YOUR QUESTIONS FOR THE EXPERTS PANEL

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Mel Lindauer
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YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Mel Lindauer » Sat Jun 08, 2013 11:47 pm

Hello Everyone:

On October 18, 2013, I'll have the pleasure of moderating a Q&A session with this year's Panel of Experts at the 2013 Bogleheads Conference in Philadelphia.

The Panel will consist of a number of authors and other financial experts. Some of the returning Panel members include authors Bill Bernstein, Rick Ferri, Bill Schultheis, Mike Piper and our own Queen Laura, Forbes columnist and co-author of The Bogleheads Guide to Retirement Planning. Also returning to the Panel for the third time this year will be author, columnist and Director of Personal Finance for Morningstar, Christine Benz, and Allan Roth, author and CBS MarketWatch columnist.

A new and exciting addition to the panel this year will be the recently-retired Chief Investment Officer of Vanguard, Gus Sauter.

Since many of you won't be able to attend to ask your questions in person, you can post your question(s) for the Panel members right here on this thread. And even if you do plan to attend, you should still post your questions right here.

If you'd like to direct your question to a particular Panel member, be sure to do so at the beginning of your post (Question for Rick, Question for Bill Bernstein, etc.). Otherwise, the questions will be directed to the entire Panel.

Shortly before the Conference, I'll consolidate all the accumulated questions by subject matter, and then ask the Panel members to respond to as many questions as time allows.

Fire away!

Best regards to all,

Mel

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by cheepsk8 » Wed Jun 12, 2013 1:01 pm

This might be a newbie question and for that I apologize, but I've been hearing a lot of "noise" regarding the bond market and bond funds recently. Can bonds and bond funds still be considered "safe" part of asset allocation in a rising interest rate environment? What bonds or bond funds do the experts recommend using as the "ballast" in a portfolio: I bonds, TIPS, munis, long/int/short term treasuries, total bond market? What role should international bonds play in the bond portion of a portfolio?
Thanks in advance and thank you mel for taking the time to organize and plan all of this.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Peter Foley » Wed Jun 12, 2013 1:10 pm

I suggested the same topic as a question for Mr. Bogle. What is your opinion of stable value funds in this environment?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Bogle101 » Wed Jun 12, 2013 1:59 pm

What type of toppings will you be putting on your philly cheesesteaks as you visit restaurants around the city during the convention?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Wed Jun 12, 2013 2:23 pm

I am submitting this question on June 12, 2013, five months before Bogleheads 12. My question is: remembering as best you can what investments, in June, had solid consensus views among experts regarding the expectations for the immediate future, what was the expert consensus in June and how did it compare with what actually happened?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by xxd091 » Tue Jun 18, 2013 4:12 pm

Would it be possible for the Panel to start to include the non US Bogleheads position as an addendum in their advice?.Vanguard and Index Investing are going worldwide.Many Bogleheads live overseas and would like their position taken on board.Two particular points currently come to mind .Diversification is de rigeur with stocks-how does this work with bonds for the non US investor ? What position does Hedging play-especially where the non US investor is concerned?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Tue Jun 18, 2013 4:44 pm

Do you read the Prospectus? If so, how do you use it--what parts do you pay attention to and what things are you looking for?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Tue Jun 18, 2013 4:59 pm

Followup about reading the prospectus. As an example of things you might read in a prospectus, the Summary Prospectus for the Vanguard Emerging Markets Government Bond Index Fund explains that because of volatility and stock market correlation, "if your goal is to lower risk and volatility, this Fund is not an appropriate investment."

How would you advise a lay person to interpret a statement like that?
  • Assume that it means what it says, and that it's accurate. Take it literally.
  • Take it with a grain of salt.
  • Ignore it.
(Full quotation:)
A Note on Risk: Many investors invest in bonds and bond funds in an attempt to lower the overall risk of their portfolios. This strategy makes sense when the bonds owned are U.S. bonds because U.S. bond returns typically are not highly correlated with, and are far less volatile than, stock returns. The strategy is less likely to be effective, however, when bonds owned are emerging market bonds. Returns of emerging market bonds, even dollar-denominated bonds like those owned by the Fund, can be quite volatile, and tend to correlate more closely with U.S. and foreign stock returns than with U.S. bond returns. Consequently, if your goal is to lower risk and volatility, this Fund is not an appropriate investment.
Last edited by nisiprius on Tue Jun 18, 2013 5:38 pm, edited 1 time in total.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by treypar » Tue Jun 18, 2013 5:35 pm

What is the recommended asset allocation for a retiree needing income over the two decades. I know that John Bogle has stated that stocks may return more than bonds. Mr Bogle"s simple math is stocks may return 7% which computed from 2% dividends and 5% growth. Does this mean I should change my allocation from age in bonds?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Phineas J. Whoopee » Wed Jun 19, 2013 4:46 pm

Bogle101 wrote:What type of toppings will you be putting on your philly cheesesteaks as you visit restaurants around the city during the convention?
Steak wit for me.

Oh, wait: I'm not an expert; not on the panel; and probably can't attend; so I'm not the one you asked.

PJW

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by VictoriaF » Wed Jun 19, 2013 9:48 pm

Phineas J. Whoopee wrote:
Bogle101 wrote:What type of toppings will you be putting on your philly cheesesteaks as you visit restaurants around the city during the convention?
Steak wit for me.
The trick is to have it witty without being cheesy.
Phineas J. Whoopee wrote:Oh, wait: I'm not an expert; not on the panel; and probably can't attend; so I'm not the one you asked.

PJW
It never stopped others from answering questions directed elsewhere.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by LadyGeek » Wed Jun 19, 2013 10:09 pm

To Bill Bernstein:

Although the risks of bonds and stocks are very different, investors sometimes associate a high yield bond with an equivalent equity portfolio. What is the role of high yield bonds in a portfolio?

A brief introduction for new investors would be appreciated. Please allow time for Rick Ferri to respond.

References: An analysis my colleague did on high yield and know the data before buying HY bonds
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Scooter57 » Wed Jun 19, 2013 10:35 pm

Please ask Mr. Bogle to elaborate on his recent comments about using dividend paying stocks for income in retirement. Does he think that is a safer approach than the Total Return technique? Would he recommend investing in a nonindex fund like Vanguard's Dividend Growth Fund? Then ask Bill Bernstein for his views on a dividend growth approach, too.

(And please thank both of them for writing such helpful books for those of us who want to learn enough to manage our own investments!)

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Thu Jun 20, 2013 5:32 am

Bond funds versus bank CDs: as a core "fixed income" holding in a simple retirement savings portfolio, is a traditional core bond fund really any better than just buying CDs directly from a bank? If so, how? Assume one shops diligently for good rates.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Levett » Thu Jun 20, 2013 5:37 am

Question for all the panelists: what was (or is) your most humbling investment experience and what have you learned from it?

Lev

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by ML 59 » Thu Jun 20, 2013 8:42 am

Will a transcript of the discussion / Q&A be available?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SGM » Thu Jun 20, 2013 6:02 pm

I saw an article stating it might be helpful to have an SPIA in a Roth. Are there any circumstances where it would make sense to have an SPIA in a Roth? If so is it related to your tax rate in retirement and your longevity and is there a simple way to calculate a break even point vs. having an SPIA with taxable money?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SimpleGift » Tue Jun 25, 2013 1:21 am

Mr. Bernstein:

What lessons for portfolio construction today, if any, can be drawn from your latest e-book, Skating Where the Puck Was?

In other words, if alternative risk assets around the world are experiencing increasing correlations and decreasing excess returns due to globalization, how has this influenced your current asset allocation and diversification recommendations for investors' portfolios?

Are alternative risk assets still worth considering for investors' portfolios, beyond simply diversified global equities?
Last edited by SimpleGift on Tue Jul 02, 2013 8:23 am, edited 1 time in total.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Tue Jun 25, 2013 2:39 pm

Have bonds, themselves, changed? If so, should we change course or stay the course?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by JohnD » Tue Jun 25, 2013 5:17 pm

Hi everyone, first time poster and this will be my first conference.

Please ask Jack or others on the panel to expand on his recent comments regarding how social security or pension might impact the ratio of bonds in one's portfolio.

Thank you very much for requesting questions in advance.

Some background if helpfull:
by conference time, if all goes according to plan, i will have retired on a FERS pension with $25K VSIP and FERS suppliment (replacement social security payment) until i am 62 which will be October 2014. Our home is almost paid off and we have about $500K total in ROTH, IRA and TSP (1/3 total Stock fund US, 1/3 total stock international, 1/3 devided between total bond fund and international bond fund (not EM). I plan to draw SS age 70.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by avbferry » Sun Jul 07, 2013 11:07 am

How would they recommend non-US residents / citizens allocate their investments? For example with regards to dealing with asset allocations, ETFs to consider, should they invests in bond ETFs in the US or at their place of residence, estate duties for residents not from a country with tax treaty with US.

Thanks, please let us know where the transcript would be posted.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by hoops777 » Sun Jul 14, 2013 2:22 pm

What does the panel think of the idea of holding only blue chip dividend paying stocks with a long history of increasing dividends for the equity portion of your portfolio and taking only the dividends for monthly income,never selling any shares if possible.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Sun Jul 14, 2013 3:28 pm

Would a "run" on a bond fund do great harm to investors that choose to stay in the fund, and, if so, how? In the forum, some think redemptions, by forcing sales into a down market, cause a permanent loss of NAV that affects everyone holding the fund. Others think the fund would basically liquidate the assets backing the shares of those choosing to redeem them, with little effect on the shares of those who stay in. Which is correct? Do you know of an historical example of a "run" on a high-grade bond fund, and what actually happened?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SGM » Sun Jul 14, 2013 7:26 pm

Is there any amount of investible assets that make individual highly rated municipal bonds or a fixed maturity fund a more sensible investment than a municipal bond fund?

What factors argue for short and long term TIP funds vs. individual TIPs in a tax deferred space or a Roth?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SGM » Sun Jul 14, 2013 7:34 pm

This one is for my bro. What factors should one consider in comparing taking a lump sum vs. a pension from a major corporation at age 62? I am thinking some factors are PBGC guarantees, single vs. survivor benefits, comparisons to annuities, the availability of COLAs, lower lump sums than what were allowed in the past, ability to manage one's money later in life, protection from fraud, and ongoing fees.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SnowSkier » Sun Jul 14, 2013 8:16 pm

nisiprius wrote:Bond funds versus bank CDs: as a core "fixed income" holding in a simple retirement savings portfolio, is a traditional core bond fund really any better than just buying CDs directly from a bank? If so, how? Assume one shops diligently for good rates.
+1

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Mon Jul 15, 2013 9:36 am

For Gus Sauter. In 2007, you wrote an article entitled A framework for developing the appropriate mix of indexing and active management, in which you concluded:
These analyses of U.S. and European funds demonstrate the asset allocation advantages to an investor of combining index and actively managed funds. They also further the rationale for an overall core-satellite approach, comprising index funds for the core and actively managed funds as satellites.
Six years later, is your belief in the asset allocation advantages of adding active funds to a core of index funds stronger, weaker, or about the same as it was in 2007?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by patriciamgr2 » Sat Jul 20, 2013 5:07 pm

Factor-Based Investing:

Bogleheads are familiar with value and small cap "tilts" in investing style. Many experts are encouraging investors to incorporate additional factors such as momentum and profitability to increase returns and/or decrease volatility. What does the panel think about this trend and what is the most cost-effective way for a Boglehead investor to include these new factors in portfolio construction?

thanks!

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Vanguard Coverdell ESAs

Post by BornInCA » Sat Jul 20, 2013 8:42 pm

Question for Vanguard:

When will Vanguard allow parents to establish Coverdell ESA accounts? Why is Vanguard still not allowing Coverdell ESA accounts to be established at this time?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by lhl12 » Sun Jul 21, 2013 2:04 am

1) There has been a lot of discussion on this forum about whether/how to include Social Security in one's asset allocation, including conflicting statements about Mr. Bogle's own views on this topic. It would be great to get a clear, comprehensive, definitive statement from each panelist about the "right" way to incorporate this asset.

2) What are the panel's views on "smart beta" (currently getting a lot of attention in the financial press)?

3) What are the panel's views on TIPS (and their role in a portfolio) in the current interest rate and inflation environment?

4) if it were hypothetically possible to get a HELOC (or other credit facility) that absolutely positively could not be called by the lender under any circumstances, then what would be the right magnitude of credit line (as a percentage of total assets) to use as part of an overall portfolio (assuming the line would get used from time to time in the ordinary course? More generally, how should one think about the role of optional (not mandatory) debt (or negative cash) in a portfolio?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by umfundi » Thu Jul 25, 2013 2:41 am

Safe Withdrawal Rates?

A lot is said about saving for retirement, but much less is said about managing and depleting your funds during retirement. In particular, the idea of a Safe Withdrawal Rate seems to be a phantom, since it depends so much on future performance.

Can you please comment on guidelines for managing one's portfolio withdrawals during retirement?

Thank you,

Keith
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Thu Jul 25, 2013 8:19 am

There has been controversy in the forum about the very concept of the glide slope, of reducing stock allocation and risk with age. Some posters who've done their own analyses failed to see glide slopes as having an advantage over simply holding a constant, moderate allocation. Rob Arnott drew attention with an article, The Glidepath Illusion, in which he stated that "Glidepath—with less risk taken late in our working lives—is inferior to its counterintuitive inverse;" that is, he seems to be recommending that stock allocation should increase with age.

Without fussing about the exact shape of the glide slope, what do the experts generally think about risk versus age? As we age, should our stock allocation increase, decrease, or stay the same?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by stratton » Tue Jul 30, 2013 3:00 pm

Why did Vanguard buy a market neutral fund?

It almost seems like something "interesting" to keep the quants from getting bored. :P

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by chaz » Tue Jul 30, 2013 3:09 pm

Is the bitcoin a good investment?
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Mel Lindauer » Sat Aug 10, 2013 12:02 pm

Post your questions here for the Experts Panel in before it's too late.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Mel Lindauer » Wed Aug 21, 2013 1:03 am

I'm starting to gather the questions for the Experts, so if you have any more questions, post them here before it's too late.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by umfundi » Wed Aug 28, 2013 6:10 pm

Can the experts please comment on socially responsible investing? If we pick a particular ethical point of view, does that not make our options less diversified?
For what it's worth, I don't have any ethical qualms about owning shares in companies that do things I find abhorrent. The critical point here is that I do not see how not owning those shares would make the world a better place at all. Buying shares of a company in a secondary market does not aid the company in any meaningful way.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by ABQ4804 » Wed Aug 28, 2013 8:18 pm

Two questions:

1. Recently there was a forum thread titled "a different way of looking at investing for retirement" commenting on Joseph Lipsitz' article: http://www.myfederalretirement.com/public/1181.cfm Lipsitz suggests individuals consider pension and annuity income as their conservative/fixed income allocation, then invest remaining retirement savings aggressively for growth; basically considering your pension and annuity as your fixed income allocation. This is instead of the common 60/40 stock/bond asset allocation many retirees use. Would appreciate expert panel opinions on this strategy, for those lucky to have pensions. (Edited to note this is similar to JohnD's question posted earlier)

2. A 70 year old individual has purchased a Long Term Care Insurance policy from a highly rated insurance company expected to still be in business when the LTC is needed. The policy is paid in full (10 year pay option) so no future premium payments, and is a superior policy with only 30 day wait, 5 years coverage, home care included, all the bells and whistles of LTC. How, or would the experts change their financial planning advice for this individual, since most long term care costs will be covered and not need to come from savings?

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by SGM » Thu Aug 29, 2013 2:12 am

umfundi wrote:Can the experts please comment on socially responsible investing? If we pick a particular ethical point of view, does that not make our options less diversified?
For what it's worth, I don't have any ethical qualms about owning shares in companies that do things I find abhorrent. The critical point here is that I do not see how not owning those shares would make the world a better place at all. Buying shares of a company in a secondary market does not aid the company in any meaningful way.
Mike Piper, author/blogger
Keith
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by nisiprius » Thu Aug 29, 2013 7:02 am

One for Dr. Bernstein. Your book Masters of the Word: How Media Shaped History explores the relationships between communication technology and political power. The word "investing" does not appear in this book.* Have you any thoughts on how communications have changed investing? Are market dynamics fundamentally the same today when I can get a stock price myself, as they were when I had to ask my broker to use his Quotron terminal?

*Except in the list of the titles of your other books.
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by VictoriaF » Thu Aug 29, 2013 11:10 am

Please discuss at what level of fixed rates it will become advantageous to start buying TIPS again.

Victoria

P.S. You see, Mel, I've learned my lesson about the question length! {smile}
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Mel Lindauer » Thu Aug 29, 2013 11:17 am

VictoriaF wrote:Please discuss at what level of fixed rates it will become advantageous to start buying TIPS again.

Victoria

P.S. You see, Mel, I've learned my lesson about the question length! {smile}
:D
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by lhl12 » Thu Aug 29, 2013 11:28 am

I don't know if it will be possible, but it would be GREAT if a transcript of the questions actually asked and the answers actually given could be posted somewhere on the forum (for those unable to attend).

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by VictoriaF » Thu Aug 29, 2013 11:30 am

lhl12 wrote:I don't know if it will be possible, but it would be GREAT if a transcript of the questions actually asked and the answers actually given could be posted somewhere on the forum (for those unable to attend).
Take a look at the notes from the previous conventions, http://www.bogleheads.org/wiki/Boglehea ... n_Meetings . We will have something similar after BH12.

Victoria
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Jazzman » Thu Aug 29, 2013 12:04 pm

Thanks so much, Victoria.

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Mel Lindauer
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Mel Lindauer » Thu Aug 29, 2013 7:28 pm

VictoriaF wrote:
lhl12 wrote:I don't know if it will be possible, but it would be GREAT if a transcript of the questions actually asked and the answers actually given could be posted somewhere on the forum (for those unable to attend).
Take a look at the notes from the previous conventions, http://www.bogleheads.org/wiki/Boglehea ... n_Meetings . We will have something similar after BH12.

Victoria
For those who don't know, Victoria is the one who takes those great notes and makes them available for all those folks who couldn't attend.

Thanks for doing such a great job, Victoria! It's folks like you that make our community so special.
Best Regards - Mel | | Semper Fi

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Rick Ferri
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Rick Ferri » Thu Aug 29, 2013 7:57 pm

For RIck:

Is Smart Beta a really smart way to invest?

:D
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by umfundi » Thu Aug 29, 2013 9:04 pm

Rick Ferri wrote:For RIck:

Is Smart Beta a really smart way to invest?

:D
Hey!

If the experts have questions, what are the rest of us regular schmucks supposed to do?

Keith :D :D
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Carpe » Fri Aug 30, 2013 11:13 am

This questions can be addressed to all members of the panel:

Benoit Mandelbrot has questioned the validity of normal distributions in financial risk assessment, yet the ubiquitous and foundational nature of Gaussian statistics in education has resulted in this tool being widely used in both professional and non-professional financial circles. Perhaps too widely. As demonstrated by Mandelbrot, stock market behaviour extends beyond the normal distribution curve, doing so frequently. The implication is that there is more risk out there than what the normal distribution suggests, and that the viewpoint of future stock market behaviour conforming to a normal distribution is highly idealized. Despite this, there seems to be little traction in alternative analysis and strategies, and a "safe" analysis can be achieved simply by conforming to the "normal" point of view as well as perhaps allowing increased influence of recency. Where do you stand on this?
Carpe: pick, pluck, pluck off, gather

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Rick Ferri
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Re: YOUR QUESTIONS FOR THE EXPERTS PANEL

Post by Rick Ferri » Fri Aug 30, 2013 11:48 am

Normal distribution is as relevant to the stock market as age-in-bonds is to personal asset allocation. It sort-of fits some of the time. :happy

Sorry, couldn't hold back!

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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