What is "Slice and Dice"?

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What is "Slice and Dice"?

Post by LadyGeek » Sun Oct 24, 2010 3:37 pm

There are a number of active threads comparing the Fama / French approach (owning the entire market) versus "Slice and Dice" (tilting towards small caps).

As the battle is gearing up on both sides, I failed to find a clear definition of "Slice and Dice". The best definition I could find is 10 years old, from one website (I don't know if this is a credible source). So, I took my best shot and created a new wiki page. It doesn't look complete, but I don't know what's missing.

This is not my background. Could the experts please review and suggest updates / corrections?

Please see Slice and Dice on the Bogleheads Wiki.

This page is not linked to anything in the main wiki. I'll hook it in properly when everyone says that it's correct. Thanks.
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Post by bob90245 » Sun Oct 24, 2010 3:50 pm

From the wiki:

"Slice and Dice [S&D] is essentially an equal weighting of 25% large growth, 25% large value, 25% small growth and 25% small value stocks based on CRSP deciles"

The above is only one example of S&D. I define S&D more broadly where an investor diversifies their equity asset classes beyond US Large Blend (i.e. TSM). For example, all of the Lazy Portfolios would also qualify as S&D.
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Post by Chuck T » Sun Oct 24, 2010 3:51 pm

LadyGeek

First, I am not an expert on slice and dice. In your draft wiki page you state that slice and dice requires equal weighting of a number of sub asset class funds. I do not believe equal weighting is required. What is required is to break an exisiting asset class into more than one sub asset class, This is my opinion, not fact.
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Post by empb » Sun Oct 24, 2010 4:00 pm

In agreement with the previous posters, in that 'Slicing and Dicing' is simply splitting the market portfolio into some smaller components and re-weighting them as one sees fit.

However, I'm not sure you can calling TSM investing the "Fama / French approach". They've gone on record saying there's nothing wrong with the market portfolio (or any other portfolio for that matter so long as one hold enough stocks), but on this board, when someone refers to "multifactor investing" or "tilting" or "slicing and dicing" they're referring to targeting the 3 risk factors in the FF model, i.e., Mkt, SmB and HmL. In other words, not the market portfolio.
Last edited by empb on Sun Oct 24, 2010 4:08 pm, edited 3 times in total.

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Post by zaplunken » Sun Oct 24, 2010 4:02 pm

What is CRSP? I can usually guess an acronym but I'm stumped.

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Post by dbr » Sun Oct 24, 2010 4:09 pm

Well, definition is definition, but in my concept of investing slice and dice means that one explicitly controls one's allocation to a set of sub-classes of an asset.

An example is that if one believes the subclasses of US equities are the nine M* style boxes then a slice and dice portfolio explicitly allocates a quantity to each style box and maintains that allocation by rebalancing.

If one combines this with FF theory, then the allocation is defined by the factor loadings of small and value that one has in addition to the total market loading and one specifically allocates to the chosen factor loading and maintains that allocation.

One can implement slice and dice by picking an array of actual retail funds and maintain an explicit allocation to those funds. I see this as an approximate attempt to implement an allocation over style boxes. Mathematically if one wants to actually fill an n x n array of style boxes using retail funds, one needs at least n^2 funds that are linearly independent from each other to always find a solution to an arbitrary slice and dice requirement.

The example in the Wiki assumes a 2 x 2 style box under the implicit assumption that funds actually exist that are pure examples of each asset class, a simple implementation of the non-degeneracy of available funds. The assumption that slice and dice uses just that array of asset classes is too restrictive and the restriction that the weighting is equal would not very often be agreed to by most.

Setting a stock bond ratio at some value like s/b and buying a single bond fund and a single stock fund in that ratio would be a slice and dice asset allocation where the recognized asset classes are stocks and bonds.

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Post by Beagler » Sun Oct 24, 2010 4:14 pm

zaplunken wrote:What is CRSP? I can usually guess an acronym but I'm stumped.
http://lmgtfy.com/?q=CRSP+investing
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Post by bob90245 » Sun Oct 24, 2010 4:16 pm

zaplunken wrote:What is CRSP? I can usually guess an acronym but I'm stumped.
Center for Research in Security Prices. There is a wiki page if you're interested:

http://en.wikipedia.org/wiki/Center_for ... ity_Prices
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Post by dbr » Sun Oct 24, 2010 4:19 pm

I forgot to add that tilting and slice and dice are completely different concepts. Tilting does require allocation according to a slice and dice model, however, as tilting addresses the question of what the allocation across asset classes is while slice and dice only specifies that the asset classes are managed explicitly and are fixed. Tilting means a preference for some asset classes or for some factor loading that is different from the total market of whatever asset population one is working in, usually US equities.

Investment in the total market is possible without any definition or analysis of what asset subclasses might even exist, at least in theory. Devising a index to represent the total market might be a more difficult proposition.

I am not sure I would refer to a FF "approach" as I am not sure Fama and/or French have indicated an approach. If they have, it seems to be random comments that tend toward "invest in the whole market." What the Fama-French approach is is a analysis of how to predict returns for various diversified classes of assets. By diversified they mean, and I mean, that diversifiable risk is eliminated already. The fact that risk can be explained by a three factor model applicable to diversified asset classes that we can identify and actually buy in the market means that investors can devise portfolios that have higher or lower return as desired. You cannot do that without slicing and dicing, but slicing and dicing does not mean that is what you are doing.

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Post by SP-diceman » Sun Oct 24, 2010 4:25 pm

Whats investing ?
(everyone seems to disagree)


:)



Thanks
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Post by idahospud » Sun Oct 24, 2010 5:01 pm

In equity investing:
there is the total market equity weighted approach and...
anyone that 'tilts' away from this norm is committing 'slicing and dicing' or 'overweighting'.

the above is not a criticism (I do some of it too) but it is the way I understand 'tilting' and 'slicing and dicing' and 'overweighting' and...
in my mind at least, all three terms are synonymous.

I think the present definitions of tilting and S & D are pretty adequate, unless they really are concepts with different meanings.

Here is one place where the 'Wiki' suppports my argument:

Tilting
Tilting is defined as any deviation (change) from the Total Stock Market distribution percentages as previously defined. Tilting is a good term because it implies you adjust within reason and don't go overboard with extreme weighting to small.

Historically, value stocks and small stocks have provided higher returns than large blend and growth stocks (in both domestic and foreign markets). The theoretical basis posited for these higher returns states that small stocks and value stocks are riskier than large and growth stocks, and that the higher returns compensate investors for higher risk. [5] [6] [7] Based on theory and past performance, some investors choose to add additional value and small stocks to their portfolios. Many investors who tilt employ what is termed a 4x25 allocation consisting of equal parts of 25% large blend; 25% large value; 25% small blend; and 25% small value. Tilters employ blend indexes for growth stock exposure in response to the long term performance of small cap growth stocks. [8] [9] Other tilters, valuing greater portfolio simplicity, overweight small value stocks by adding a small value fund to the market portfolio. [10] Overweight means increasing your holdings to more than is naturally in the market profile. As an example, the Small cap styles represent 9% (3 + 3 + 3) of the total market. Tilting to Small means overweighting your portfolio to hold more than 9% of Small cap stocks.

If you invest $1.00 in a total market index fund, each stock receives the same amount of your dollar in proportion to it's cap weight. The largest stock gets 100 times the amount of a company 100th it's size. Therefore, no company gets more or less than that determined by it's market capitalization.

Tilting is defined as any deviation (change) from the Total Stock Market distribution percentages as previously defined. Tilting is a good term because it implies you adjust within reason and don't go overboard with extreme weighting to small.


http://www.bogleheads.org/wiki/Value_Tilting_-_Stock

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Post by Noobvestor » Sun Oct 24, 2010 5:52 pm

bob90245 wrote:From the wiki:

"Slice and Dice [S&D] is essentially an equal weighting of 25% large growth, 25% large value, 25% small growth and 25% small value stocks based on CRSP deciles"

The above is only one example of S&D. I define S&D more broadly where an investor diversifies their equity asset classes beyond US Large Blend (i.e. TSM). For example, all of the Lazy Portfolios would also qualify as S&D.
Wow. That's not how I've been reading it at all (the definition). Like you, I viewed it simply as the name suggests generally: slicing a portfolio beyond a total market. Hmm.

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Post by dbr » Sun Oct 24, 2010 5:59 pm

I will grant that almost everyone on this forum who uses the term "slice and dice" really means "small cap value tilt." I also grant that almost everyone on this forum who refers to a "more diversified" portfolio really means "small cap value tilt." I have learned to stop worrying and to love the more diversified slice and dice portfolios.

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Post by fishnskiguy » Sun Oct 24, 2010 6:22 pm

I agree with most of the other posters. Slice & Dice is not an equal weight of LG, LV,SG,SV. That's one example of a slice and dice portfolio, and a poor one at that, IMO.

In Chapter 13 of Four Pillars, WB gives several examples of possible portfolios. All are S&D portfolios.

Our equity port is pretty much a "classic" S&D portfolio with a value tilt:

30% US LB
30% INTL LB
10% US LV
10% US SV
10% EM
10% Precious Metals and Mining

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Post by Index Fan » Sun Oct 24, 2010 6:32 pm

To me, 'slice and dice' is a general term for overweighting certain parts of the equity market in one's portfolio, generally meaning that one holds more small/mid cap stocks and often more value than blend/growth when compared to the total stock market approach.
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Post by nisiprius » Sun Oct 24, 2010 6:46 pm

I'm going to try a definition off the top of my head just for laughs.

The "slice and dice" approach refers to an investing style which involves the use of more than the three traditional asset classes, stocks, bonds, and cash. It is often contrasted with "total market" investing.

The names refer to the way stocks are treated. "Total market" investing treats stocks as a unitary asset class and invests in them via a total stock market index fund; "slice-and-dice" segregates out portions of the stock market and treats them as separate asset classes, and weights them, not by market capitalization, but in some other way--sometimes by the use of portfolio construction methods based on "modern portfolio theory" (MPT).

Whereas a "total market" investor' might be satisfied, outside of cash, with a two-fund portfolio--Total Stock Market Index and Total Bond Market Index--a "slice and dicer" would use more than one stock fund. A simple example of a "slice and dice" portfolio would be William Schultheis's "Coffeehouse Portfolio," in which the stock allocation is made up of six equal "slices:" Small-Cap Value Index, REIT Index, Total International Stock Index, Index (S&P) 500, Value Index, and Small-Cap Index.

Slice-and-dicers may use asset classes in addition to stocks, bonds, and cash, such as commodities or non-investment-grade ("high-yield") bonds. The definition of "asset class" is flexible and varies from authority to authority.

The theoretical justification for "slice-and-dice" rests on the benefits of what is often called "diversification." However, in this context the word is used with a specific technical meaning. It refers to asset classes with low correlation coefficients. The benefit comes from the fact that a mixture of assets with low correlation will have better risk-adjusted returns than either of them taken by itself. A well-known example is that even though international stocks are riskier than domestic stocks, adding a moderate amount of international stocks to domestic stocks actually reduces the risk of the domestic stocks--slightly.

Although slice-and-dice has sound theoretical underpinnings, its use is not uncontroversial among Bogleheads. It is more complex than a "total market" approach. Slice-and-dice portfolios require more attention and more frequent rebalancing than simpler portfolios. The debate boils down to how large the benefit is, whether it is possible to prove unequivocally that there really is a benefit, and, even if so, whether it is worth the effort.
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Post by dbr » Sun Oct 24, 2010 6:57 pm

I like nisi's explantion. Its essence is the identification of asset sub-classes, the specification of weights for those classes, the explanation that what the classes are is a matter of definition, and that slice and dice is contrasted to total market or "unitary" asset class investing.

I think it is not part of the definition but essential to explanation that there is a theoretical rationale for slice and dice. I appreciate that an explanation is given of a highly technical and non-intuitive use of the term "diversification" in order to prevent confusion with other uses of the term.

I think nisi is correct in leaving issues subject to debate at the level of mention rather than attempting to summarize the points at debate.

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Post by LadyGeek » Sun Oct 24, 2010 7:18 pm

fishnskiguy wrote:In Chapter 13 of Four Pillars, WB gives several examples of possible portfolios. All are S&D portfolios.
Thank you! I have William Bernstein's Four Pillars, but I didn't understand the problem enough to know where to look. He splits the market into four corners: Large Value, Large Growth, Small Value, Small Growth.

Is this simply a matter of terminology? IOW, slicing through the equity style box horizontally is called "slicing", while cutting it vertically is called "dicing"; hence the "slice and dice"? I'm looking at the equity style box as a 9-box version of WB's four corners. (However, nisiprius is extending this definition to include all asset classes. See below.)

=============================
Is there a consensus that "slice and dice" only refers to equities (stocks)? To be sure I understand this correctly, the equity parts of the Lazy Portfolios that don't align with the total stock market weighting are considered to be "slice and dice". Also note the usage in the Slice and Dice International page.

OTOH, nisiprius and dbr are taking a broader view to include all asset classes; not just equities. Do we have two definitions (context dependent), or obfuscation of a single definition?

I'm content to leave issues subject to debate at the level of mention, but I want to accurately state what those mentions are. (The wiki needs to be objective.)

========================
I still have some work to do and correct the "Fama / French Approach".

===========================
zaplunken wrote:What is CRSP? I can usually guess an acronym but I'm stumped.
It's in the footnotes, "Chicago Center for Research in Security Prices". I try to never guess an acronym. You have no idea how many TLAs (Three Letter Acronyms) mean different things in different fields. For example: SWR = Safe Withdrawal Rate (investing) = Standing Wave Ratio (RF engineering).
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Post by dbr » Sun Oct 24, 2010 7:25 pm

LadyGeek, I think you are trying to post a simple definition of terminology by finding the definition from usage. This is a noble undertaking as the marvelous history of the Oxford English Dictionary proceeds in the same manner. The OED process is to solicit examples from a huge population of contributors who provide cited examples of usage following which editors compile the appropriate statement of definition. I think if you keep at this you will be successful, but the first expectation is that there will be many usages submitted and that usages will be context dependent. I also think that in financial writing there is an abysmal habit of substituting example for exposition that creates perpetual problems in understanding terminology.

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Post by norookie » Sun Oct 24, 2010 7:43 pm

:D I recall a poster posting 10% each selection not considering the 9grid box. Thats my interpretation of a S&D'er. However there are many as shown above.
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Post by Paladin » Sun Oct 24, 2010 7:45 pm

zaplunken wrote:What is CRSP? I can usually guess an acronym but I'm stumped.
http://www.google.com/

See the first entry!

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Post by retiredjg » Sun Oct 24, 2010 7:46 pm

empb wrote:'Slicing and Dicing' is simply splitting the market portfolio into some smaller components and re-weighting them as one sees fit.
To me, this is the best and most concise definition. And it fits the idea of taking something whole (total stock market, total international, whatever) and slicing and dicing it up into the pieces you want in whatever size you want them.
However, I'm not sure you can calling TSM investing the "Fama / French approach".

I agree with this too. FF approach is not the same as a total market approach in my opinion.
idahospud wrote:anyone that 'tilts' away from this norm is committing 'slicing and dicing' or 'overweighting'.
I disagree. Slice and dice is independent of tilting in my opinion. If you had total stock market and added some small cap value on the side, you'd have a tilt, but no slice and dice.

I do not think of "slice and dice" as a term that is used with bonds. The total bond market is not something that can easily be sliced and diced into its components. It could certainly happen in theory, but I don't think all the components are available as separate units.

As mentioned by dbr, your undertaking is indeed noble, LadyGeek, and I wish you luck. If you manage to finish this one, try to get some consensus on what "diversification" means.:wink: My hat is off to you!

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Post by Paladin » Sun Oct 24, 2010 7:50 pm

retiredjg wrote:I do not think of "slice and dice" as a term that is used with bonds. The total bond market is not something that can easily be sliced and diced into its components. It could certainly happen in theory, but I don't think all the components are available as separate units.
I disagree. The total bond market can easily be sliced and diced. Bernstein does it in all of this sample portfolios in 13 Pillars.

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Post by LadyGeek » Sun Oct 24, 2010 7:59 pm

dbr wrote:LadyGeek, I think you are trying to post a simple definition of terminology by finding the definition from usage. This is a noble undertaking as the marvelous history of the Oxford English Dictionary proceeds in the same manner. The OED process is to solicit examples from a huge population of contributors who provide cited examples of usage following which editors compile the appropriate statement of definition. I think if you keep at this you will be successful, but the first expectation is that there will be many usages submitted and that usages will be context dependent. I also think that in financial writing there is an abysmal habit of substituting example for exposition that creates perpetual problems in understanding terminology.
dbr, this is quite an honor. I did not know I was following in the path of the illustrious OED. Because my background is engineering, I assumed my inability to find an explanation was simply because I did not understand the subject. I thought there was single, clear answer. I was wrong.

Your insight into the differences between financial and technical writing are enlightening.

If I need a consensus, or multiple definitions, then that's what I'll put in the wiki. The intent is to provide guidance so others won't have the same confusion that I'm going through right now.
Last edited by LadyGeek on Sun Oct 24, 2010 8:01 pm, edited 1 time in total.
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Post by nisiprius » Sun Oct 24, 2010 8:01 pm

LadyGeek wrote:Is this simply a matter of terminology? IOW, slicing through the equity style box horizontally is called "slicing", while cutting it vertically is called "dicing"; hence the "slice and dice"?
No, I don't think so. I think "slice and dice" is just a jocular way of suggesting that the universe of investments is chopped fairly fine.
Is there a consensus that "slice and dice" only refers to equities (stocks)?
Again, I don't think so. But then don't I think it's a technical term with a precise meaning.

It's like "stay the course" versus "time the market." There's no precise definition of either term.
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Post by rustymutt » Sun Oct 24, 2010 8:08 pm

Ladygeek, you could slice those 4 assets again by making internationals a part of your slice and dice portfolio. Then you could take a slice of something and buy REITs. Then you might want to add commodities for to lower your risk. These are all things you can do with your investments that would be called slice and dice. I have 12 different slices in my diced up portfolio. Each diced up slice is there for a reason.
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Post by retiredjg » Sun Oct 24, 2010 8:09 pm

Paladin wrote:
retiredjg wrote:I do not think of "slice and dice" as a term that is used with bonds. The total bond market is not something that can easily be sliced and diced into its components. It could certainly happen in theory, but I don't think all the components are available as separate units.
I disagree. The total bond market can easily be sliced and diced. Bernstein does it in all of this sample portfolios in 13 Pillars.
Just for fun, I'll disagree back. Slice and dice refers to chopping up a 2 dimensional figure - like Tic-Tac-Toe. You can't do bonds in 2 dimensions - to fully describe bonds, you need 3 dimensions - like a Rubik's Cube.

Oh, heck, I suppose you can slice and dice a Ribik's Cube too. Just like the potato I diced yesterday.... Carry on. :roll:

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Post by natureexplorer » Sun Oct 24, 2010 8:14 pm

It doesn't have to be Total Market to be not Slice and Dice. One could also be 100% in small cap and is not slicing and dicing. For me slicing and dicing is keeping allocations to more than one sub asset classes constant (for example by adding new money to the underperforming asset class). For example:

50% TI
50% TSM

or

30% TI
70% TSM

Technically having an allocation to both bonds and stocks is the simplest form of slicing and dicing, here it is often referred to as rebalancing.

One could also be slicing between different sectors, value/growth, cap sizes, geographic regions, developed vs emerging, etc etc etc. The Vanguard Target Retirement funds do daily slicing and dicing for you.

Slicing and dicing is dangerous of you cannot stay the course. Slicing and dicing enhances returns if you have not perfectly correlated volatility that reverses to mean. See Vanguard's rebalancing paper. If you have momentum, slicing and dicing will hurt returns.

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Post by Paladin » Sun Oct 24, 2010 8:16 pm

retiredjg wrote:
Paladin wrote:
retiredjg wrote:I do not think of "slice and dice" as a term that is used with bonds. The total bond market is not something that can easily be sliced and diced into its components. It could certainly happen in theory, but I don't think all the components are available as separate units.
I disagree. The total bond market can easily be sliced and diced. Bernstein does it in all of this sample portfolios in 13 Pillars.
Just for fun, I'll disagree back. Slice and dice refers to chopping up a 2 dimensional figure - like Tic-Tac-Toe. You can't do bonds in 2 dimensions - to fully describe bonds, you need 3 dimensions - like a Rubik's Cube.

Oh, heck, I suppose you can slice and dice a Ribik's Cube too. Just like the potato I diced yesterday.... Carry on. :roll:
LOL. Yup! Why 3D for bonds?

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Post by LadyGeek » Sun Oct 24, 2010 8:22 pm

retiredjg wrote:Just for fun, I'll disagree back. Slice and dice refers to chopping up a 2 dimensional figure - like Tic-Tac-Toe. You can't do bonds in 2 dimensions - to fully describe bonds, you need 3 dimensions - like a Rubik's Cube.

Oh, heck, I suppose you can slice and dice a Ribik's Cube too. Just like the potato I diced yesterday.... Carry on. :roll:
What about the fixed income style boxes? Time is on the x-axis (duration), risk is on the vertical axis (credit rating).
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Post by Paladin » Sun Oct 24, 2010 8:25 pm

LadyGeek wrote:
retiredjg wrote:Just for fun, I'll disagree back. Slice and dice refers to chopping up a 2 dimensional figure - like Tic-Tac-Toe. You can't do bonds in 2 dimensions - to fully describe bonds, you need 3 dimensions - like a Rubik's Cube.

Oh, heck, I suppose you can slice and dice a Ribik's Cube too. Just like the potato I diced yesterday.... Carry on. :roll:
What about the fixed income style boxes? Time is on the x-axis (duration), risk is on the vertical axis (credit rating).
That's why I asked. Duration and credit quality implies 2D.

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Post by retiredjg » Sun Oct 24, 2010 8:30 pm

Paladin wrote:
retiredjg wrote:
Paladin wrote:
retiredjg wrote:I do not think of "slice and dice" as a term that is used with bonds. The total bond market is not something that can easily be sliced and diced into its components. It could certainly happen in theory, but I don't think all the components are available as separate units.
I disagree. The total bond market can easily be sliced and diced. Bernstein does it in all of this sample portfolios in 13 Pillars.
Just for fun, I'll disagree back. Slice and dice refers to chopping up a 2 dimensional figure - like Tic-Tac-Toe. You can't do bonds in 2 dimensions - to fully describe bonds, you need 3 dimensions - like a Rubik's Cube.

Oh, heck, I suppose you can slice and dice a Ribik's Cube too. Just like the potato I diced yesterday.... Carry on. :roll:
LOL. Yup! Why 3D for bonds?
Well quality and duration make up the two dimensions usually discussed. The third would be separating the government bonds from corporate bonds. Then there is this appendage to the side for high yield and munis. I guess that is two appendages. Maybe it's ears.

Anyway, I just don't think of slicing and dicing the universe of the bond market, although I do see a reason to use a couple of different durations. It just is not slice and dice to me. It's more of just a slice.

I cook a lot so my slice and dice thoughts probably follow cooking definitions. :lol:

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Post by LadyGeek » Sun Oct 24, 2010 8:39 pm

Timeout for some perspective. This is exactly what I went through when I asked about leverage. I did not understand what leverage meant and was inundated with reasons why it was bad. You need to understand what this stuff is first, then figure out what to do with it. The result was a very nice page with clear examples that objectively explained everything: Please see Leverage on the Bogleheads Wiki. A forum "team" effort.

I'll scan through the posts here, then try to come up with something for the wiki. The idea is to teach the basic concepts so investors can understand what's being discussed in the forum (and how to use it for themselves).

Press any key to continue...
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Post by fishnskiguy » Sun Oct 24, 2010 8:42 pm

nisiprius wrote:
LadyGeek wrote:Is this simply a matter of terminology? IOW, slicing through the equity style box horizontally is called "slicing", while cutting it vertically is called "dicing"; hence the "slice and dice"?
No, I don't think so. I think "slice and dice" is just a jocular way of suggesting that the universe of investments is chopped fairly fine.
Is there a consensus that "slice and dice" only refers to equities (stocks)?
Again, I don't think so. But then don't I think it's a technical term with a precise meaning.

It's like "stay the course" versus "time the market." There's no precise definition of either term.
I agree with Nisi completely. Slice & Dice is simply slang. Nothing vertical or horizontal about it. The phrase was, to the best of my knowledge, lifted from the advertisement for the world's greatest invention, the Veg-o-Matic :D

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Post by Imperabo » Sun Oct 24, 2010 8:43 pm

Am I slicing and dicing if I hold multiple funds but weight them according to market cap? Say, for TLH purposes?

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Post by fishnskiguy » Sun Oct 24, 2010 8:46 pm

Imperabo wrote:Am I slicing and dicing if I hold multiple funds but weight them according to market cap? Say, for TLH purposes?
Yep.

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What about taxes and how to define value vs growth ?

Post by blevine » Sun Oct 24, 2010 8:52 pm

I posted elsewhere about fine tuning a portfolio in a tax deferred account.
Since I follow asset location and given current tax law heavily favors equities, that means I "slice and dice" amongst fixed income options in my tax def portfolio. No tax cost to trading between Total Bond, GNMA, Investment Grade, long vs short duration etc.

Has anyone studied the tax cost vs benefit of rebalancing value vs growth and large vs small cap in the taxable portfolio ? If they raise the cap gains tax in 2011 or beyond it's going to get very expensive I'd think.

To avoid both the complexity and possibly tax, I have stuck with a small # of equity portfolios, a core US, a core International and the infrequent satellites if I think there is value somewhere to be had. I rode the small cap wave for a while by adding separate US and Int small cap funds, but now dropped them to concentrate on my core holdings for now. If they significantly raise cap gains taxes I would reduce such efforts further.
If they raise the tax on dividends, that's another story.
2 ways to look at buying dividend vs growth stocks :

1) Buy the growth stocks in anticipation of tax law favoring them.

2) Assume the market is rationale, and equity issuers realize that
dividends were very attractive recently but may not be going forward.
Firms can choose to raise their dividends or buy back shares, depending
on tax law. See article on one of Wall Street's brightest CEOs :

http://wallstreetpit.com/48849-blackroc ... ices-today

In it they say regarding BlackRock’s dividend:

“We have historically had a 40%-ish dividend policy, and we did buy back stock… We’re not a big user of capital, so we’re going to re-look at our February board meeting at our dividend policy. What we will be paying attention to is the government’s policy on the taxation of dividends. If they happen to raise the dividend taxation policy and dividends are less positive for our client base, we may have a larger component of share repurchases. If they extend the Bush tax cuts related to dividends, we would probably significantly raise their dividends.”

I raise this as many think dividend/value as one and the same.
They simply are not. Paying dividends is a strategy to market a stock,
and they even call investors "clients" in the above article. Nothing to do with value.

Also core funds like total stock have lower exp ratios than Value Index
or Growth Index. Does the strategy really pay off after higher fees and taxes ? Even if so, will increased cap gains rates change the picture ?

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Post by LadyGeek » Sun Oct 24, 2010 9:01 pm

fishnskiguy wrote:I agree with Nisi completely. Slice & Dice is simply slang. Nothing vertical or horizontal about it. The phrase was, to the best of my knowledge, lifted from the advertisement for the world's greatest invention, the Veg-o-Matic :D

Chris
Good timing. My next question was "Are there any products that include "Slice and Dice" in their name?". I'm thinking of funds that use "index" in their name just so they can grab a piece of the market.

It was the Veg-o-Matic??? :o Is there any possibility you can find a "credible" source to track the origin? At least I haven't seen anyone sell a fund for only $19.95... (I think... buy now, get a 2nd fund for 1/2 price...)

Additional definitions in bob90245's website: Investment Advice (bookmarking for later)

blevine - Could you please post the link to your thread so you'll get a better response to your question? I'm just looking for definitions, and would prefer to not sidetrack the topic.
Last edited by LadyGeek on Sun Oct 24, 2010 9:35 pm, edited 1 time in total.
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Post by retiredjg » Sun Oct 24, 2010 9:13 pm

fishnskiguy wrote:
Imperabo wrote:Am I slicing and dicing if I hold multiple funds but weight them according to market cap? Say, for TLH purposes?
Yep. Chris
Yep. I think so too.

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Post by Jack » Sun Oct 24, 2010 9:32 pm

Imperabo wrote:Am I slicing and dicing if I hold multiple funds but weight them according to market cap? Say, for TLH purposes?
If you are truly maintaining market cap then the multiple funds are identical to holding the total market fund. There is no difference. It is not slicing and dicing because effectively it serves no purpose. It's just the total market.

This effectively is what Vanguard is doing with Total International. Total International used to be a fund of multiple funds held to replicate the total international market cap. It is being converted to a single fund that effectively owns the same holdings in a single fund. Vanguard recognizes that there is no difference other than logistical efficiencies.

The only reason to slice and dice with multiple funds rather than just holding the total market cap is because you want to tilt or deviate from the total market cap in some way.

Edit: In a taxable account I suppose holding multiple funds instead of a single total market fund might present tax loss harvesting opportunities.
Last edited by Jack on Sun Oct 24, 2010 10:07 pm, edited 1 time in total.

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Post by CABob » Sun Oct 24, 2010 9:40 pm

Slice & Dice is simply slang. Nothing vertical or horizontal about it. The phrase was, to the best of my knowledge, lifted from the advertisement for the world's greatest invention, the Veg-o-Matic :D

Chris
:lol:
So I thought I would Google "Slice and dice" to see what I got. I got about a half million hits including this one http://whatis.techtarget.com/definition ... 97,00.html
To slice and dice is to break a body of information down into smaller parts or to examine it from different viewpoints so that you can understand it better.
To me it's kind of like porn, I can't define it but I know it when I see it.

Edited to fix a quote box.
Last edited by CABob on Sun Oct 24, 2010 11:15 pm, edited 1 time in total.
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Post by tetractys » Sun Oct 24, 2010 10:02 pm

Just a point that might add a few cents:

I think the term "slice & dice" is derived from the Vegi-matic (sp?) kitchen utensil ads. I can still here the words, "It slices! It dices!" I venture to say those ads may have been among the first infomercials.

"But wait, there's more!"

I'm not sure anyone has mentioned yet that S&D is a technique for increasing expected returns, of either a portion of a portfolio, or of the whole portfolio. This could be debatable though, because of the overlap with tilting towards the FF 3 factors, or to REITs, commodities, or country sectors, and since it could also be considered a diversification technique. And I'm not sure if most S&D investors expect a rebalancing bonus or not.

Best regards, Tet
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Post by bob90245 » Sun Oct 24, 2010 10:19 pm

tetractys wrote:I'm not sure anyone has mentioned yet that S&D is a technique for increasing expected returns, of either a portion of a portfolio, or of the whole portfolio. This could be debatable though, because of the overlap with tilting towards the FF 3 factors, or to REITs, commodities, or country sectors, and since it could also be considered a diversification technique. And I'm not sure if most S&D investors expect a rebalancing bonus or not.

Best regards, Tet
I, for one, am not expecting increased returns or a rebalance bonus. Rather, I am looking for lower overall portfolio volatility. And by extension, a wider choice of equity funds during the withdrawal phase.

But... if I do get higher returns and a rebalancing bonus, I'll take that, too. :D
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.

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Post by Kevin M » Mon Oct 25, 2010 12:14 am

retiredjg wrote:Well quality and duration make up the two dimensions usually discussed. The third would be separating the government bonds from corporate bonds. Then there is this appendage to the side for high yield and munis.
Retiredjg, puzzled that you don't see government/corporate as adequately characterized by the 2 dimensions. Short-term treasuries at one extreme in each dimension and long-term high-yield corporates at the other?

High yield clearly is characterized primarily on the quality axis. Munis also are characterized on the 2 axes, but add in the aspect of tax efficiency. Tax efficiency is a dimension common to all investments, no?
retiredjg wrote: Anyway, I just don't think of slicing and dicing the universe of the bond market, although I do see a reason to use a couple of different durations. It just is not slice and dice to me. It's more of just a slice.
I don't really think in these terms, but if I spend a few seconds on it, I clearly see my bonds sliced and diced along the quality and term dimensions, and Vanguard shows them to me that way in their portfolio watch views.

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Post by Kevin M » Mon Oct 25, 2010 12:33 am

I haven't thought deeply about it before, although I consider myself a slice and dicer as well as a tilter, but thinking about it now ...

I visualize slicing and dicing as slicing a portfolio along one dimension of a morningstar-type style box and dicing it along the other, whether for equities or bonds, then maintaining a target asset allocation in each cell (sliced and diced cube?).

I think of tilting as targeting an AA that deviates from the total stock market (or total bond market) in one or more cells of the style box.

This model isn't complete, as it doesn't address the domestic vs. international split, a REIT tilt, or a tilt to any other asset class not characterized by the dimensions in a morningstar-type style box. Nevertheless, although I don't visualize it, I just consider these other asset classes as additional cells (maybe Retiredjg's "appendages" is an apt metaphor).

I think slice and dice is most commonly applied to domestic equities, but increasingly to international equities as well, especially as more international slices and dices become inexpensively available. Ditto for tilting, except this may also be commonly applied to international vs. domestic (but what's a tilt? more than 20% international? less than global market weight in international?).

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Post by nisiprius » Mon Oct 25, 2010 6:36 am

I like to use Google Books and select "full view only," which tends to give hits mostly on public domain, hence older material. It seems to be just an old, euphonious phrase. I don't think Popeil originated it.

"VICTORIA SALAD: Bananas. Grapes, Stoned cherries, Apples, Diced pineapple, Pears, Melon, Ginger cordial, Peaches, Sugar, Apricots

Prepare the fruits and slice and dice them. Cover one pound of sugar with one pint of water and cook until the syrup is thick and ropy. Cool and flavor to taste with ginger cordial. Any other preferred cordial or liqueur may be used. Mix the fruits in a salad bowl decorated with cherries, and serve with the flavored syrup."--Salads, sandwiches and chafing dish recipes, By Marion Harris Neil, 1916, and several other cookbooks of the same vintage.

"The pundits like to slice-and-dice our country into Red States and Blue States"--a person not to be named for fear of turning the discussion p*l*t*c*l :), 2008

Here is a technical reference, and here it is clear that a die is indeed part of a slie... I mean slice. "Following this operation and again prior to further processing which would prevent determination of die location on the slice, five dice are selected from each of the previously identified slices. Dice selection is identical to that for selection of dice from a slice with discrete units. That is, four dice are selected from near the periphery of the slice and one die from the center (see Figure 2). The 25 dice thus obtained from the five slices are then viewed under a SEM....Other metallization run(s) are examined, following the same procedure for slice and dice selection, until an acceptable metallization run is found."--National Bureau of Standards, 1970
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Post by dumbmoney » Mon Oct 25, 2010 7:41 am

Slice and dice generally refers to rebalancing to a fixed percentage various types of stock funds, as a long term strategy. It may be viewed as a watered down form of value or contrarian investing, since you buy losers and sell winners. (Of course, it's not very contrarian to adopt a contrarian strategy that has performed well...)
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Post by Ice-9 » Mon Oct 25, 2010 8:42 am

fishnskiguy wrote: The phrase was, to the best of my knowledge, lifted from the advertisement for the world's greatest invention, the Veg-o-Matic :D
Thank you for this. I remembered the commercial, but not the product name. :D

http://www.youtube.com/watch?v=1GniNeqSX5U

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Post by sscritic » Mon Oct 25, 2010 9:03 am

nisiprius wrote: Here is a technical reference, and here it is clear that a die is indeed part of a slie... I mean slice. "Following this operation and again prior to further processing which would prevent determination of die location on the slice, five dice are selected from each of the previously identified slices. Dice selection is identical to that for selection of dice from a slice with discrete units. That is, four dice are selected from near the periphery of the slice and one die from the center (see Figure 2). The 25 dice thus obtained from the five slices are then viewed under a SEM....Other metallization run(s) are examined, following the same procedure for slice and dice selection, until an acceptable metallization run is found."--National Bureau of Standards, 1970
So is slice and dice the combination of two verbs or two nouns? Or is it one verb and one noun? Let me slice that and pick out the dice:

1) slice (verb) and dice (verb)
2) slice (verb) and dice (plural noun)
3) slice (noun) and dice (verb)
4) slice (noun) and dice (plural noun)

I like the idea of taking a single die out of a single slice (noun and noun).

But then we should really be talking about slices and dice (or slice and die). I think we should respect parallelism.

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Post by sscritic » Mon Oct 25, 2010 9:17 am

Following the physical analogy, there should be two separate terms: a sliced portfolio is divided in one dimension only, a diced portfolio is divided in two or more dimensions. Sliced and diced is redundant; you can't dice an onion without slicing it first. Note that the sliced onion has cuts in only one direction while a diced onion requires cuts in three.

A sliced portfolio: Stocks, Bonds, Cash
A diced portfolio: Stocks (Domestic and Foreign); Bonds (Domestic and Foreign); Cash (CDs denominated in US and other currencies).
A three dimensional diced portfolio: add that large and small thing you do.
A four dimensional diced portfolio: add that growth and value thing you do.

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