed income, a four fund portfolio.
Last edited by SpringMan on Sun Apr 21, 2013 3:17 pm, edited 1 time in total.
Best Wishes, SpringMan

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steve roy
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by steve roy » Sun Apr 21, 2013 3:16 pm

At the same time I have simplified the portfolio (getting rid of sector funds) I have also done slicing and dicing.

On the taxable side, the Mrs. and I are in Vanguard Total Market, Vanguard Total International, Vanguard Small Cap, Vanguard Small Cap International. (Sadly, Vanguard has no International Small Cap Value). We also have investments in Vanguard Tax Exempt Funds (Intermediate, Limited Term, Short Term).

On the Tax Deferred Side, we're invested in Wellesley, Vanguard Target Income, Vanguard Small Cap Value, Vanguard REITS. We're overweighted in Small Cap Value (thanks, Larry Swedroe) and REITS, due to Dr. Swenson. (I'm also influenced by the esteemed Dr. Bernstein, and have shortened the duration of the bond allocation to the point where the Vanguard portfolio review robot yells: "Danger Will Robinson! Danger! Too many short term bonds!")

I say, the hell with the robot. We do our thing.

We're still accumulating, but the Master Plan is: Strong tilt to Small Cap and Small Cap Value, 15%-20% REITS, and an overall asset allocation of 70% bonds (Shorter term, some intermediate term, a large slug of TIPS) and 30% stocks (I'm shooting for 50% international, 50% domestic, but I might dial back the international a bit -- right now we're at 27% international.) We will end up, at the end of the accumulation period, strongly tilted to small cap and small cap value.

And we will likely hang on to Wellesley, expanding it to 8-10% of total assets. This (still evolving) allocation has returned 5.2% over five years, and 6.4% over the past year.
Last edited by steve roy on Sun Apr 21, 2013 3:21 pm, edited 1 time in total.

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Re: Slicer & dicer is now a total market investor.

Post by SnapShots » Sun Apr 21, 2013 3:18 pm

Taylor Larimore wrote:mdpsychcrnp:

If we could start over (we are locked-into our taxable funds with capital-gains which will be voided at death), this would be our basic portfolio:

The Three Fund Portfolio

Best wishes.
Taylor
Taylor,

Jack Bogle, in a recent Morningstar interview, recommended investing 50/50 in a TBM index fund and an intermediate corporate bond index fund. In today's world, would you still only invest in these three funds?

Best regards,
Mikki
the best decision many times is the hardest to do

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Taylor Larimore
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Switching TIPS ?

Post by Taylor Larimore » Sun Apr 21, 2013 3:32 pm

SpringMan wrote:Taylor,
Have you given up the idea of adding TIPS or the Vanguard TIPS fund? You used to like 50% TBM and 50% TIPS for fixed income, a four fund portfolio.
Springman:

Last February I exchanged our intermediate-term TIPS fund (VIPSX) into Vanguard's new short-term TIPS fund (VTAPX). The reason was that at our age (I'm 89) the shorter-term bond fund should be more suitable (less risk) with our short-term time-frame.

We still hold 50% Total Bond Market for its diversification benefit (less risk).

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Default User BR » Sun Apr 21, 2013 4:17 pm

Were I starting over, I would have a simpler approach, but it wouldn't be the three-fund. I would look to use something like Trev's four-fund factor approach. That's a stock allocation of 25% each of US large-blend, US small-value, foreign large-value, and foreign small-blend. But, like Taylor, the capital gains situation kind of locks me into a more complicated approach. Not that I care that much. The Big Spreadsheet tracks all that.


Brian

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by nedsaid » Sun Apr 21, 2013 4:28 pm

I have always been a value oriented investor and I have always liked the mid-cap sector of the market. A review of my portfolio by my insurance company (they actually did a great job on this) showed that I had very few small caps. So I bought an S&P 600 Small Cap ETF and started buying into funds that represented the small part of the market.

About 2007, I attended a Merriman seminar and their case for "slice and dice" was pretty compelling. I had many of the pieces already. I trimmed my individual stocks and further added to my REIT holdings. I added International small/mid-cap and U.S. small value to my portfolio. I have gradually increased my International holdings in both stocks and bonds.

The problem with "slice and dice" is that it gets pretty complicated and new asset classes get invented all the time. I think having REITs, International Stock, Emerging Markets, Small Cap, and Small Value gets you most of the benefit. International small cap is another important area. But you can go overboard with this stuff. I draw the line when they start talking about Emerging Markets Small Cap value. Eventually, the pizza gets sliced into too many pieces. Eating a pizza sliced into four pieces is as good as the same pizza sliced 16 ways.
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Calm Man » Sun Apr 21, 2013 4:41 pm

I know, I know, tilt this, tilt that. To me it is nothing I have to abandon as I concluded rightly or wrongly that it needlessly complicated things compared to Taylor's 3 fund portfolio. In fact I use a 2-fund portfolio. It supposedly has higher expected returns which I assume correlates with higher possible losses. Others might say no. I would go to Taylor's 3 fund portfolio of my 2-fund one and move on with life.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by nedsaid » Sun Apr 21, 2013 4:47 pm

Nothing wrong with the three fund portfolio. Indexing with very broad indexes is an excellent strategy.

Only time will tell if the "slicers and dicers" get the excess return we seek. An extended period of outperformance by the growth sector of the market would leave a lot of us red faced.

I am only telling folks what I am doing. Nothing at all wrong with a more simple indexing strategy. The market return is far more than what most investors get.
A fool and his money are good for business.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Call_Me_Op » Sun Apr 21, 2013 4:59 pm

To be brief, this really comes down to the issue of how much risk you are willing to accept in your equity holdings. A Total Market Index is cap-weighted and thus essentially an investment in US large-caps. If you are willing to accept more risk in exchange for greater expected return, you can tilt to small-cap and value. There is no right or wrong answer, it's just a matter of how much risk you are willing to accept on the equity side.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by nedsaid » Sun Apr 21, 2013 5:11 pm

Call me op, that was a great post. You are so right.
A fool and his money are good for business.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Call_Me_Op » Sun Apr 21, 2013 5:13 pm

nedsaid wrote:Call me op, that was a great post. You are so right.
Thanks nedsaid.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Taylor Larimore
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Answer to multiple bond fund question.

Post by Taylor Larimore » Sun Apr 21, 2013 6:12 pm

Taylor:
Jack Bogle, in a recent Morningstar interview, recommended investing 50/50 in a TBM index fund and an intermediate corporate bond index fund. In today's world, would you still only invest in these three (total market index) funds?

Mikki:

Bill Bernstein once wrote: "When I disagree with Jack Bogle I am usually wrong." I feel the same.

Your simple question has a complex answer, but I will do my best to explain my feelings about Jack's 50%/50% recently recommended bond fund allocation:

* Consider a youngish investor with with an 80% stock/20% bond portfolio. This means that Total Bond Market Index Fund (VBMFX) and Intermediate-term Investment Grade Bond Fund (VFICX) each represents 10% of the portfolio. Each of these funds has a $3,000 minimum; therefore, the investor must have a minimum $30,000 portfolio. Most beginning investors have smaller portfolios making it impossible to split their bond allocation between two funds. In this case, it is one or the other. I think TBM is the best choice for its better diversification.

* Looking back, I have seen little success by investors trying to market-time stock and bond markets which are very efficient. Any perceived under-valued or over-valued bond category is quickly arbitraged away. I am not convinced that the current unpopularity of guaranteed Treasury securities is warrented. Again and again I have observed the wisdom of staying-the-course (assuming it's the right course).

* In 1998 when the U.S. total stock market plunged more than -37%, Total Bond Market gained +5.1%. Intermediate-Term Investment Grade fell -6.2%. When it was needed for safety, Total Bond Market Index Fund was a much better partner to the other two (stock) funds in the Three Fund Portfolio.

* Simplicity is a primary attribute of a good portfolio. We need to resist the siren call of adding "one more fund" unless there is a strong reason for significantly better expected portfolio performance. I'm not convinced that bond overlap and little change in duration is worth the additional complexity--except perhaps for large bond portfolios.

* I believe that ANY good-quality, low-cost, short- or intermediate-term bond fund should do the job of providing safety and income in a portfolio. We are "dancing on the head of a pin,"

There is more than one road to Dublin.

Keep investing simple.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Answer to multiple bond fund question.

Post by Blues » Sun Apr 21, 2013 6:18 pm

Taylor Larimore wrote:There is more than one road to Dublin.

Best wishes.
Taylor
Great post, Taylor. I think that too often the forest gets lost for the trees.

(But I really only posted to remind you that there's more than one city in Ireland. :P :mrgreen: )

Sláinte! :sharebeer
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by CABob » Sun Apr 21, 2013 6:44 pm

(But I really only posted to remind you that there's more than one city in Ireland. )
And more than one Dublin http://www.ci.dublin.ca.us/
:wink: :wink:
As for the OP question, I do have a REIT and SCV tilt, but, I am frequently considering whether it is worthwhile in my case. I may drop the tilts in the future primarily in the interest of simplicity.
And the value of the TIPS fund is in question in my mind and may make some changes there also.
Bob

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Blues » Sun Apr 21, 2013 6:54 pm

CABob wrote:
(But I really only posted to remind you that there's more than one city in Ireland. )
And more than one Dublin http://www.ci.dublin.ca.us/
:wink: :wink:
As for the OP question, I do have a REIT and SCV tilt, but, I am frequently considering whether it is worthwhile in my case. I may drop the tilts in the future primarily in the interest of simplicity.
And the value of the TIPS fund is in question in my mind and may make some changes there also.
I actually dated a girl from tiny Dublin, GA many years ago...and then many years later in another city worked with a guy from that same town who knew the family.

On topic: I think many of us are consumed with the conflict of trying to maintain a simple portfolio while still covering all of the appropriate bases. Right now I have five funds based on the "Core Four" concept. (FTSE Int'l Small Cap was added because back then Total Int'l didn't include small caps.)

I know that if I get the opportunity to do so before kicking the bucket, my wife would be more than a little happy if I just transferred it all into a checking account so she wouldn't have to give it a moment's thought. :wink:
(And since I don't trust anyone to manage the funds on her behalf I'll hopefully have the chance to set it up in a "lifestyle fund" beforehand...or at least remember to tell her which one to choose.)

Edit to add: If I were starting all over today, I'd go with Taylor's "Three Fund Portfolio", be done with it and go for a walk with the dog.
Last edited by Blues on Mon Apr 22, 2013 3:16 pm, edited 1 time in total.
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by livesoft » Sun Apr 21, 2013 8:02 pm

I think forum member yobria is someone who was into small-cap value in a big way and changed his mind. If one looks at his posts, he hasn't posted in a while. But yobria was teased a bit for being on the SCV bandwagon with RZV, then abandoning RZV after a (big?) loss and going vocally anti-SCV afterwards.

Here's a relevant humorous thread:
http://www.bogleheads.org/forum/viewtop ... &p=1392574
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Call_Me_Op » Mon Apr 22, 2013 5:17 am

livesoft wrote:I think forum member yobria is someone who was into small-cap value in a big way and changed his mind. If one looks at his posts, he hasn't posted in a while. But yobria was teased a bit for being on the SCV bandwagon with RZV, then abandoning RZV after a (big?) loss and going vocally anti-SCV afterwards.
I see 2 mistakes - going into any investment "in a big way", and then evaluating it based upon its performance over a short period of time.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by TheDan666 » Mon Apr 22, 2013 10:10 am

I used to slice and dice with REIT index. However, the main issue is simplicity and maintenance. I have a work 401k with 50% in self-directed portion, a rollover IRA, a Roth IRA, my wife's rollover IRA, and a taxable account. Keeping them all in balance is enough work as it is without slicing dicing.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by staythecourse » Mon Apr 22, 2013 11:14 am

momar wrote:I don't believe I am capable of placing a bet on something that may underperform for a decade or greater and then staying the course.
Interesting because the same can be said of those who are TSM investors. What you are touching on is frame of reference risk. My view is being TSM is tilting toward large cap (70%) then a S/d who is (for example) 50/50. God did not invent market cap weighting. That is man made and thus feels to be the "norm".

When folks say Tilting they need to ask themselves "tilting from what??" That will answer where your frame of reference lies and thus your answer of if one should be s/d vs. TSM investors.

Neither is wrong, but momar is completely correct STICKING to the plan is more important then finding the PERFECT plan.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Default User BR » Mon Apr 22, 2013 11:32 am

TheDan666 wrote:I used to slice and dice with REIT index. However, the main issue is simplicity and maintenance. I have a work 401k with 50% in self-directed portion, a rollover IRA, a Roth IRA, my wife's rollover IRA, and a taxable account. Keeping them all in balance is enough work as it is without slicing dicing.
My spreadsheet takes care of all that. It aggregates the sub-sheets from various accounts, updates the allocations and sub-allocations, then performs a 5/25 rebalancing analysis. It also computes deltas from nominal for all cases. Once it was set up, tracking and maintenance became easy.


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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by OverTheHill » Mon Apr 22, 2013 12:14 pm

The slice and dicers and the tilters are all trying to win the race, which of course means that they can crash and burn along the way. When it comes to investing, I'm happy with coming in second or third, because I'm more likely to avoid a crash along the way, plus it's just easier on the soul. Sort of like the rabbit and the turtle. Good luck.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Default User BR » Mon Apr 22, 2013 12:42 pm

OverTheHill wrote:The slice and dicers and the tilters are all trying to win the race, which of course means that they can crash and burn along the way.
So can the three-funders.


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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by EDN » Mon Apr 22, 2013 1:29 pm

A brief comment on what I've read here.

First, a quick intro: today, we are relatively certain there are at least 5 factors that drive the expected returns of a diversified portfolio: stock/bond, small/large stock, value/growth stock, long/short maturity and credit/government exposure. That is the FF 5 Factor Model, the 3F model with 2 additional (generally non controversial) fixed income factors. Of course you can diversify across all the risks, some of the risks, or none of them. To be a multifactor investor, you simply have to admit these are considerations you've had and decided what was right for you.

So, when you read and hear things like those who previously had stuck to TSM as the only necessary bond holding beginning to say that the index needs to be improved (more corporate bond exposure), what that translates to is that person is saying that investors should consider tilting to the credit factor. See above. I'm OK with that if they understand the risks. That's just a multifactor preference.

When you read things like retirees selling their longer-dated bond portfolios to buy shorter-term portfolios because they want less exposure to interest rate risk, that person is just tilting away from the TERM factor. See above. I'm OK with that if they can endure lower expected returns. That's just a multifactor preference.

So it certainly seems to me like even the most ardent "3 fund" investors are beginning to realize we live in a multifactor world and portfolios should be fashioned according to individual needs and along sources of expected return (that is what differentiates investing from speculating -- investors take risks that carry an expectation of reward, or avoid risk with an expectation of receiving a lower return, speculators bet that they can get higher returns without higher risk, or the same returns with lower risk). In other words, the investor landscape is flattening a bit, and views are all converging to the Fama/French research driven/multifactor view of the world. That's a good thing.

I don't see us going backwards, deciding to ignore ways we now understand markets to behave -- in essence walking across a crowded street with a blindfold on.

All investors should spend time thinking critically about how much of the above 5 risks they can or want exposure to. It simply allows one to build a better allocation for their preferences, sort of like a piece of bespoke clothing vs. off the rack apparel. Both will fit, one just fits better.

Eric

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by grap0013 » Mon Apr 22, 2013 2:07 pm

livesoft wrote:I think forum member yobria is someone who was into small-cap value in a big way and changed his mind. If one looks at his posts, he hasn't posted in a while. But yobria was teased a bit for being on the SCV bandwagon with RZV, then abandoning RZV after a (big?) loss and going vocally anti-SCV afterwards.

Here's a relevant humorous thread:
http://www.bogleheads.org/forum/viewtop ... &p=1392574
That's easily my favorite thread ever. I haven't read it in a couple months and I laughed just as hard the 2nd time reading it!
There are no guarantees, only probabilities.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by grap0013 » Mon Apr 22, 2013 2:15 pm

Seeing EDN post reminds me about these constant portfolio "tweaks" that he has talked about a few times on here. I think these drag on portfolio returns in the long run. ie an investor has a 10% slice to SCV and then later abandons it for simplicity. Go 80% stocks into 2008 and then go 60/40 a couple years later stating that they didn't sell low, but they learned more about their risk tolerance. IMO that's a big increase in bonds in a short amount of time but people rationalize it. The latest can be found on the shortening of the bond duration thread. All of these points can be summarized as "stay the course" and you'll likely get much better returns.
There are no guarantees, only probabilities.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by Blues » Mon Apr 22, 2013 2:36 pm

grap0013 wrote:The latest can be found on the shortening of the bond duration thread. All of these points can be summarized as "stay the course" and you'll likely get much better returns.
Depending on where you are in the investment / retirement continuum, "likely" is something that some investors take into consideration while taking more conservative or defensive positions. Not all investors are equally immune to long term bear markets (or the equivalent on the fixed income side). If adjusting their portfolios helps them sleep better at night or withstand a protracted market drop...so be it.

To each their own and more power to them all.
“Tactics without strategy is the noise before defeat.” - Sun Tzu | "Everybody has a plan until they get punched in the mouth." - Mike Tyson

OverTheHill
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by OverTheHill » Mon Apr 22, 2013 4:10 pm

Default User BR wrote:
OverTheHill wrote:The slice and dicers and the tilters are all trying to win the race, which of course means that they can crash and burn along the way.
So can the three-funders.


Brian
Yep, no question about it. To each their own. Good luck to us all.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by EDN » Mon Apr 22, 2013 4:31 pm

OverTheHill wrote:The slice and dicers and the tilters are all trying to win the race, which of course means that they can crash and burn along the way. When it comes to investing, I'm happy with coming in second or third, because I'm more likely to avoid a crash along the way, plus it's just easier on the soul. Sort of like the rabbit and the turtle. Good luck.
I actually loathe all these euphemisms we seem to have come up with for investing like "win the race" or "already won the game". Investing is just a means to an end, and it ain't over till its over.

Investors who hold different than TSM/TBM allocations aren't trying to win anything, they are just trying to match their goals/preferences with their portfolios. No different, really, than someone who holds a stock/bond mix other than "age in bonds" based on their circumstances. Here is a simple example: should a Google executive invest the same way as the person who manages a Family Dollar store? Should someone in retirement without any additional sources of income have the same bond allocation as someone who has SS and an inflation adjusted pension?

Different strokes for different folks. So long as the decisions are based on well-researched sources of risk and return, it's hard to fault anyone for their decisions. It's only when people denounce others, as in "everyone should hold these 3 funds" (a lot of the people saying that don't actually do that, by the way), or continue to deny the existence of various additional sources of return beyond stocks vs. bonds, do you start to interject yourself to add some clarity.

I mean, if I hold a portfolio that is tilted to small and value stocks globally, with short-term bonds, where the stocks outperform TSM by the same amount that my bonds underperform TBM, have I really tried to pull one over on someone? I determined that I could take greater than market risks in stocks, but not in bonds.

Further, I might not feel like I can afford to have all my equity holdings tied to the fortunes of a relatively small handful of multinational companies that drive global TSM returns. And in deviating from the market, I'm willing to accept other periods where those big multinationals are the toast of the town and I'm bringing up the rear with greater emphasis on smaller and slower growing businesses. If that's the path I've chosen, and done so by implementing with passive funds, what is to disagree with?

Sure, if you go into something looking for a free lunch, and bail out at the first sign of trouble, that is another deal altogether. But that isn't what we are talking about.

Eric

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by steve r » Mon Apr 22, 2013 6:19 pm

momar wrote:I have owned both REIT and SCV in the past. I don't believe I am capable of placing a bet on something that may underperform for a decade or greater and then staying the course. It is more that I have gained more of an understanding of what holding for the long term really means. The other part is that I am not convinced the premiums will hold.
...
I have similar thoughts when I see posts about 100% stocks because the poster is so young and just knows he is unemotional and cold blooded. With the caveat that I of course am not referring to some of the more seasoned investors and pros here.
+1

I currently tilt ... but have my doubts. As I gain life experience I appreciate the value the experience of others more and more - particularly those with more experience than I have. Taylor comes to mind.

Eric's point:
Further, I might not feel like I can afford to have all my equity holdings tied to the fortunes of a relatively small handful of multinational companies that drive global TSM returns. ...
Is the main reason I still tilt. Particularly when the mega-caps are volatile.

To answer the OPs question, it is expereince (often bad expereriences) that pushes me to tilt less and less with age.
Maximize Diversification - Minimize Costs - Avoid Lotteries

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SteveNet
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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by SteveNet » Mon Apr 22, 2013 7:06 pm

I slice and dice tilted for about 13 yrs, then this last fall my DFA adviser up and quit, I couldn't see paying .9 basis points per yr ( to a new DFA manager) to manage balancing only as I no longer input due to being retired.
Also imo the funds were spread wiley nilly across taxable, roth and 2 Iras. Balancing would include having more funds (Vanguard or other) in addition to all my DFA funds.
Not something I really wanted to spend my time and effort orchestrating.

Don't get me wrong, I did well enough for those 13 yrs respectively.
Now have enough (if there is such a thing) to not have to worry IF I have enough. (at least I believe so).
To me Dying with more is well kind of pointless.
So I dissolved the mess in my accounts down to one equity etf, and 3 different bond positions and cash.
I found that for now at least a 60/40 Bonds/equity makes me feel very comfortable mentally.

Would I like to have more SURE, do I want the hassle of monitoring and balancing across 15 DFA positions with additional other funds to balance with?
NO forgetaboutit.

I have also found that I don't pay attention to all the "Noise" like I used to with the multitude of funds.
If the markets take a BIG hit 20% or larger I 'might' sell some bond position to re-balance to take advantage of the buy low sell high advantage...

DFA .9 basis points + an average of about .48 ER VS no cost of fund manager and an average of about .07 ER. Not hard to take.

To each their own.
Being frugal is hard to learn, but once learned is hard to stop.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by bogleenigma » Mon Apr 22, 2013 10:51 pm

Thanks to all you folks thus far who have commented. Each of you have voiced the very same arguments that I have had in my mind for the last six months while I have been pondering this switch.

On the side of the TSM approach I most closely identify with the need for simplicity. I currently have two equity funds and three bond funds (BND, VCIT, VWEHX). Once the Vanguard International Bond Fund is introduced I will likely add this in to split my TBM allocation. That will give me six funds to allocate across mine and my wife's accounts: her roth ira, her roll-over ira, her 403b, her 457b, my 403b, my roll-over ira, my roth ira, and my beneficiary ira. The argument is, of course, do I really want to take the extra time on tweaking my portfolio for the rest of my investing lifetime by adding VNQ, VNQI, VBR, and VSS (I've decided to stick with exclusively Vanguard funds despite the attraction to DLS and DGS). That would bring me up to ten funds.

Regarding tilting, I echo EDN's thoughts that there are no hard and fast rules regarding portfolio allocation. Choosing an allocation across asset classes is really a very individualized thing: what risks am I willing to endure in a particular market condition? What risks am I willing to diversify away from and which ones can I accept? Deviating from the total market approach does not necessarily mean taking on more risk in an absolute sense but rather taking on more and different risks with a theoretically higher return over very long time periods. This reminds me of the ongoing Swedroe/Ferri debate regarding HY. Two very well educated and well informed people whom I respect simply come to very different conclusions given the data presented.

It seems for me the ultimate question is this. Should I decide to change my IPS statement to reflect my preference to tilt, can I stick with this strategy for the rest of my investing lifetime? Because for equity tilting to work for me over the long term then this is a decision I will be forced to take. I can say with 100% certainty that given what I know of the risk/return characteristics of VCIT and VWEHX and how those risks play out over long periods of time that I will not deviate from including those in my portfolio (though I may add VIPSX when I actually retire). Similarly I am convinced by the academic finance literature that adding an international bond allocation is useful to diversify away certain other risks. That, of course, is tilting as well. Am I willing to make that same kind of commitment to equity tilting? I'm not sure yet. But I'm exceedingly grateful for all of your contributions here to lead me along that decision making process. Please continue to comment and educate me Just in case there is the temptation by anyone to criticize my "tilting on the bond side" (it seems to some folks here that this is heresy), I would remind you that I'm not interested in your opinion on this issue, as I have already well explored this issue to my satisfaction. Thanks.

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Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

Post by SnapShots » Tue Apr 23, 2013 5:13 pm

livesoft wrote: Here's a relevant humorous thread:
http://www.bogleheads.org/forum/viewtop ... &p=1392574
Very Funny!! There's lot of truth to humor.

Taylor, thanks for taking the time to answer my simple question with a complex answer.

As I read through the threads - I think - one day I'll find the: WOAH-OH-OH-AH-AH-AH-AAAA-HA-AH-AH-AH moment. Have realized there's never going to be one. :o
the best decision many times is the hardest to do

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