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steve_14

There's been much discussion about factor investing, which is advocated by Larry Swedroe. In many comments, he has argued that one should not put all one's eggs in one factor basket, but diversify across factors: beta, value, size, and momentum. Yep, that's why I only invest in stocks based in Broo...

steve_14

Since REITS are 90% pass-through, doesn't their expected return approximately equal their yield, currently < 3% ? If so, seems like a terrible risk/return proposition. VCIT-- interm-term corp BBB-- has the same yield. Indeed, REITs are not a good value today, as Dr. Bernstein has recently noted. Un...

steve_14

REITS once may have semi-justified a separate allocation - they had 7% yields and low volatility. Today they're not practically different from any other sector. I think people who spice up their portfolios with a small REIT allocation are just finding comfort in complexity - more funds equals more d...

steve_14

According to the Wall Street Journal (registration may be required, or google the title "F-Squared Investments Received Wells Notice From SEC"), the SEC has sent F-Squared a Wells notice, meaning it's considering formally investigating them. F-Squared is a major provider or ETF portfolios ...

steve_14

You'll probably (depending on your time horizon and exactly how rates move: plateau/increase at a constant rate/increase at an accelerating rate) still get break even "eventually" even if you don't reinvest, because the fund will begin buying higher yielding bonds immediately with your rem...

steve_14

Absent deflation, I fully expect we'll see inflation going forward.

steve_14

REITs are about 3-4% of the total US market (which you already have). What makes REITs so special that you would overweight them over Materials or Utilities (which are a similarly small part of the market)? It's accurate to say that they are 3-4% of the total US publicly available stock market. The...

steve_14

If you have capital to invest, you have only two choices: companies that went public, and companies that didn't. In the current regulatory environment, fewer companies are going (or staying) public, and the number of public companies is falling rapidly. Staying private doesn't make your company a ba...

steve_14

Here's the in-sample study (1965-2001): Do Investors Capture the Value Premium? Using the same indexes and time period as in the Houge et al paper (Table I in the paper) , but presenting annualized returns and implied growth in $1000 over the same time periods. I don't see the same time periods - m...

steve_14

DFSVX: DFA US Small Cap Value... The last 10 years should certainly have been good to DFSVX, as once again the FF data has shown a significant value premium. Except: http://i58.tinypic.com/5cypap.jpg VISGX = Vanguard Small Growth Fund (that's the space the FF data says should really do poorly).

steve_14

If the Fama/French data has little relationship to reality, why not look at the very funds that use the data to target the value premium, i.e. DFA's value funds? Here are their results since inception, and after the premiums would supposedly be arbitraged away following the publication of the 1992 ...

steve_14

Nope, small caps, large caps, green caps, red caps and all other caps are all represented in your TSM holding in the proportion the market says they deserve. There's no need to bet on one cap or another beyond this.

steve_14

When you feel the urge to complexify and sectorize your three fund portfolio, lie down until it does away (with apologies to Sam Clemens).

steve_14

These start-ups are certainly welcome to seek profits for their VC backers. They're not getting any from me though. Cut out the middleman and invest directly.

steve_14

This is one of the primary practical benefits. In many cases it makes sense at or around the age of retirement to ensure (and insure) that you will have $X of basic income - enough to feed clothe and house you - until you die, even if you happen to live until 110 years old. You can do that with a c...

steve_14

[OT comments removed by admin LadyGeek] As I've taken pains to point out to you, the P/E of BOSVX is nowhere near 14. It's more on the order of 60. The only way to get 14 is to intentionally throw out all the companies with negative earnings, including 9 of its top 25 holdings. Maybe I'll start cal...

steve_14

There are some interesting articles these days about letting your stock positions actually increase over time once you hit your conservative point at retirement (i.e. by drawing down bonds but not selling stocks to replenish them right away). And the idea is that even though your time horizon is sh...

steve_14

There's never a reason to deal with the distant uncertainties of a deferred annuity IMO, especially at current low interest (and therefore payout) rates. As you approach 80, if you're in good health and need a higher level of income than your portfolio is providing, consider spending a portion on a...

steve_14

LAlearning wrote:I dislike all TDF except Vanguard's. Even then I am nonplussed about the intl bond portion.

Me too. I'm a huge fan of the Vanguard funds, but don't trust those from other providers.

steve_14

You certainly have a wide margin of error if you're happy living on $1,200 per month. I'm not sure how many enjoyable retirement things (like travel) you're going to be able to do on that budget though. And does that budget include large one time expenses, like a new vehicle, and home repairs?

steve_14

There's never a reason to deal with the distant uncertainties of a deferred annuity IMO, especially at current low interest (and therefore payout) rates. As you approach 80, if you're in good health and need a higher level of income than your portfolio is providing, consider spending a portion on an...

steve_14

Since you're still posting this paper, I will continue posting my criticism of it. Ok, and since the value crowd is still talking about Fama/French results, I'll continue to post my criticism of it: It's a spurious reconstructed data set that has little relationship to reality, and is used mainly a...

steve_14

There's no right or wrong answer. Personally, I'm insurance averse, so I self insure if the maximum cost would be less than 10% or so of my savings. Others would take those policies for the peace of mind alone.

steve_14

The comment about if you didn't retire with enough annuitize doesn't ring true for me. Annuities typically pay less than I would get in the market. If I don't have enough to live on from market returns an annuity surely won't help. Well if you retire at 65 with a 4% withdrawal rate, and after 10 ye...

steve_14

And in reality - in real fund results - valuations do in influence future returns, on average. Value, momentum, sector bets, do not. Interesting that you believe valuations influence future returns, but that this doesn't apply to stocks with low valuations. Ok! Yeah, because again I'm big on what r...

steve_14

Everything I said above is all very well and good, but is that sort of middle-of-the-road approach practicable or even actionable? In my humble opinion, it absolutely is. I myself decided to get out of small cap stocks (VTMSX) completely in my passive core portfolio about two weeks ago due to what ...

steve_14

And yet the MAJORITY of financial planners use 4%. I don't see any point in all those powerpoint slides that adds or negates my question. I'm not debating if 4% is safe I'm using it as an example to question what is the real value of my portfolio at a market high. If you need a number, go with 4% o...

steve_14

I didn't say anything about "overpriced" or "a free lunch". I simply pointed out that investors as a whole have changing preferences for asset classes, and at the moment are willing to pay a lot for small caps, which often means lower returns ahead. The idea is that if there rea...

steve_14

Thanks for the link. At this point, calling REITs and small caps expensive is just stating the obvious. The many posts here about overweighting these bits of the market are further evidence of overheated asset classes. However, as you say, the future is a very uncertain place. Also agree about EM. ...

steve_14

You cannot rationally set an allocation based only on point estimates of the expected central tendencies of some unknown and unestimated distributions. Well, you can consider how many dollars of profits you're getting for each $100 spent. If this differs between two investments, your returns expect...

steve_14

Thanks for the link. At this point, calling REITs and small caps expensive is just stating the obvious. The many posts here about overweighting these bits of the market are further evidence of overheated asset classes. However, as you say, the future is a very uncertain place. Also agree about EM.

steve_14

My proof is simple: the expected returns of SV is higher than TSM, and the correlation is less than 1. SV has a unique factor exposure, just as bonds exposure you to credit risk and interest rate risk. All also true of small growth, which is clearly as risky, if not more so, than SV in real fund re...

steve_14

What struck me about the article was this statement, which would seem to confirm that the investing public are very illiterate: The 2014 DALBAR report , for instance, concluded that over the past 20 years, individual stock fund investors achieved only a 5.02 percent average annual return, which is ...

steve_14

it sometimes amazes me to see folks somehow think one of the three FF factors is proved canon but the other two are some sort of made up mystical mumbo-jumbo. Because, ya know, CAPM was around twenty years before FF so it must be true! It's as if beta is mathematically proved but value and small ar...

steve_14

For one thing, he should not have compared a large cap only index to all stock mutual funds. He should have used a total market fund, which outperformed the S&P 500 by almost 1% per year over the last 15 years. Here is a far more rigorous and trustworthy study showing that index beat active over...

steve_14

Paying a modest fee for AUM --- (hello Rick Ferri)---may have value for even the smartest of bogle-head advocates. +1. As I posted in the other thread, Mom's in her mid-80's and not willing or interested in becoming internet-savvy, and my sister is a non-practicing attorney who is contentious and s...

steve_14

It completely supports Mr.Bogle's opinion that for a U.S. investor, an international allocation doesn't (it didn't) really matter It's just like putting 100% of your portfolio in GE stock - 90% of the time, investing in more than one company "won't really matter" over your time horizon. Y...

steve_14

Pshaw! So called "experts" like Dave Ramsey don't know what they're talking about. The long run, stock markets clearly return 17% per year. I'm so tired of this guy raining on my parade with his pessimistic predictions. Well, he recommends mutual funds with loads, so 12% is what you're le...

steve_14

If you think you can time individual stocks based on 12-month momentum, based on empirical data, there is no a priori reason not consider other trend-following strategies, for example moving average crossovers. Right, and not only do you have to believe in the idea, you have to believe that the Wal...

steve_14

Pshaw! So called "experts" like Dave Ramsey don't know what they're talking about. The long run, stock markets clearly return 17% per year. I'm so tired of this guy raining on my parade with his pessimistic predictions.

steve_14

My foreign stocks are purely insurance against country specific risk, which we know can pop up dramatically from time to time. In that 10% chance where the US economy implodes (see: Japan), I'll be glad I took out the policy. In the other 90% of cases, my real estate, human capital, etc. values show...

steve_14

In general you don't really know your risk tolerance until you have a large portfolio that loses 50% or more of its equity investment. The 2008-9 plunge was a good test. I was an experienced investor (30 years of investing) and had a large portfolio and I learned that I was not quite the risk taker...

steve_14

I doubt Larry has ever referred to them as "free lunches" And here's your quote: Also based on the research my thinking on value has changed over the years. I started out thinking it was almost all risk story. Then converted by the research on behavioral errors to probably at least a free...

steve_14

I'd bury my money in a coffee can long before I'd let one of the nice folks at ML get their hands on it. But you can only lead a horse to water. Maybe a chart showing how painful even a small fee can over the long term would help.

steve_14

I've noticed that each of these patterns - value, momentum, etc - which have been waterboarded out of some specious historical data set yield material for numerous investing articles. You first publish one announcing the free lunch has been discovered. Then a few years later, you do the "rememb...

steve_14

Interesting work, but might be of limited value for individuals. If you were to "fit" them to your current situation (family longevity and health issues, your current health, past health issues), you'd probably get very different outcomes.

steve_14

I wouldn't own a fund that cost more than .2%, assuming I had cheaper choices.

steve_14

$ in the bank is king. Everything else is just promises from another party.

steve_14

Obvious answer: don't invest in a single country's stock -- diversify globally. Yes, I keep half my assets abroad for just this reason. However I think our short dataset regarding these things (last 90 years or so) was probably an abnormally good period for country diversification, mainly due to Ja...

steve_14

Since you (presumably) need to spend money to live somewhere anyway, wouldn't you really need to subtract a theoretical alternate housing (renting) cost, and figure out what he makes on the difference, if this is the argument you want to make? Right, the OP has considered the capital gain, but not ...

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