When you weight according to market cap, your weights will move together with the market fluctuations, without the need of adjustments on your part.
For any other metric you'll have to re-weight every now and then because your weights will not move together with the underlying securities, and pay for the corresponding transaction costs.
Search found 322 matches
- Tue Jun 15, 2021 8:50 am
- Forum: Investing - Theory, News & General
- Topic: Is market capitalization the correct metric?
- Replies: 64
- Views: 5768
- Sun May 16, 2021 7:29 pm
- Forum: Non-US Investing
- Topic: ETF choice and asset allocation (based in EU)
- Replies: 11
- Views: 3120
Re: ETF choice and asset allocation (based in EU)
Reinvesting every time there is a distribution requires a big commitment and you might incur in transaction costs, depending on your brokerage account. Morever, in some accounts in addition to taxes you pay a commission over the distribution of dividends, like in the Degiro Custody account.
- Sun May 16, 2021 1:05 pm
- Forum: Non-US Investing
- Topic: ETF choice and asset allocation (based in EU)
- Replies: 11
- Views: 3120
Re: ETF choice and asset allocation (based in EU)
Is there a reason you prefer the iShares world and emerging market UCITS over the Vanguard ones? Is it cost? Costs should be close enough, but there are other reasons for choosing iShares. 1) larger fund size. This is the main reason. When it comes to passive investing, it is generally considered wiser to look for passive ETF with large fund size, so that expenses are kept lower because of the economy of scales, there is more liquidity and there is lower risk that the fund is closed/merged. Here you can find a good article by JustETF that explains why larger funds are preferable https://www.justetf.com/uk/news/etf/size-matters-when-it-comes-to-etfs.html If you use the single Vanguard fund FTSE all-world it should be large enough, but for e...
- Sun May 16, 2021 10:45 am
- Forum: Non-US Investing
- Topic: ETF choice and asset allocation (based in EU)
- Replies: 11
- Views: 3120
Re: ETF choice and asset allocation (based in EU)
As I don't know if I'll want to take income each year, do I need to put some assets into a distributing fund like Vanguard FTSE All-World UCITS ETF IE00B3RBWM25 USD? No. Accumulating is better. If you really need money you can still sell some shares. However, my wife thinks that given our age, and the fact we shouldn't be needing the money for a while, we should be more aggressive with part of the portfolio more weighted towards India / China / Japan / Private Equity / Hedge Funds (though these last two may not be very Bogleheads!). Any thoughts or suggestions? Rather than going All-world with a single fund, you can split the developed and emerging market component using two funds and weight according to your risk tolerance. Vanguard have ...
- Sat May 15, 2021 6:15 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS - Did you give up?
- Replies: 493
- Views: 101265
Re: TIPS - Did you give up?
Buying VTIP and SCHP have been one of the few very good ideas I had at the end of last year.
- Sat May 15, 2021 6:13 pm
- Forum: Investing - Theory, News & General
- Topic: Globally Diversified or Worsified?
- Replies: 207
- Views: 15881
Re: Globally Diversified or Worsified?
Fluctuations in the stock market can have time scales of the order of decades. The historical data we have at our disposal -or at least those that we can take seriously- are all within a time window of about a century. A century, while it might sound a long time interval on many other aspects, is a relatively short time to sample stock market movements.
Therefore, while we have no precedents of a single 30 years period of US stocks consistently underperforming, it is written absolutely nowhere that this can't happen in the close future, and it's actually a possibility that it's fair to consider even realistically.
Having no exposure to international stocks means being exposed to that kind of risk, and things don't happen until they happen.
Therefore, while we have no precedents of a single 30 years period of US stocks consistently underperforming, it is written absolutely nowhere that this can't happen in the close future, and it's actually a possibility that it's fair to consider even realistically.
Having no exposure to international stocks means being exposed to that kind of risk, and things don't happen until they happen.
- Sat May 15, 2021 2:26 pm
- Forum: Investing - Theory, News & General
- Topic: In what condition, will international significantly overperform US?
- Replies: 178
- Views: 18846
Re: In what condition, will international significantly overperform US?
In the conditions we have right now.
There has been a significant increase in the P/E in the past years. Sooner or later the P/E will reverse to the mean, because it always does. In order for this to happen, either earnings will grow at a faster pace than they have so far -but why would it happen?- or there will be a downward correction of share prices.
There has been a significant increase in the P/E in the past years. Sooner or later the P/E will reverse to the mean, because it always does. In order for this to happen, either earnings will grow at a faster pace than they have so far -but why would it happen?- or there will be a downward correction of share prices.
- Sat May 15, 2021 12:26 pm
- Forum: Investing - Theory, News & General
- Topic: Currency hedged bond ETFs ?
- Replies: 20
- Views: 1713
Re: Currency hedged bond ETFs ?
I'm 30 and I'll likely go back in the close future, like end of year.
I've seen people suggesting to avoid bonds, indeed. I felt like I wouldn't mind a little bit of diversification among asset classes, even with small weight.
90% is going to whatever good alternative I find to the American VT, and that problem is solved. Then, either I make it 100% and I dodge the issue completely, or I need to determine what else I could do with the remaining 10 %.
- Sat May 15, 2021 12:15 pm
- Forum: Investing - Theory, News & General
- Topic: Currency hedged bond ETFs ?
- Replies: 20
- Views: 1713
Re: Currency hedged bond ETFs ?
It's not a nitpick, it's a clarification of the framing of the role of bonds. I don't hold foreign bonds as the risk free asset, nor do I expect them to be. IMHO, if the objective of holding bonds is simply to hold the risk free assets, I wouldn't include foreign bonds in that bucket, or even corporate USD denominated. If optimizing for risk free, and you're a USA investor, Treasuries (in nominal and TIPS flavors) should be the asset of choice. So, yes, your holding of EM bonds is a risk asset, just like all foreign bonds and USD corporates. I don't think this is in disagreement with your POV. Sooner or later I will have to go back to Europe. Would you suggest to avoid foreign bonds altogether, buy a bunch of low yield European governments...
- Fri May 14, 2021 10:31 pm
- Forum: Non-US Investing
- Topic: What happened to AGGH ? (Euro hedged global aggr)
- Replies: 8
- Views: 2969
Re: What happened to AGGH ? (Euro hedged global aggr)
More intuitive is the Morningstar fund chart of AGGH (blue and filled) in comparision to the index LEGATRUU (black), the unhedged, distributing version AGGG (red, the currency risk manifested itself as a chance in the choosen period) and a newer Vanguard competitor VAGF (green). As always, Morningstar does not get the legend right. It's a bit of a letdown that the main website does not provide the proper information about the tracking error. i find the way they make the comparison pretty unclear. They show that AGGG is tracking just fine, but what I want to know is whether with AGGH they're doing a good job as well. If we take the Vanguard equivalent, they do use a benchmark that is also currency hedged so that an apple to apple comparison...
- Fri May 14, 2021 5:50 pm
- Forum: Investing - Theory, News & General
- Topic: Currency hedged bond ETFs ?
- Replies: 20
- Views: 1713
Re: Currency hedged bond ETFs ?
How is currency appreciation correlated with stock performance, usually ?secondopinion wrote: ↑Fri May 14, 2021 5:31 pm Take your pick. I pick unhedged bonds because I avoid making the bold decision to be USD exclusive with bonds. I do not hold them right now because the amount of funds toward bonds is not meaningful to justify it (I already have a bit of international stock which is not often hedged).
- Fri May 14, 2021 1:50 pm
- Forum: Investing - Theory, News & General
- Topic: Currency hedged bond ETFs ?
- Replies: 20
- Views: 1713
Re: Currency hedged bond ETFs ?
Agreed. Outside US there might be additional problems, but in principle unhedged seems to be the right way to go.
- Fri May 14, 2021 12:23 pm
- Forum: Investing - Theory, News & General
- Topic: Currency hedged bond ETFs ?
- Replies: 20
- Views: 1713
Currency hedged bond ETFs ?
I was watching a Sharpe interview, and he came up with a sort of cryptical sentence when talking about bond funds his "perfect portfolio".
"The international bond fund is currency hedged. I don't know how I feel about it"
And he just left it there.......
I tried to do a little bit of research, Ben Felix made a video (Common sense investing) where he explains that according to the data there is not a definitive answer about what is better.
What are your thoughts on the subject ?
What is some good literature in which the pros and cons are clearly explained ?
"The international bond fund is currency hedged. I don't know how I feel about it"
And he just left it there.......
I tried to do a little bit of research, Ben Felix made a video (Common sense investing) where he explains that according to the data there is not a definitive answer about what is better.
What are your thoughts on the subject ?
What is some good literature in which the pros and cons are clearly explained ?
- Fri May 14, 2021 10:20 am
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
Re: Why the disdain for managed funds like ARKK that destroy total market funds?
What this data is telling you is that most investors started buying ARKK at a later stage, and relatively few were in the game since the beginning, thus enjoying the performance in its full extent.
- Fri May 14, 2021 9:38 am
- Forum: Investing - Theory, News & General
- Topic: Should the Total World Index include Crypto?
- Replies: 30
- Views: 3234
Re: Should the Total World Index include Crypto?
For a brief second I thought that these were your actual money.watchnerd wrote: ↑Fri May 14, 2021 9:19 amCode: Select all
US Stocks CRSP US Total Market $42,541,751.08 34.65% Stocks VTSAX Ex-US Stocks FTSE Global All Cap ex-US $30,708,034.10 25.01% 59.67% VTIAX US Bonds FTSE USBIG $24,492,867.24 19.95% Bonds VBTLX Ex-US Bonds FTSE WorldBIG - USBIG $22,361,044.12 18.21% 38.16% VTABX Crypto CoinMarketCap $2,460,000.00 2.00% Alts GBTC, ETHE Gold Backed ETFs Gold Backed ETFs $203,700.00 0.17% 2.17% GLDM
- Fri May 14, 2021 9:16 am
- Forum: Non-US Investing
- Topic: Should I add small-cap ETF?
- Replies: 12
- Views: 3495
Re: Should I add small-cap ETF?
This is really a great answer and well explained. Thank you for listing all these details. A conviction to stay with a fund for up to 17 years in order to get benefits out of it is not really a thing that I would probably do. I guess it's human nature to always seek complicating stuff when they are simple . I've been always asking myself since I started investing last year if I should add this or that to my portfolio. Whether it was gold, small-cap, or any other thing out there. :happy I am going to keep my portfolio as it is and keep holding the total market fund, that's all I need. I have this fear that if I tilt toward SCV, then after few years a new article will come out suggesting that the strongest factor is something else, and so I ...
- Fri May 14, 2021 4:39 am
- Forum: Investing - Theory, News & General
- Topic: Should the Total World Index include Crypto?
- Replies: 30
- Views: 3234
Re: Should the Total World Index include Crypto?
According to portfolio theory, market cap weighing should get you closest to the efficient frontier.Ocean77 wrote: ↑Fri May 14, 2021 1:06 am I never understood the fuzz is about market cap weighting assets to begin with. The market cap is simply the price tag the market puts on a certain specific company. There is no other guidance hidden in that market cap that we may try to read into it. The market offers no advice that one's personal portfolio should hold 1000x of one company compared to another one that has 1/1000s of the market cap. I.e. look at an arbitrarily weighted index like the Dow Jones, how poorly it is constructed, and what silly decisions the committee has been making on replacing stocks, and still it pretty much matched the S&P over time.
- Fri May 14, 2021 12:27 am
- Forum: Investing - Theory, News & General
- Topic: Should the Total World Index include Crypto?
- Replies: 30
- Views: 3234
Re: Should the Total World Index include Crypto?
I believe that the theory behind the choice of investing in the whole market is solid only if we reduce our definition of market to the assets that can create added value. So no, I don't believe crypto should be included, nor commodities or other currencies for what matters.
Many people disagree with me on this.
Many people disagree with me on this.
- Thu May 13, 2021 10:11 pm
- Forum: Investing - Theory, News & General
- Topic: $365 billion wiped off cryptocurrency market after Musk tweet
- Replies: 108
- Views: 11652
Re: $365 billion wiped off cryptocurrency market after Musk tweet
I can’t help the folks who buy the truly speculative or scam coins. They’ll gamble and many of them will lose. But there are plenty of crypto tokens that can and will disrupt traditional finance—the same institutions that leech off of average people on the daily. Or will disrupt the use of gold as a store of value. Or will further the adoption of exciting new uses of digital value or virtual worlds. I think those will be net positives. You cannot stop all progress merely to protect a few who inevitably will speculate regardless of the situation. With that mindset we never would have had the internet take off the way it did, even though some folks got burned in the dot com boom and bust. I believe it's the opposite. Bitcoins speculations ar...
- Thu May 13, 2021 6:54 pm
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
- Thu May 13, 2021 6:52 pm
- Forum: Investing - Theory, News & General
- Topic: Too Good To Be True Portfolio
- Replies: 35
- Views: 5260
- Thu May 13, 2021 6:39 pm
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
Re: Why the disdain for managed funds like ARKK that destroy total market funds?
What a bad news. I have been shorting ARKK in the hope of having an insurance over being long on VT...
With negative corr it won't work
- Thu May 13, 2021 2:08 pm
- Forum: Investing - Theory, News & General
- Topic: Crypto: New Asset Class or Sector or ???
- Replies: 25
- Views: 2068
Re: Crypto: New Asset Class or Sector or ???
Crypto currencies are currencies, and they'll always be. Then, people started asking themselves the obvious question: if they're currencies what justifies all this excitement about them? Nobody is equally excited about investing in the yen after all. The correct answer would be "indeed the excitement is misplaced", but this was somehow unsatisfactory for all the market participants who already have a lot at stake in them. Therefore, a new framework for defining crypto was constructed, in order to provide the appearance of some theoretical basis to support putting money there. And people started saying "they're actually a completely new asset class!" In this way your conscience is clean when you buy bitcoins: you're actua...
- Thu May 13, 2021 1:20 pm
- Forum: Non-US Investing
- Topic: 3 Fund Portfolio - UK Investor
- Replies: 16
- Views: 9606
Re: 3 Fund Portfolio - UK Investor
Unfortunately not. Only large and medium.Valuethinker wrote: ↑Thu May 13, 2021 12:45 pm Doesn't the FTSE all-world fund include small caps as we?
- Thu May 13, 2021 12:34 pm
- Forum: Non-US Investing
- Topic: 3 Fund Portfolio - UK Investor
- Replies: 16
- Views: 9606
Re: 3 Fund Portfolio - UK Investor
Hi, I've never invested before, and this is my first post on Bogleheads. I've just read Taylor Latimore's book on the 3 Fund Portfolio. I'm 27 and was going to invest in (weighting more towards stocks given my age and the long-term nature of my investments): Vanguard Total Stock Market Index Fund (VTSAX) Vanguard Total International Stock Index Fund (VTIAX) Vanguard Total Bond Market Fund (VBTLX) As per the book's well thought out advice. However I seemingly cannot invest in these funds from the UK. Does anyone have any advice on which funds are avaialble to me from the UK, but mirror the VTSAX, VTIAX, and VBTLX. Thanks, Niall I'd go for one of these two possibilities Option number 1 Vanguard FTSE All-World UCITS ETF (USD) (Acc) iShares Co...
- Thu May 13, 2021 9:43 am
- Forum: Investing - Theory, News & General
- Topic: Is inflation bad...
- Replies: 89
- Views: 9430
Re: Is inflation bad...
In general this is true, but it seems that inflation has already affected stock prices before it could affect the prices of consumer goods. Because of this asymmetry, for those who intend to start investing now, stocks might not hedge against inflation as well as they normally do.
in other words, there are good chances that the boost in stock prices due to inflation has already taken place.
- Wed May 12, 2021 7:21 pm
- Forum: Non-US Investing
- Topic: Tell an inexperienced investor ETF or Dividend? [Ukraine]
- Replies: 19
- Views: 1862
Re: Tell an inexperienced investor ETF or Dividend?
Well, with 25% cash.........platfsholding wrote: ↑Wed May 12, 2021 10:37 am according to history, such a portfolio in 2008 and 2020 was at a loss by 15%, and SPY by 50%
You know, a portfolio in which you don't invest in any asset would go down by 0% in case of market crisis.
- Wed May 12, 2021 7:03 pm
- Forum: Investing - Theory, News & General
- Topic: Vanguard short term inflation protected bonds (TIPS)
- Replies: 18
- Views: 2241
- Wed May 12, 2021 6:41 pm
- Forum: Investing - Theory, News & General
- Topic: Vanguard short term inflation protected bonds (TIPS)
- Replies: 18
- Views: 2241
Re: Vanguard short term inflation protected bonds (TIPS)
I have been having VTIP and SCHP in my portfolio since before it was cool, so far I have sacrificed a significant portion of my returns because of that, but I'm still hopeful that it will end up being a wise strategy.
- Wed May 12, 2021 4:52 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
I've run few simulations, and it seems that when it comes to international it's much easier to see 20+ years periods in which 90/10 does better than 100/0, and again, this is true even when bonds are strongly underperforming, due to the remarkable power of low correlation and the influence of volatility on cumulative returns we discussed before.
I'm sure we have some very systematic analysis on the subject somewhere, and I'd be glad to read few articles.
While I absolutely acknowledge that the data show that 100/0 would work better for US in most of the past periods, I remain unsure about how universal and un-challengeable this property is. I know, I'm stubborn.
I'm sure we have some very systematic analysis on the subject somewhere, and I'd be glad to read few articles.
While I absolutely acknowledge that the data show that 100/0 would work better for US in most of the past periods, I remain unsure about how universal and un-challengeable this property is. I know, I'm stubborn.
- Wed May 12, 2021 8:51 am
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
A 10-year long transition from 100/00 to 70/30 is pretty gradual in practice. If the market "crashes" one year into such a transition, the difference between 100/00 and 97/03 isn't going to be a material difference and - if you have the ability - you can react by simply increasing your savings rate during the market drawdown. There are some strategies you can employ to make the glide path less directly dependent on time by taking into account the value of future retirement savings relative to the current balance in the retirement accounts, but a time-based glide path is probably a "good enough" approximation. This whole discussion seems to me more formal than substantive, given that those who go 100/0 are not counting t...
- Wed May 12, 2021 6:08 am
- Forum: Investing - Theory, News & General
- Topic: When would you buy cryptocurrency?
- Replies: 199
- Views: 18137
Re: When would you buy cryptocurrency?
I can only see myself getting crypto coins in case I want to actually use them for a transaction, for whatever reason, which is what they're supposed to be about.
I don't invest in currency and commodities, and indeed I have very little cash as well.
I don't invest in currency and commodities, and indeed I have very little cash as well.
- Wed May 12, 2021 12:40 am
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
No offense takenDrewski04 wrote: ↑Wed May 12, 2021 12:27 am I’ll simply state again: Over long periods of time an all stock portfolio will have a better chance of generating higher returns than a portfolio that includes bonds.
And truly I mean no offense to you or anyone else who uses bonds as there are many sound reasons to do so.
The data strongly agree with your position after all.
So I was actually contemplating going 100/0, but then I thought about the emergency fund. The EF would be larger in virtue of the more significant risk taken.
It would be about 1/5 of the money I have. So, what I will do is to reduce the emergency fund and allocate a little to bonds, so that I end up with 95/5 anyway, while the money allocated to stocks are the same I'd have in case of 100/0.
- Wed May 12, 2021 12:12 am
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
With that said, it is not surprising to me that many people use bonds in their portfolios, and for a lot of good reasons. What wouldn’t be a good reason, would be including bonds in the accumulation phase as a way to maximize overall returns. Perhaps there is something that shows bonds to have both guaranteed returns AND higher upside than stocks...and if so, that would be a truly magical investment. Exactly like the addition of bonds is unlikely to maximize the overall return with respect to 100/0 stocks, VTI is unlikely to maximize the overall return with respect to SCV stocks. Yet, for some reason, VTI is deemed the logical choice in the accumulation phase. Historical data shouldn't be trusted when they hint at tilting toward SCV, but t...
- Tue May 11, 2021 11:36 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
It doesn't sound immaterial to me. Actually, I'm surprised that you don't arrive to the conclusion I was expecting, given that you correctly listed all the ingredients you need to get there:
1) historical returns are hard to rely on anyeay
2) it's still possible that an asset class that is expected to do well according to past data could underperform
Then, given those premises, what's so surprising about people including bonds in their portfolio by following the exact same logic ?
There's nothing magical about VTI. It's a bet like any other.
- Tue May 11, 2021 11:07 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
My attempt to make a simple point missed the mark: SCV is simply one asset class of the market, it is not the entire market. VTI is by definition the Total Market, stocks not bonds, and yes the US Market. I will bet more on the strength of the Total Market, as opposed to a mere asset class...but it is nice that VTI includes SCV because again, it is the Total Market. The total US stock market seems to me a rather arbitrary choice about the degree of diversification you feel comfortable with. You decide that including the asset class of low return bonds is too much, and I guess you have the same opinion about the geographical diversification provided by an all-countries world index, whereas reducing the portfolio to the asset class of high r...
- Tue May 11, 2021 8:28 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
Unless the equity risk premium vanishes, it is, but that's not what I was referring to. By using the term 'mathematically', I'm differentiating from 'behaviorally', which I've noted in this thread can very likely lead one to a more balanced portfolio. Ok now I understand, thanks for the clarification. You draw the line at VTI because that is the market...SCV is not. VTI + bonds has a better risk adjusted return than VTI alone. Then the 100/0 fans argue that they don't care, because the only thing they care about is the cumulative return after n years. Well, if this is the case, past data suggest that the cumulative return of SCV is even better. In the logic that volatility is not a problem, an SCV ETF would be preferable with respect to VT...
- Tue May 11, 2021 7:59 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
I never said "U.S." And I stated what I meant by mathematically: maximizing returns, then maximizing the safe withdrawal rate. The fact that with 100/0 you'll maximize the return is not a mathematical result. It's just a fair guess based on the assumption that stocks will behave in this century roughly in the same way they behaved in the previous one. Outside US, there are already several examples in which 100/0 stocks would be defeated by stocks+bonds, and it's totally possible that the same will happen in US. . By the way, for the 100/0 fans, why don't you go all in in your analysis and reduce your portfolio to small cap value ? If reducing volatility is nothing to be bothered about, then I guess the wisest choice would be to g...
- Tue May 11, 2021 7:39 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
What do you mean with "mathematically" ? Over the past century, US stocks have triumphed over bonds hands down. Expecting them to continue to do so is at best a reasonable expectation, it's not a mathematical result and in fact several people doubt that this will be the case.willthrill81 wrote: ↑Tue May 11, 2021 7:26 pm Mathematically, a fairly strong case can be made for a 100/0 AA until about 10 years from retirement, in order to maximize returns, that begins moving to a target 70/30 at retirement, in order to maximize the safe withdrawal rate.
- Tue May 11, 2021 3:30 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
It sounds like a wise approach to life.
- Tue May 11, 2021 12:05 pm
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
Re: Why the disdain for managed funds like ARKK that destroy total market funds?
the other issue is that most of the people that had skin in the game won't be around as based on the outflows they no longer have any skin in the game! they've moved onto the next high flying product. but yes the reason these products are even known is because of their past performance. if they weren't performing, the managers wouldn't be on podcasts, cnbc, etc etc and their products would not be at the top of every screener you ran. Its also like SPIVA persistence information doesn't exist. even if you know it exists. this time is always different. I told a guy that you have an 11% chance of a fund that was in the top half of like equity funds to repeat being in the top half. the next 5 years. "so your telling me theres a chance"...
- Tue May 11, 2021 10:31 am
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
Re: Why the disdain for managed funds like ARKK that destroy total market funds?
While the Schadenfreude is childish, it's also true that this is the result of a general unresolved problem: only funds that outperform are advertised. Since this is done consistently, people tend to fall into the trap of believing that outperforming is easier than what it actually is. These moments of truth are rather healthy over the long run. It's a reminder that making money is not as easy as it looks sometimes.
- Tue May 11, 2021 10:09 am
- Forum: Investing - Theory, News & General
- Topic: Odd Lots: Why Passive Investing Might Be Distorting The Market (Podcast)
- Replies: 56
- Views: 8519
Re: Odd Lots: Why Passive Investing Might Be Distorting The Market (Podcast)
The hedge fund manager should be happy for the "distortions", so that he can make money over the alleged market inefficiencies.
- Tue May 11, 2021 10:07 am
- Forum: Investing - Theory, News & General
- Topic: Why the disdain for managed funds like ARKK that destroy total market funds?
- Replies: 1587
- Views: 210439
Re: Why the disdain for managed funds like ARKK that destroy total market funds?
Peter Lynch discussed this uncertainty about what to do when prices go down in a conference. He made the case that the problem of most people is that they buy without knowing why.hnd wrote: ↑Tue May 11, 2021 10:00 am like their entire portfolios moved into these funds. and literally the past 24 hours many of them are posting, scratching their heads, "did i make a mistake?" contemplating whether they should sell or not! none of those products are even at half the markets return YTD. some are in the red.
When you buy without knowing why, then when the price goes down you don't know what to do.
He really nailed it on this.
- Mon May 10, 2021 8:00 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
This is an excellent point. It might be unlikely that the worst happens i the wrong moment, but it can still happen, and your life is a single shot experience, you don't run simulations in life.
- Mon May 10, 2021 7:51 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
of course during a crisis the weight of stocks decreases with respect to bonds, therefore the mixed portfolio holders will sell some bonds and buy more stocks to rebalance back to their preferred allocation, which is precisely what it's supposed to be done. The 100% holders will at most be able to buy additional stocks with whatever cash they have at their disposal when the crisis takes place.Marseille07 wrote: ↑Mon May 10, 2021 7:38 pm whereas bond-holders would have to start buying bonds to rebalance out of stocks.
- Mon May 10, 2021 7:29 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
A couple of things. a) LTTs look great because the yields were falling the last 40 years. Unless you believe in negative yields, the four-decade-long trend likely has ended. b) Previously you called the diff of 100/0 vs 80/20, 10.3% vs 9.8%, small / minor / insignificant or whatever. Now you turned around and called 10.53% vs 10.52% "beats" is beyond me . When I changed rebalancing to monthly, suddenly I see 10.52% vs 10.49% in favor of 100/0. In my opinion this is virtually a tie, and does not show the impact of holding LTTs instead of equities. I also acknowledged that it's a minor difference, calm down. But you'll notice that in other periods the difference becomes larger, especially during crisis. Besides, I'd like to point o...
- Mon May 10, 2021 7:10 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
I mean, "admirable", these are numbers, either I'm right or I'm wrong, there's not much room to grasp at straws.
Then, yes, you are right, finding a case in past history is different from foreseeing it before it happens.
No, I'm still learning how the website works hahah. But I am undoubtely satisfied to have been able to catch this little mechanism.climber2020 wrote: ↑Mon May 10, 2021 7:07 pmDid you happen to test the numbers for someone who is regularly withdrawing from the portfolio instead of adding to it?
See how the various allocations work out for the early 2000 retiree.
- Mon May 10, 2021 7:00 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
Damn, sorry. I'll look for it, but anyway my simulation isMarseille07 wrote: ↑Mon May 10, 2021 6:47 pm
That link doesn't show your simulation. You need to specifically generate a link for that, it's some option somewhere on the same page.
time window 1995-2020
portfolio 1 = 100 US total stock market
portfolio 2 = 95 US total stock market/ 5% long term US treasury
portfolio 3 = 50/50 of the two assets.
And the same should work also by replacing 95/5 with 90/10.
2 slightly beats 1 and they both beat 3 by a wider margin, and this is consistent starting from around 2008
- Mon May 10, 2021 6:43 pm
- Forum: Investing - Theory, News & General
- Topic: 10-20% Bonds? What’s the point?
- Replies: 251
- Views: 21043
Re: 10-20% Bonds? What’s the point?
I made all the possible comparisons that came to my mind for 20 and 30 years. In most cases, 100/0 does, indeed, win over <100, and when someone is wrong it is important to acknowledge it. My intuition was incorrect. I did find, however, the case I had in mind, of lower volatility triumphing over lower expected returns. Before coming for my jugular, Yes, this result comes for my cherry-picking/data mining. Yet the very fact that it could happen is something people, to my understanding, were disputing. If you combine total market with long term treasury in a period between the mid nineties and 2020-ish, 100 can lose to 95/5 and also to 90/10 while it wins over 50/50 , that is, the optimal allocation isn't 100/0 even in a period in which stoc...