The Tell Tale Chart

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

The Tell Tale Chart

Post by Doc » Tue Oct 17, 2017 3:12 pm

In a recent thread there was a discussion of whether a Total Return Chart as opposed to Price or Rolling Return Chart was more appropriate.

Since I don't think many are familiar with a Rolling Return chart I though an example might be informative.

For this purpose I used an S&P 500 fund (SPY), an intermediate term "corporate" fund (VFIDX) and an Intermediate term Treasury fund (VFIUX).

(I also included an ultra short bond fund to created a baseline in the chart with near zero return in order to show the funds of interest more clearly. More below.)

The long term has several periods when the stock market declined significantly but except for the 2008 crash the difference between Treasuries and corporates was barely a wiggle in the curve during this time.

Image

Compare this to the 3 month rolling return chart where the difference in performance of the two bond segments are clearly shown doing stock market declines and also with percentage scale which makes quantification easier.

Image

If your interest is in comparing different funds over longer periods while avoiding "end point" problems you can use a rolling return chart with a 60 month time period.

Image

Morningstar link to the last chart. Play with it yourself if it perks your interest.
http://quotes.morningstar.com/chart/fun ... 22%3A60%7D

(Using the ultra-short fund is just a convenience so that you don;t have both bars and lines on your chart. It also allow you to have both funds and ETFs presented in the same manner. I also find it useful to use the sliders at the bottom of the chart to expand the time scale and to move the time covered by the chart to what was and what is now.)

Have fun.

Aside: Poe's "The Tell Tale Heart" was published in January 1843 has nothing to do with Doc's "The Tell Tale Chart" posted in October 2017. Or does it? :D
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
siamond
Posts: 3430
Joined: Mon May 28, 2012 5:50 am

Re: The Tell Tale Chart

Post by siamond » Tue Oct 17, 2017 3:39 pm

Doc wrote:
Tue Oct 17, 2017 3:12 pm
Aside: Poe's "The Tell Tale Heart" was published in January 1843 has nothing to do with Doc's "The Tell Tale Chart" posted in October 2017. Or does it? :D
Well, actually, John Bogle used the same analogy with Edgar Allan Poe's work some 15 years ago, but he came up with a different type of chart than rolling returns to compare the trajectories of asset classes and/or portfolios, while dubbing it a "Telltale chart" too...

You can check this Wiki page to learn more about John's clever chart. You can also use the Simba spreadsheet to easily generate such Telltale charts (and rolling charts too!).

acanthurus
Posts: 257
Joined: Sun Aug 04, 2013 8:02 am

Re: The Tell Tale Chart

Post by acanthurus » Tue Oct 17, 2017 9:24 pm

Removed
Last edited by acanthurus on Tue Oct 31, 2017 6:39 pm, edited 1 time in total.

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Wed Oct 18, 2017 8:18 am

Jack, no international?

S&P 500 - VFIAX
Vanguard Developed Markets Index - VTMGX

36 month rolling return

Image
http://quotes.morningstar.com/chart/fun ... 22%3A36%7D
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Thu Oct 19, 2017 11:25 am

Bogleheads, which bond fund is better, the green or the orange?

Thirty-six month rolling return chart for 20+ years:

Image

http://quotes.morningstar.com/chart/fun ... 22%3A36%7D
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Fri Oct 20, 2017 4:04 pm

Hey Larry, does small cap value still outperform?

Vanguard Small-Cap Value Index Fund (VISVX)
Vanguard 500 Index Fund Investor Shares (VFINX)

24 month rolling returns:

Image

http://quotes.morningstar.com/chart/fun ... 22%3A24%7D
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Sat Oct 21, 2017 8:34 am

I ran out of interesting general questions to be addressed by this type of chart. Anybody got another one?
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

staythecourse
Posts: 4964
Joined: Mon Jan 03, 2011 9:40 am

Re: The Tell Tale Chart

Post by staythecourse » Sat Oct 21, 2017 8:46 am

Doc wrote:
Fri Oct 20, 2017 4:04 pm
Hey Larry, does small cap value still outperform?

Vanguard Small-Cap Value Index Fund (VISVX)
Vanguard 500 Index Fund Investor Shares (VFINX)

24 month rolling returns:

Image

http://quotes.morningstar.com/chart/fun ... 22%3A24%7D
Funny, I think you actually used cherry picking on a rolling return question to confuse the answer. Try using longer rolling returns, i.e. 10 and 20 years and see the differences. If I use rolling returns (which I LOVE) I use randomly 3 different sets (3, 10, 20 years) so I am not "cherry picking" the rolling return interval.

Good luck.

p.s. My guess you will see the premium in small and value over longer periods and more important you will see its consistency the longer you look, i.e., for example, 20% in 3 years, 80% in 10 years, 90+% in 20 years.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Sat Oct 21, 2017 9:08 am

staythecourse wrote:
Sat Oct 21, 2017 8:46 am
Funny, I think you actually used cherry picking on a rolling return question to confuse the answer.
For the most part I took Vanguard funds and used a plot for the longest time available. But whatever fund I picked I used the longest time available. If you make the chart you can easily home in on the areas of interest. But making the period longer doesn't provide any more data.
staythecourse wrote:
Sat Oct 21, 2017 8:46 am
Try using longer rolling returns, i.e. 10 and 20 years and see the differences.
I'm using Morningstar charts. The period is limited to 3, 6, 12, 24, 36 and 60 months. To go longer maybe I could go to the Simba spreadsheet as siamond suggested but that's more work than I want to do. And when you get done it's still past performance. :D

If you go to a really long time like 10 or 20 years you are back to the total return charts except with different end points. You could accomplish a similar type comparison by using a Morningstar ten (or 20) year total return chart and then moving the slider to adjust the endpoints.

(I just tried that idea the VISVX & VFINX pair and it wasn't very instructive in my mind.)
p.s. My guess you will see the premium in small and value over longer periods and more important you will see its consistency the longer you look, i.e., for example, 20% in 3 years, 80% in 10 years, 90+% in 20 years
I'm 40% small and and valuey. My chart didn't change my mind but I'm going to look at it again every three or four years.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
siamond
Posts: 3430
Joined: Mon May 28, 2012 5:50 am

Re: The Tell Tale Chart

Post by siamond » Sat Oct 21, 2017 10:16 am

Doc wrote:
Sat Oct 21, 2017 8:34 am
I ran out of interesting general questions to be addressed by this type of chart. Anybody got another one?
Well, you could play with REITs, with Gold and with Mid-Cap-Value to address the classic questions. Maybe also corporate bonds. I don't know how meaningful that is though, because:
a) the time periods are too short when solely using real-life funds
b) what really matters is the performance of entire portfolios, not individual assets

Still, I agree with you that rolling returns charts are underused, and that's a bit of a shame because they are indeed very informative.

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Sat Oct 21, 2017 10:50 am

siamond wrote:
Sat Oct 21, 2017 10:16 am
the time periods are too short when solely using real-life funds
That is a problem but if you go back more than about 20 years you really compound the "history repeating itself" factor.

Regarding corporate bonds, I "touched" on that one with the "which bond fund is better, the green or the orange" question but nobody bit. :D

It seems Bogleheads have only a two track mind regarding bonds - Total Bond Market and TIPS ladders.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

User avatar
siamond
Posts: 3430
Joined: Mon May 28, 2012 5:50 am

Re: The Tell Tale Chart

Post by siamond » Sat Oct 21, 2017 11:17 am

Doc wrote:
Sat Oct 21, 2017 10:50 am
That is a problem but if you go back more than about 20 years you really compound the "history repeating itself" factor.
What do you mean? I don't get it? Yes, history tends to repeat itself, and that's very useful information, isn't it?
Doc wrote:
Sat Oct 21, 2017 10:50 am
Regarding corporate bonds, I "touched" on that one with the "which bond fund is better, the green or the orange" question but nobody bit. :D

It seems Bogleheads have only a two track mind regarding bonds - Total Bond Market and TIPS ladders.
Actually, your chart did intrigue me, and I made my own comparison between PTTRX and VBILX (which I personally use for bonds). Then assembled a true Telltale chart (Jack's style) to better understand the dynamics. Remember that Jack Bogle in recent years complained that Total Bonds doesn't include enough corporates? I always take Jack's pronouncements with a big grain of salt, but in this case, I was fully convinced and went for it. And I believe quite a few Bogleheads did something similar. So maybe there are three tracks (oh, and then there are the CD guys, of course).

PS. which one won? Well, PTTRX did win against VBILX, but by a much smaller margin. Also, it's an institutional fund, so this is cheating a tad. Still, if only Pimco would provide lower expense ratios, I might not be opposed to more active management with my bonds portfolio... Ah, the shame! :wink:

User avatar
Doc
Posts: 7612
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: The Tell Tale Chart

Post by Doc » Sat Oct 21, 2017 12:46 pm

siamond wrote:
Sat Oct 21, 2017 11:17 am
PS. which one won? Well, PTTRX did win against VBILX, but by a much smaller margin. Also, it's an institutional fund, so this is cheating a tad.
I didn't cheat, I used the lowest E/R for both. :wink:

I bought PTTRX in 2006 after watching it for five years waiting for it to mess up. It never did except for a small glitch when Gross left and that was probably due to everyone bailing rather than the remaining management team under performing. On the cost ratio, I think that Pimco's large use of derivatives may reduce costs &/or produce income that more than offsets the higher E/R. They have been consistently out performing over decades and I have a hard time believing that it is all due to "stock" picking. PTTRX does have higher volatility at least in the short run but also higher Sharpe and Sortino ratios. Higher transaction costs can make a difference in the other direction for smaller positions.

I never use a TBM fund except for small accumulator positions. I also tend to use Vanguard's active bond funds for the most part.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

Post Reply