Latest Thoughts from Larry Swedroe

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000
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Re: Latest Thoughts from Larry Swedroe

Post by 000 »

klaus14 wrote: Tue Feb 02, 2021 5:31 pm
000 wrote: Tue Feb 02, 2021 5:17 pm Did any of those provide diversification (that worked) during the March 2020 coronacrash?
SRRIX did.
i always thought that's the only one that made any sense. All others are susceptible to crashes but insurance has its own cycle (fire/hurricanes doesn't coincide with recessions)
I'd buy some if it was easy to buy.
How did it compare to holding common stock in insurers? (And, if the interval fund only allows liquidity on specific dates, then the comparison should be just on those dates).
klaus14
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Re: Latest Thoughts from Larry Swedroe

Post by klaus14 »

000 wrote: Tue Feb 02, 2021 5:37 pm
klaus14 wrote: Tue Feb 02, 2021 5:31 pm
000 wrote: Tue Feb 02, 2021 5:17 pm Did any of those provide diversification (that worked) during the March 2020 coronacrash?
SRRIX did.
i always thought that's the only one that made any sense. All others are susceptible to crashes but insurance has its own cycle (fire/hurricanes doesn't coincide with recessions)
I'd buy some if it was easy to buy.
How did it compare to holding common stock in insurers? (And, if the interval fund only allows liquidity on specific dates, then the comparison should be just on those dates).
If you want to argue something please argue it directly instead of using this questioning method or asking research you could easily do yourself from others.
000
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Re: Latest Thoughts from Larry Swedroe

Post by 000 »

Hey, you said it provided diversification. I assumed you had the returns data handy. I have no idea how to lookup point-to-point total returns data for these interval funds.
klaus14
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Re: Latest Thoughts from Larry Swedroe

Post by klaus14 »

000 wrote: Tue Feb 02, 2021 7:14 pm Hey, you said it provided diversification. I assumed you had the returns data handy. I have no idea how to lookup point-to-point total returns data for these interval funds.
you can see the fund price went UP during corona crash. That is diversification. And fund price is still up in the last 1 year and fund returns are positive according to data nedsaid posted.

Whereas, common stock insurers like LRE, Fairfax, Markel etc all crashed hard on March and their 1 year returns are negative (you can use portfoliovisualizer for total returns for these)

I don't think interval limit changes this picture. I believe SRRIX have quarterly intervals and that is more than sufficient for rebalancing.
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Re: Latest Thoughts from Larry Swedroe

Post by klaus14 »

Stone Ridge also have a mutual fund version of the Reinsurance fund (SHRIX)
That fund also did very well during corona crash (down ~3%)

And you can see here it compared to a basket of 3 insurer stocks. It's smooth sail compared to stocks. It returned similar to bonds with slightly higher volatility. However it's not correlated to bonds (or stocks). This means it can bring diversification benefits to a stock/bond portfolio
Last edited by klaus14 on Tue Feb 02, 2021 8:32 pm, edited 2 times in total.
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Taylor Larimore
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StoneRidge Funds

Post by Taylor Larimore »

Bogleheads:

Before investing in a StoneRidge Fund, be sure to read the fund's Prospectus:

https://www.stoneridgefunds.com/documen ... us.pdf?v=5

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “The marketing colossus known as the mutual fund industry provides the weaponry which enables investors’ to indulge their suicidal instincts.”
"Simplicity is the master key to financial success." -- Jack Bogle
000
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Re: Latest Thoughts from Larry Swedroe

Post by 000 »

klaus14 wrote: Tue Feb 02, 2021 7:37 pm Stone Ridge also have a mutual fund version of the Reinsurance fund (SHRIX)
That fund also did very well during corona crash (down ~3%)

And you can see here it compared to a basket of 3 insurer stocks. It's smooth sail compared to stocks. It returned similar to bonds with slightly higher volatility. However it's not correlated to bonds (or stocks). This means it can bring diversification benefits to a stock/bond portfolio
Thank you. Interesting.
Random Walker
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

nedsaid wrote: Tue Feb 02, 2021 3:36 pm I thought I would post the latest results of the four Alternative funds that Larry Swedroe recommended some time back.

LENDX - Stone Ridge Alternative Lending Fund

3 Month Return 15.48%
YTD Return 6.92%
1 Year Return 17.42%
3 Year Return 8.91%

SRRIX - Stone Ridge Reinsurance Risk Premium Interval Fund

YTD Return -0.47%
1 Year Return 5.88%
3 Year Return -1.55%
5 Year Return -2.15%

AVRPX - Stone Ridge All Asset Variance Risk Premium Fund

3 Month Return 1.71%
YTD Return 0.70%
1 Year Return -21.17%
3 Year Return -10.78%
5 Year Return -3.02%

QSPIX - AQR Style Premia Alternative Fund

3 Month Return 7.51%
YTD Return 5.82%
1 Year Return -16.29%
3 Year Return -13.47%
5 Year Return -6.27%

Things are looking better for Larry's four picks, Year To Date performance is looking better. LENDX, the Stone Ridge Alternative Lending fund is looking much better and actually is going gangbusters. Longer term, the overall 3 and 5 year performance is disappointing but good to see signs of life. Larry might eventually be vindicated here. Let's see.
Do you know if these are price only returns, or returns including distributions? Thanks,

Dave
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

I have the 4 alternatives. When one adds them to his portfolio, he needs to ask himself what he is trying to accomplish with them. Intertwined with that question is where is the investor creating the allocation from? For me, these alternative positions were effectively taken from a portion of a municipal bond allocation in my taxable account. I was looking for after tax returns above municipal bonds but below equities and improved portfolio efficiency. Over the last year I think I’m about 2 for 4 (I think this is likely an unfair price only comparison from Yahoo though). SRRIX and LENDX have beater my short to intermediate term munis and AVRPX and QSPRX have underperformed my munis. The underperformance of AVRPX and QSPRX has been greater than the outperformance of LENDX and SRRIX. As mentioned in a recent Cliff Asness piece, QSPRX has had a rough year. It has been performing poorly lately mainly because of value’s underperformance. Just when value started to do well, it’s allocation to momentum started to hurt it.

Dave
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Re: Latest Thoughts from Larry Swedroe

Post by BJJ_GUY »

Random Walker wrote: Tue Feb 02, 2021 10:49 pm I have the 4 alternatives. When one adds them to his portfolio, he needs to ask himself what he is trying to accomplish with them. Intertwined with that question is where is the investor creating the allocation from? For me, these alternative positions were effectively taken from a portion of a municipal bond allocation in my taxable account. I was looking for after tax returns above municipal bonds but below equities and improved portfolio efficiency. Over the last year I think I’m about 2 for 4 (I think this is likely an unfair price only comparison from Yahoo though). SRRIX and LENDX have beater my short to intermediate term munis and AVRPX and QSPRX have underperformed my munis. The underperformance of AVRPX and QSPRX has been greater than the outperformance of LENDX and SRRIX. As mentioned in a recent Cliff Asness piece, QSPRX has had a rough year. It has been performing poorly lately mainly because of value’s underperformance. Just when value started to do well, it’s allocation to momentum started to hurt it.

Dave
How do you reconcile SRRIX fund terms in contrast with the way the underlying assets (and related profits and losses) are calculated? For example, reinsurance loss provisions trap capital and often loss creep continues to eat away at the NAV well after the date on which one might suspect the impact to have already been accounted for. So if losses cause capital outflows, this means the remaining investors will share in the subsequent loss creep in an inequitable ratio, and they will also have a magnified % of NAV that represents trapped capital (that cannot be redeployed). The interval fund structure never made sense with reinsurance to me. What am I misunderstanding?
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Re: Latest Thoughts from Larry Swedroe

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Random Walker wrote: Tue Feb 02, 2021 10:28 pm
nedsaid wrote: Tue Feb 02, 2021 3:36 pm I thought I would post the latest results of the four Alternative funds that Larry Swedroe recommended some time back.

LENDX - Stone Ridge Alternative Lending Fund

3 Month Return 15.48%
YTD Return 6.92%
1 Year Return 17.42%
3 Year Return 8.91%

SRRIX - Stone Ridge Reinsurance Risk Premium Interval Fund

YTD Return -0.47%
1 Year Return 5.88%
3 Year Return -1.55%
5 Year Return -2.15%

AVRPX - Stone Ridge All Asset Variance Risk Premium Fund

3 Month Return 1.71%
YTD Return 0.70%
1 Year Return -21.17%
3 Year Return -10.78%
5 Year Return -3.02%

QSPIX - AQR Style Premia Alternative Fund

3 Month Return 7.51%
YTD Return 5.82%
1 Year Return -16.29%
3 Year Return -13.47%
5 Year Return -6.27%

Things are looking better for Larry's four picks, Year To Date performance is looking better. LENDX, the Stone Ridge Alternative Lending fund is looking much better and actually is going gangbusters. Longer term, the overall 3 and 5 year performance is disappointing but good to see signs of life. Larry might eventually be vindicated here. Let's see.
Do you know if these are price only returns, or returns including distributions? Thanks,

Dave
Hi Dave, I got the returns off of the Bloomberg website. My assumption is that distributions are included but you can check with Bloomberg.
A fool and his money are good for business.
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nedsaid
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Re: Latest Thoughts from Larry Swedroe

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000 wrote: Tue Feb 02, 2021 7:14 pm Hey, you said it provided diversification. I assumed you had the returns data handy. I have no idea how to lookup point-to-point total returns data for these interval funds.
I got my return information right off the Bloomberg website.
A fool and his money are good for business.
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Re: Latest Thoughts from Larry Swedroe

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Larry Swedroe
@larryswedroe

Apr 9

My latest Evidence Based Investor article examines the findings on the performance of investors in 401(k) plans during the COVID-19 bear market. Some surprising (older, more experienced investors did worse) and not surprising findings.
A couple nuggets from Larry's article:
Morningstar’s finding that older (and thus more experienced) participants with higher incomes and higher balances (attributes typically associated with more sophisticated investors) who made allocation changes were the very ones most likely to abandon their plans when stressed by market volatility indicates that many investors are over-confident of their abilities (an all-too-human trait).
Three and a half percent of participants using a target-date fund and 3 percent of participants using retirement managed accounts opted out of their respective strategies (for example, started self-directing) during 2020, about a quarter of the percentage of self-directed participants that did so.

The underperformance for reallocators was estimated at 7.5 percent through the entire year based on average changes across all self-directors who changed allocations (versus participants who rebalanced quarterly).
This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
A fool and his money are good for business.
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Larry Swedroe
@larryswedroe

Mar 23
My latest Evidence Based Investor article reviews the research on the relationship between investment wisdom and age.

There’s an old adage that with age comes wisdom. But do we tend to become better investors as we age? Unfortunately, research has found that, in general, the answer is no, older investors are no better than younger investors, although it’s not all one-sided. Two conflicting forces might be at work: the wisdom older investors gain from their experiences, and the possibility of diminishing cognitive abilities.
A fool and his money are good for business.
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Re: Latest Thoughts from Larry Swedroe

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nedsaid wrote: Sun Apr 11, 2021 6:22 pm

This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
Is the price charged worth it? If Vanguard will do it for 1/2 of the cost or less assuming you stick your assets in a set it and forget it fund, what value add is American Century/JPM providing?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Random Walker
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

nedsaid wrote: Sun Apr 11, 2021 6:22 pm
Larry Swedroe
@larryswedroe

Apr 9

My latest Evidence Based Investor article examines the findings on the performance of investors in 401(k) plans during the COVID-19 bear market. Some surprising (older, more experienced investors did worse) and not surprising findings.
A couple nuggets from Larry's article:
Morningstar’s finding that older (and thus more experienced) participants with higher incomes and higher balances (attributes typically associated with more sophisticated investors) who made allocation changes were the very ones most likely to abandon their plans when stressed by market volatility indicates that many investors are over-confident of their abilities (an all-too-human trait).
Three and a half percent of participants using a target-date fund and 3 percent of participants using retirement managed accounts opted out of their respective strategies (for example, started self-directing) during 2020, about a quarter of the percentage of self-directed participants that did so.

The underperformance for reallocators was estimated at 7.5 percent through the entire year based on average changes across all self-directors who changed allocations (versus participants who rebalanced quarterly).
This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
Hi Nedsaid,
As you know, I jumped over to the advisor route in 2009. I did a lot of spreadsheets in trying to make the decision. I had cells in my Excel spreadsheets for deeper tilts, improved tax efficiency, improved portfolio efficiency. Of course there were cells for the increased expense ratios and advisor fees. Two significant cells that I had no good way to quantitate were for stuff I didn’t know that I didn’t know and my potential bad investor behavior. Obviously I could screw around with the numbers to get any result I wanted, consciously or subconsciously. But when I did my best to realistically evaluate the decision, I kept coming to the conclusion that my potential for behavioral error was a significant reason to go the advisor route. Of course advisors can display bad behavior too! But at least there is an extra layer of protection between me and my money. I think withdrawal phase is a much more significant issue than accumulation.

Dave
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nedsaid
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Random Walker wrote: Sun Apr 11, 2021 10:50 pm
nedsaid wrote: Sun Apr 11, 2021 6:22 pm
Larry Swedroe
@larryswedroe

Apr 9

My latest Evidence Based Investor article examines the findings on the performance of investors in 401(k) plans during the COVID-19 bear market. Some surprising (older, more experienced investors did worse) and not surprising findings.
A couple nuggets from Larry's article:
Morningstar’s finding that older (and thus more experienced) participants with higher incomes and higher balances (attributes typically associated with more sophisticated investors) who made allocation changes were the very ones most likely to abandon their plans when stressed by market volatility indicates that many investors are over-confident of their abilities (an all-too-human trait).
Three and a half percent of participants using a target-date fund and 3 percent of participants using retirement managed accounts opted out of their respective strategies (for example, started self-directing) during 2020, about a quarter of the percentage of self-directed participants that did so.

The underperformance for reallocators was estimated at 7.5 percent through the entire year based on average changes across all self-directors who changed allocations (versus participants who rebalanced quarterly).
This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
Hi Nedsaid,
As you know, I jumped over to the advisor route in 2009. I did a lot of spreadsheets in trying to make the decision. I had cells in my Excel spreadsheets for deeper tilts, improved tax efficiency, improved portfolio efficiency. Of course there were cells for the increased expense ratios and advisor fees. Two significant cells that I had no good way to quantitate were for stuff I didn’t know that I didn’t know and my potential bad investor behavior. Obviously I could screw around with the numbers to get any result I wanted, consciously or subconsciously. But when I did my best to realistically evaluate the decision, I kept coming to the conclusion that my potential for behavioral error was a significant reason to go the advisor route. Of course advisors can display bad behavior too! But at least there is an extra layer of protection between me and my money. I think withdrawal phase is a much more significant issue than accumulation.

Dave
I have been mulling this over for years, the decision of whether to go it alone or to partner up with an advisory firm. A big issue is the cost, and Bogleheads being cheap in all things investing, have a hard time paying even the 30 basis points that Vanguard charges for their Portfolio Advisory Service. It is a drag and the dollars add up.

A big factor for me is that I am single and have no children. At some point I would fully like to turn the keys over and let somebody else do the driving. One big event that I thought about was a case of elder abuse on the peripheries of my family, it was one of the worst things I have ever seen. One of the things that helped was an account manager that refused to release the funds of an account to greedy family members, it was the only thing not tied up and available to pay bills. It just seems to be another layer of protection against my own bad behavior, cognitive decline, and greedy family members.

I want some more comprehensive services rather than just portfolio management and this arrangement might just fit the bill. Nothing is perfect, one can even poke holes in Vanguard Personal Advisory Service. But I might just go ahead and pay the fees to receive comprehensive financial planning. We will see how it all goes.
A fool and his money are good for business.
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nedsaid
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Grt2bOutdoors wrote: Sun Apr 11, 2021 10:11 pm
nedsaid wrote: Sun Apr 11, 2021 6:22 pm

This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
Is the price charged worth it? If Vanguard will do it for 1/2 of the cost or less assuming you stick your assets in a set it and forget it fund, what value add is American Century/JPM providing?
I have been with American Century for many years, I know the company very well and have come to trust them over the years. I already had an account there and it cost me just a few extra basis points to switch over. I am one and a half years into the process and so far so good. The account has done well so far. As far as the retirement planning, so far I have received portfolio analysis and some retirement projections. I also can link most of my financial accounts so that I can view everything in one place. We will see how comprehensive the planning really is.

This company has had a commitment to financial education for many years and at one time had a group of planners at the company. I had access to Financial Engines there for a while. They have run my whole portfolio through the Morningstar Professional Software a couple of times and received reports. They are returning to providing advice and planning as well as portfolio management. Customers have asked for help and the company has geared up to provide it. So I have had positive experiences with them before and it seemed logical to give this new service a try.

They are very competitive with their service with all in costs of 0.90% a year. I looked at Merriman in 2007-2008 and they wanted 1% for Assets Under Management and the cost of the underlying DFA Funds were another 0.34%. Independent Advisors charge 1% a year, I work for someone for a brief time that charged 0.75% for portfolio management and that is probably as cheap as an independent advisor will go unless it is a very large account.

I have never dealt with Vanguard though I have owned both their mutual funds and ETFs.
A fool and his money are good for business.
Random Walker
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

nedsaid wrote: Sun Apr 11, 2021 11:27 pm
Random Walker wrote: Sun Apr 11, 2021 10:50 pm
nedsaid wrote: Sun Apr 11, 2021 6:22 pm
Larry Swedroe
@larryswedroe

Apr 9

My latest Evidence Based Investor article examines the findings on the performance of investors in 401(k) plans during the COVID-19 bear market. Some surprising (older, more experienced investors did worse) and not surprising findings.
A couple nuggets from Larry's article:
Morningstar’s finding that older (and thus more experienced) participants with higher incomes and higher balances (attributes typically associated with more sophisticated investors) who made allocation changes were the very ones most likely to abandon their plans when stressed by market volatility indicates that many investors are over-confident of their abilities (an all-too-human trait).
Three and a half percent of participants using a target-date fund and 3 percent of participants using retirement managed accounts opted out of their respective strategies (for example, started self-directing) during 2020, about a quarter of the percentage of self-directed participants that did so.

The underperformance for reallocators was estimated at 7.5 percent through the entire year based on average changes across all self-directors who changed allocations (versus participants who rebalanced quarterly).
This article reinforced my thinking regarding having someone else make my investment decisions. I have turned over about 30% of my retirement assets to American Century Private Client Group to see if I like this process. It seemed that older investors with larger balances were more prone to market panic because they have more at stake. There is a big difference between a 40 year old with 25 or so working years ahead still making contributions to the portfolio and a 70 year old who is retired and less able to withstand bear markets.
Hi Nedsaid,
As you know, I jumped over to the advisor route in 2009. I did a lot of spreadsheets in trying to make the decision. I had cells in my Excel spreadsheets for deeper tilts, improved tax efficiency, improved portfolio efficiency. Of course there were cells for the increased expense ratios and advisor fees. Two significant cells that I had no good way to quantitate were for stuff I didn’t know that I didn’t know and my potential bad investor behavior. Obviously I could screw around with the numbers to get any result I wanted, consciously or subconsciously. But when I did my best to realistically evaluate the decision, I kept coming to the conclusion that my potential for behavioral error was a significant reason to go the advisor route. Of course advisors can display bad behavior too! But at least there is an extra layer of protection between me and my money. I think withdrawal phase is a much more significant issue than accumulation.

Dave
I have been mulling this over for years, the decision of whether to go it alone or to partner up with an advisory firm. A big issue is the cost, and Bogleheads being cheap in all things investing, have a hard time paying even the 30 basis points that Vanguard charges for their Portfolio Advisory Service. It is a drag and the dollars add up.

A big factor for me is that I am single and have no children. At some point I would fully like to turn the keys over and let somebody else do the driving. One big event that I thought about was a case of elder abuse on the peripheries of my family, it was one of the worst things I have ever seen. One of the things that helped was an account manager that refused to release the funds of an account to greedy family members, it was the only thing not tied up and available to pay bills. It just seems to be another layer of protection against my own bad behavior, cognitive decline, and greedy family members.

I want some more comprehensive services rather than just portfolio management and this arrangement might just fit the bill. Nothing is perfect, one can even poke holes in Vanguard Personal Advisory Service. But I might go ahead and pay the fees to receive comprehensive financial planning. We will see how it all goes.
Bad behavior, cognitive decline, and protection from greedy elder abuse are huge issues. Each on its own can dominate a reasonable advisor fee. It’s important to define one’s realistic personal investing goals and devise a plan that achieves them. Doing that is way more important than simply maximizing terminal wealth. Seems to me that in your case an advisory fee might be a sort of insurance policy payment to protect yourself from those three risks. As you know, William Bernstein says something to the effect that once the investor knows enough to choose a good advisor, he probably knows enough to do it on his own. But perhaps that doesn’t apply to the issues of aging. I’m single too, and that factored into my advisor decision. Have you read Larry’s retirement book? It addresses cognitive decline and has a chapter on elder abuse. I haven’t been able to get that deep in the book yet. Think I have some psychological barriers preventing me from looking at some of those chapters.

Dave
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nedsaid
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Random Walker wrote: Sun Apr 11, 2021 11:47 pm
Bad behavior, cognitive decline, and protection from greedy elder abuse are huge issues. Each on its own can dominate a reasonable advisor fee. It’s important to define one’s realistic personal investing goals and devise a plan that achieves them. Doing that is way more important than simply maximizing terminal wealth. Seems to me that in your case an advisory fee might be a sort of insurance policy payment to protect yourself from those three risks. As you know, William Bernstein says something to the effect that once the investor knows enough to choose a good advisor, he probably knows enough to do it on his own. But perhaps that doesn’t apply to the issues of aging. I’m single too, and that factored into my advisor decision. Have you read Larry’s retirement book? It addresses cognitive decline and has a chapter on elder abuse. I haven’t been able to get that deep in the book yet. Think I have some psychological barriers preventing me from looking at some of those chapters.

Dave
Yes, I have read through Larry's book on retirement planning. Not sure I have scoured every page but certainly have flipped through the book and read what was interesting to me. There are places it gets a little to dense for me so I will skip read, but it was a pretty good book.
A fool and his money are good for business.
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Re: Latest Thoughts from Larry Swedroe

Post by JBTX »

nedsaid wrote: Sun Apr 11, 2021 6:27 pm
Larry Swedroe
@larryswedroe

Mar 23
My latest Evidence Based Investor article reviews the research on the relationship between investment wisdom and age.

There’s an old adage that with age comes wisdom. But do we tend to become better investors as we age? Unfortunately, research has found that, in general, the answer is no, older investors are no better than younger investors, although it’s not all one-sided. Two conflicting forces might be at work: the wisdom older investors gain from their experiences, and the possibility of diminishing cognitive abilities.
I would find it partially intuitive that older investors were more reactive. They have more at stake, they are closer to retirement, they probably pay more attention and thus are more emotionally affected at sudden changes.

Younger investors probably don't pay as much attention, have far less at stake, have other stuff going on, and for those that do pay attention a market drop is a DCA buying opportunity.
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Re: Latest Thoughts from Larry Swedroe

Post by YRT70 »

For those interested in Larry's latest thoughts, the message board on rationalreminder.ca is a good place. Larry is actively participating there.
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Re: Latest Thoughts from Larry Swedroe

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Larry Swedroe
@larryswedroe

May 7
My latest article for Evidence Based Investors examines the research findings on returns to SPAC investors.
A couple takeaways from Larry's article on SPACs:
Costs built into the SPAC structure are subtle, opaque and far higher than has been generally recognised. Post-merger, the median total cost (promote, underwriting and warrants/rights) equals about 14 percent.
From January 2019 through June 2020, six SPACs failed to merge and therefore liquidated compared to 47 that successfully merged—a failure rate of 11 percent.
Reviewing SPAC returns back to 2010, there was never a year in which SPAC mergers outperformed the Russell 2000. Even the best of years underperformed by 10 percent within the first year post-merger, and many years saw excess returns of -40 percent or more.
In another tweet, Larry discusses the outperformance of Small Value after periods of exuberance in Large Growth. It looks pretty compelling to me.
Larry Swedroe
@larryswedroe
·
May 4
Three prior periods (roaring 20s, nifty 50, http://dot.com) when growth beat value, resulting in high valuations for G, were followed by total returns (FF research indices)
1929-43: LG 2% vs SV 80%.
66-82: LG 110% vs 908% for SV
00-12: LG 22% vs SV 287%.
4/20- ?
Then Larry muses on why smart people do dumb things.
Larry Swedroe
@larryswedroe
·
May 4
My latest Evidence Based Investor article asks why do smart people do dumb things. There’s an axiom in finance that when the evidence conflicts with the theory, no matter how logical and intuitive it may be, throw out the theory.
Hint: People like to chase performance.
A fool and his money are good for business.
Random Walker
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Re: Latest Thoughts from Larry Swedroe

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nedsaid wrote: Sat May 08, 2021 10:34 am ·
May 4
Three prior periods (roaring 20s, nifty 50, http://dot.com) when growth beat value, resulting in high valuations for G, were followed by total returns (FF research indices)
1929-43: LG 2% vs SV 80%.
66-82: LG 110% vs 908% for SV
00-12: LG 22% vs SV 287%.
4/20- ?
[/quote]

This data really struck me. Those three time periods are the three long periods when I believe the S&P500 underperformed even TBills. The market trends are so long that it’s hard for us humans I think to see the forest from the trees. The current bull starting in about 2009 with a Covid hiccup (belch?) has been such a tremendous consistent large growth rise with extremely low volatility. It’s a large chunk of all of our investing lives and for many of us I bet the entirety of our investing lives. Combine that with recency bias and it’s a challenge to fathom anything different. Is this time different? Will history rhyme? What’s the new normal for a P/E ratio? Have the factors become commonplace knowledge and arbitraged away?

Dave
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Random Walker wrote: Sat May 08, 2021 10:51 am
nedsaid wrote: Sat May 08, 2021 10:34 am ·
May 4
Three prior periods (roaring 20s, nifty 50, http://dot.com) when growth beat value, resulting in high valuations for G, were followed by total returns (FF research indices)
1929-43: LG 2% vs SV 80%.
66-82: LG 110% vs 908% for SV
00-12: LG 22% vs SV 287%.
4/20- ?

This data really struck me. Those three time periods are the three long periods when I believe the S&P500 underperformed even TBills. The market trends are so long that it’s hard for us humans I think to see the forest from the trees. The current bull starting in about 2009 with a Covid hiccup (belch?) has been such a tremendous consistent large growth rise with extremely low volatility. It’s a large chunk of all of our investing lives and for many of us I bet the entirety of our investing lives. Combine that with recency bias and it’s a challenge to fathom anything different. Is this time different? Will history rhyme? What’s the new normal for a P/E ratio? Have the factors become commonplace knowledge and arbitraged away?

Dave
Saying that factors have been arbitraged away is like saying that it is different this time. My expectation is that new investors (and new suckers) coming into the market all of the time, the rush to Robin Hood brokerage suggests a lack of perspective and knowledge of market history. The Robin Hood phenomenon suggests to me that factors aren't dead after all. What is old (speculating in individual stocks) is new again.
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Re: Latest Thoughts from Larry Swedroe

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Perhaps one thing that IS different this time around is the role of the Federal Reserve. From Greenspan through Bernanke to Yellen and now Powell the Fed is no longer emphasizing pre-emptive control of inflation through the money supply and obscure speak but has shifted to a concern for full employment - part of the Fed's dual mandate - with full throated communication. History shall judge the effects of this shift, but it IS different as are rock bottom interest rates. Marti Zweig used to advise, "never fight the Fed".
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Re: Latest Thoughts from Larry Swedroe

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j.click wrote: Sat May 08, 2021 11:15 am Perhaps one thing that IS different this time around is the role of the Federal Reserve. From Greenspan through Bernanke to Yellen and now Powell the Fed is no longer emphasizing pre-emptive control of inflation through the money supply and obscure speak but has shifted to a concern for full employment - part of the Fed's dual mandate - with full throated communication. History shall judge the effects of this shift, but it IS different as are rock bottom interest rates. Marti Zweig used to advise, "never fight the Fed".
Great point. There actually seems to be a third unspoken mandate, that is maintaining liquidity in the markets, particularly the bond market. Fed intervention, in my opinion has distorted the markets. There are two old stock market maxims that I follow, don't fight the tape and don't fight the Fed.
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

nedsaid wrote: Sat May 08, 2021 11:03 am
Random Walker wrote: Sat May 08, 2021 10:51 am
nedsaid wrote: Sat May 08, 2021 10:34 am ·
May 4
Three prior periods (roaring 20s, nifty 50, http://dot.com) when growth beat value, resulting in high valuations for G, were followed by total returns (FF research indices)
1929-43: LG 2% vs SV 80%.
66-82: LG 110% vs 908% for SV
00-12: LG 22% vs SV 287%.
4/20- ?

This data really struck me. Those three time periods are the three long periods when I believe the S&P500 underperformed even TBills. The market trends are so long that it’s hard for us humans I think to see the forest from the trees. The current bull starting in about 2009 with a Covid hiccup (belch?) has been such a tremendous consistent large growth rise with extremely low volatility. It’s a large chunk of all of our investing lives and for many of us I bet the entirety of our investing lives. Combine that with recency bias and it’s a challenge to fathom anything different. Is this time different? Will history rhyme? What’s the new normal for a P/E ratio? Have the factors become commonplace knowledge and arbitraged away?

Dave
Saying that factors have been arbitraged away is like saying that it is different this time. My expectation is that new investors (and new suckers) coming into the market all of the time, the rush to Robin Hood brokerage suggests a lack of perspective and knowledge of market history. The Robin Hood phenomenon suggests to me that factors aren't dead after all. What is old (speculating in individual stocks) is new again.
I agree. I remember reading Bernstein that one of the criteria for a bubble is a new generation of investors and enough time to have forgotten the popping of the previous bubble. When I started deviating away from TSM investing, I believed the value premium was 90% risk and 10% behavioral. As I’ve progressed that 90/10 ratio continues to shrink. I think I might be close to believing 50% risk and 50% behavioral at this point. I think Asness feels it’s essentially all behavioral.

Dave
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

Random Walker wrote: Sat May 08, 2021 11:22 am
nedsaid wrote: Sat May 08, 2021 11:03 am
Random Walker wrote: Sat May 08, 2021 10:51 am
nedsaid wrote: Sat May 08, 2021 10:34 am ·
May 4
Three prior periods (roaring 20s, nifty 50, http://dot.com) when growth beat value, resulting in high valuations for G, were followed by total returns (FF research indices)
1929-43: LG 2% vs SV 80%.
66-82: LG 110% vs 908% for SV
00-12: LG 22% vs SV 287%.
4/20- ?

This data really struck me. Those three time periods are the three long periods when I believe the S&P500 underperformed even TBills. The market trends are so long that it’s hard for us humans I think to see the forest from the trees. The current bull starting in about 2009 with a Covid hiccup (belch?) has been such a tremendous consistent large growth rise with extremely low volatility. It’s a large chunk of all of our investing lives and for many of us I bet the entirety of our investing lives. Combine that with recency bias and it’s a challenge to fathom anything different. Is this time different? Will history rhyme? What’s the new normal for a P/E ratio? Have the factors become commonplace knowledge and arbitraged away?

Dave
Saying that factors have been arbitraged away is like saying that it is different this time. My expectation is that new investors (and new suckers) coming into the market all of the time, the rush to Robin Hood brokerage suggests a lack of perspective and knowledge of market history. The Robin Hood phenomenon suggests to me that factors aren't dead after all. What is old (speculating in individual stocks) is new again.
I agree. I remember reading Bernstein that one of the criteria for a bubble is a new generation of investors and enough time to have forgotten the popping of the previous bubble. When I started deviating away from TSM investing, I believed the value premium was 90% risk and 10% behavioral. As I’ve progressed that 90/10 ratio continues to shrink. I think I might be close to believing 50% risk and 50% behavioral at this point. I think Asness feels it’s essentially all behavioral.

Dave
I feel a wonderful sense of vindication at Cliff Asness's comments regarding the behavioral element of the Value factor. I won't say that it is all behavioral but the behavioral element in my opinion is certainly over 50%, it might be as high as 75%. Those who say that Value is a risk story focus on the fundamental risks of Value stocks, higher leverage and higher earnings volatility. I would counter that there is a pricing risk to Growth stocks, in other words Growth investors tend to be too optimistic and pay too much for their stocks. I would also point that that there is more to Value than buying cheap stocks, I prefer a combination of Value and Quality.

I have tended to believe over time that the pricing risk in Growth stocks is often greater than the fundamental risk in Value stocks. I haven't bought the idea that Value does better over very long periods of time than Growth because Value stocks are riskier. I actually perceive Value to have less risk because the expectations for Value stocks are lower than the expectations for Growth stocks.

My experience with the "Four Horsemen of Underperformance": AIG, GE, Microsoft, and Pfizer show that too high of expectations can turn great companies into mediocre stocks. These were all great stocks from the 1990's that I bought at "bargain" prices in the earlier 2000's. In retrospect, those stocks were still too expensive when I bought them even though their prices had declined. Only Microsoft has recovered its former glory but even that was after seven years of being dead money after I purchased it.

When we talk about factors, we are talking about stock characteristics and about investor preferences. It isn't as scientific as we are led to believe. Over time, investors prefer certain types of stock characteristics over others. Some of those preferences are good and some of them are bad. Less experienced investors like to chase the lottery stocks and the Value traps. On the Growth side, there is more to the story than buying what is hot. On the Value side of the market, there is more to the story than buying what is cheap. Indeed, I call the lottery stocks and the Value traps the "anti-factors." There are good investor preferences such as Quality, you just don't want to overpay.

There are a few on this forum who believe Nedsaid to be an idiot who just spins stories and downplays data. Narrative over data. I don't ignore the data but just point out that it isn't near as precise as the quants would have us believe. So when Asness makes statements like this, it is the sweet smell of vindication. Ol' Nedsaid actually does know a thing or two.

I have said that the factors are the classic greed vs. fear but I think it goes beyond even that. Factors are more experienced and more knowledgeable investors taking advantage of less experienced and less knowledgeable investors. Experienced and knowledgeable investors invest in the factors and avoid the "anti-factors". Inexperienced and naive investors rush into the classic "anti-factor" stocks, particularly the speculative lottery stocks.
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Re: Latest Thoughts from Larry Swedroe

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I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
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Re: Latest Thoughts from Larry Swedroe

Post by HomerJ »

nedsaid wrote: Sat May 08, 2021 11:51 amThere are a few on this forum who believe Nedsaid to be an idiot who just spins stories and downplays data. Narrative over data. I don't ignore the data but just point out that it isn't near as precise as the quants would have us believe. So when Asness makes statements like this, it is the sweet smell of vindication. Ol' Nedsaid actually does know a thing or two.
I think Nedsaid is an unsung genius, but those of us who argue against Swedroe and Asness are ALSO stating "it's not a precise as the quants would have us believe".

That's been my problem with Swedroe and Asness. They have their OWN team of quants that they believe. And they keep making predictions.

And they keep being wrong. Because it's not as precise as Swedroe and Asness would have you believe. Those two guys aren't as smart as Ol' Nedsaid and Drunk Homer. They think economics is similar to physics, but we know better, right?

You don't need to be vindicated by Asness. He doesn't know much more than you do.. :)
Last edited by HomerJ on Sat May 08, 2021 4:21 pm, edited 1 time in total.
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Re: Latest Thoughts from Larry Swedroe

Post by HomerJ »

nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Last edited by HomerJ on Sat May 08, 2021 4:34 pm, edited 1 time in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Latest Thoughts from Larry Swedroe

Post by Random Walker »

HomerJ wrote: Sat May 08, 2021 4:13 pm
nedsaid wrote: Sat May 08, 2021 11:51 amThere are a few on this forum who believe Nedsaid to be an idiot who just spins stories and downplays data. Narrative over data. I don't ignore the data but just point out that it isn't near as precise as the quants would have us believe. So when Asness makes statements like this, it is the sweet smell of vindication. Ol' Nedsaid actually does know a thing or two.
I think Nedsaid is an unsung genius, but those of us who argue against Swedroe and Asness are ALSO stating "it's not a precise as the quants would have us believe".

That's been my problem with Swedroe and Asness. They have their OWN team of quants that they believe. And they keep making predictions.

And they keep being wrong. Because it's not as precise as Swedroe and Asness would have you believe. Those two guys aren't as smart as Ol' Nedsaid and Drunk Homer. They think economics is similar to physics, but we know better, right?

You don't need to be vindicated by Asness. He doesn't know much more than you do.. :)
Homer,
Do you really believe that Swedroe and Asness think that their predictions have physics like accuracy? I don’t think you do. And I’m certain they don’t. Asness has lightheartedly made reference to “physics envy” in finance. And Larry always mentions “mean with wide dispersion of potential outcomes”, “cloudy crystal ball”, and “risk versus uncertainty”. This is why Larry has talked of “hyperdiversification” and recommends diversifying across as many unique and independent sources of risk as possible.

Dave
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Re: Latest Thoughts from Larry Swedroe

Post by HomerJ »

Random Walker wrote: Sat May 08, 2021 4:29 pm
HomerJ wrote: Sat May 08, 2021 4:13 pm
nedsaid wrote: Sat May 08, 2021 11:51 amThere are a few on this forum who believe Nedsaid to be an idiot who just spins stories and downplays data. Narrative over data. I don't ignore the data but just point out that it isn't near as precise as the quants would have us believe. So when Asness makes statements like this, it is the sweet smell of vindication. Ol' Nedsaid actually does know a thing or two.
I think Nedsaid is an unsung genius, but those of us who argue against Swedroe and Asness are ALSO stating "it's not a precise as the quants would have us believe".

That's been my problem with Swedroe and Asness. They have their OWN team of quants that they believe. And they keep making predictions.

And they keep being wrong. Because it's not as precise as Swedroe and Asness would have you believe. Those two guys aren't as smart as Ol' Nedsaid and Drunk Homer. They think economics is similar to physics, but we know better, right?

You don't need to be vindicated by Asness. He doesn't know much more than you do.. :)
Homer,
Do you really believe that Swedroe and Asness think that their predictions have physics like accuracy? I don’t think you do. And I’m certain they don’t. Asness has lightheartedly made reference to “physics envy” in finance. And Larry always mentions “mean with wide dispersion of potential outcomes”, “cloudy crystal ball”, and “risk versus uncertainty”. This is why Larry has talked of “hyperdiversification” and recommends diversifying across as many unique and independent sources of risk as possible.

Dave
He thinks his mean is accurate enough and his calculations of the distribution is accurate enough to make portfolios more efficient.

For instance, he'll calculate that small stocks "expected" return is higher than the Total Stock Market by 1.3% (or whatever), so he'll have one focus on small stocks, and have more bonds, and end up with a portfolio that should have the same total expected return, but should be less volatile since it has less stocks overall, and more bonds.

Makes sense, but you have to trust that his calculations of "expected returns" are accurate and precise enough to really warrant the tenth decimal place. And you're now making a bigger bet on the accuracy of those calculations. If the mean is off or the distribution is wider than expected, and small stocks underperform, you have a SMALLER stock allocation with less returns, so it can really hurt your results.

There are just too many variables to make accurate calculations, in my opinion.

Limited data set, laws change over time so the rules of the game change, making old data less useful, there is direct intervention into the markets by governments, the world is far more connected than before, and the big kicker, human emotions are involved.

Swedroe does indeed admit there is a "wide dispersion of potential outcomes" (sometimes - other times he just states the mean without the error bars), but he's way too confident in the mean (expected return).

I'm not sure it's wise to create a focused portfolio based on those educated guesses of what the mean returns of different asset classes will be.
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

HomerJ wrote: Sat May 08, 2021 4:19 pm
nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Well shoot, how do you know the right mix of stocks and bonds?
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Re: Latest Thoughts from Larry Swedroe

Post by HomerJ »

nedsaid wrote: Sat May 08, 2021 7:13 pm
HomerJ wrote: Sat May 08, 2021 4:19 pm
nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Well shoot, how do you know the right mix of stocks and bonds?
Well, that's the point... Any somewhat balanced mix has worked pretty well in the past... anything between 70/30 and 30/70 has been decent over the past 30 years. Most people didn't have to really think about it at all. Just buy every paycheck into their 401k, buy and hold, and stay the course.

Trying to do any kind of "quantitative analysis" would probably have been counter-productive for most people. Following Swedroe's recommendations would have cost people money so far.

But bond yields are super low now, so maybe the next 30 years it will be more important to do actual calculations.
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

HomerJ wrote: Sat May 08, 2021 8:52 pm
nedsaid wrote: Sat May 08, 2021 7:13 pm
HomerJ wrote: Sat May 08, 2021 4:19 pm
nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Well shoot, how do you know the right mix of stocks and bonds?
Well, that's the point... Any somewhat balanced mix has worked pretty well in the past... anything between 70/30 and 30/70 has been decent over the past 30 years. Most people didn't have to really think about it at all. Just buy every paycheck into their 401k, buy and hold, and stay the course.

Trying to do any kind of "quantitative analysis" would probably have been counter-productive for most people. Following Swedroe's recommendations would have cost people money so far.

But bond yields are super low now, so maybe the next 30 years it will be more important to do actual calculations.
I started investing in earnest in 1984, right at the time a great bull market was just starting. Interest rates were also falling and continued to fall for over 30 years after that. Inflation was falling and stayed low. We were also on the cusp of an economic boom. So we had not only the wind at our backs but hurricane force winds at our back. The dual bull markets for both stocks and bonds guaranteed the success of the balanced portfolios that you described above. Bull markets make geniuses of us all.

My sense is that future returns will be muted but I really hope that my prediction will be wrong. Somewhere on the forum, I did my best Jim Kramer imitation and put a buy recommendation on US Large Value, US Mid Value, and US Small Value. I even hit the buy button. Buy-buy. Buy-buy-buy-buy-buy. I did my best screaming maniac impression but contrary to my best efforts, Value took its sweet time to outperform, it didn't start happening until the second half of 2020. It was done light heartedly, I think St Lutz put me up to it.

Sometime before that, I pounded the table and recommended Large Value. Large Value had one good year and then the market reverted back to its Growth phase. So despite all my huffing and puffing, I couldn't blow the house of Large Growth down. We might be starting a longer term Value trend but it is too early to tell, I got fooled 4-5 years ago. The wait has tried my patience and I even joked about waiting in the pumpkin patch waiting for Asness and Swedroe to come to deliver the Value premium to all of the good little boys and girls.

I even resorted to reverse psychology and joking about voodoo dolls. I named certain Small Value factor true believers and dared them to capitulate. I trolled the Small Value threads. None of that worked but desperate times called for desperate measures.

So certainly my own track record of forecasting has been really spotty. I couldn't predict the economy, election results, or the market. But I do have some knowledge of market history. When a bear market happens, I know the odds are awfully good that the markets will recover. In the US, it has so far been 100% certainty, we just don't know when. I also know that markets have long term trends and we see Growth and Value, Large and Small, US and International take turns in leading each other. So while I have poor predictive powers, I do have enough knowledge and perspective of market history to stay the course when things look bad. I know that a better day is coming. There really is a reversion to the mean.

Larry and Cliff have not made precise predictions and they have not claimed precision. The Academic Research has been all about securities characteristics, certain characteristics tend towards better performance than others. Larry and Cliff aren't about precision but improving the odds for future investing performance. Value has had a tough decade and this had a big effect on their reputations. I am so old that I remember the financial press saying that time had passed Warren Buffett by back in the late 1990s. The 2000's vindicated Buffett in spades. If the Value premium has returned like I think that it has, Larry and Cliff will look a lot better given some time. Shoot, even the much maligned QSPIX fund has shown signs of life in 2021. As Mark Twain famously said, "The rumors of my death have been greatly exaggerated."
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Re: Latest Thoughts from Larry Swedroe

Post by gtwhitegold »

nedsaid wrote: Sat May 08, 2021 9:36 pm
HomerJ wrote: Sat May 08, 2021 8:52 pm
nedsaid wrote: Sat May 08, 2021 7:13 pm
HomerJ wrote: Sat May 08, 2021 4:19 pm
nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Well shoot, how do you know the right mix of stocks and bonds?
Well, that's the point... Any somewhat balanced mix has worked pretty well in the past... anything between 70/30 and 30/70 has been decent over the past 30 years. Most people didn't have to really think about it at all. Just buy every paycheck into their 401k, buy and hold, and stay the course.

Trying to do any kind of "quantitative analysis" would probably have been counter-productive for most people. Following Swedroe's recommendations would have cost people money so far.

But bond yields are super low now, so maybe the next 30 years it will be more important to do actual calculations.
I started investing in earnest in 1984, right at the time a great bull market was just starting. Interest rates were also falling and continued to fall for over 30 years after that. Inflation was falling and stayed low. We were also on the cusp of an economic boom. So we had not only the wind at our backs but hurricane force winds at our back. The dual bull markets for both stocks and bonds guaranteed the success of the balanced portfolios that you described above. Bull markets make geniuses of us all.

My sense is that future returns will be muted but I really hope that my prediction will be wrong. Somewhere on the forum, I did my best Jim Kramer imitation and put a buy recommendation on US Large Value, US Mid Value, and US Small Value. I even hit the buy button. Buy-buy. Buy-buy-buy-buy-buy. I did my best screaming maniac impression but contrary to my best efforts, Value took its sweet time to outperform, it didn't start happening until the second half of 2020. It was done light heartedly, I think St Lutz put me up to it.

Sometime before that, I pounded the table and recommended Large Value. Large Value had one good year and then the market reverted back to its Growth phase. So despite all my huffing and puffing, I couldn't blow the house of Large Growth down. We might be starting a longer term Value trend but it is too early to tell, I got fooled 4-5 years ago. The wait has tried my patience and I even joked about waiting in the pumpkin patch waiting for Asness and Swedroe to come to deliver the Value premium to all of the good little boys and girls.

I even resorted to reverse psychology and joking about voodoo dolls. I named certain Small Value factor true believers and dared them to capitulate. I trolled the Small Value threads. None of that worked but desperate times called for desperate measures.

So certainly my own track record of forecasting has been really spotty. I couldn't predict the economy, election results, or the market. But I do have some knowledge of market history. When a bear market happens, I know the odds are awfully good that the markets will recover. In the US, it has so far been 100% certainty, we just don't know when. I also know that markets have long term trends and we see Growth and Value, Large and Small, US and International take turns in leading each other. So while I have poor predictive powers, I do have enough knowledge and perspective of market history to stay the course when things look bad. I know that a better day is coming. There really is a reversion to the mean.

Larry and Cliff have not made precise predictions and they have not claimed precision. The Academic Research has been all about securities characteristics, certain characteristics tend towards better performance than others. Larry and Cliff aren't about precision but improving the odds for future investing performance. Value has had a tough decade and this had a big effect on their reputations. I am so old that I remember the financial press saying that time had passed Warren Buffett by back in the late 1990s. The 2000's vindicated Buffett in spades. If the Value premium has returned like I think that it has, Larry and Cliff will look a lot better given some time. Shoot, even the much maligned QSPIX fund has shown signs of life in 2021. As Mark Twain famously said, "The rumors of my death have been greatly exaggerated."
I certainly do hope that the time for quants does arrive, but I'm in no hurry at this time for it to arrive. I still have quite a few years left to save even assuming that I decide to retire early. So far I haven't capitulated. The only changes that I have made have been to get more focused on factor exposure. The only change aside from that is trading QMHNX for AMFAX which may or may not be a better mouse trap.

I feel like it's going to work going forward, but my crystal ball is as cloudy as anyone else's.
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Re: Latest Thoughts from Larry Swedroe

Post by whereskyle »

nedsaid wrote: Sat May 08, 2021 9:36 pm
HomerJ wrote: Sat May 08, 2021 8:52 pm
nedsaid wrote: Sat May 08, 2021 7:13 pm
HomerJ wrote: Sat May 08, 2021 4:19 pm
nedsaid wrote: Sat May 08, 2021 1:18 pm I want to make it clear that the Quantitative aspects of investing ARE important. Data and evidence are important. A good grasp of mathematical concepts does help a lot when investing your money. Good Quantitative analysis is helpful in constructing portfolios and in helping to improve portfolio efficiency. Just saying that as with everything else, nothing is perfect and quantitative analysis does have some limitations. You also have to know what is behind the numbers.
Eh, pretty much any basic portfolio using Total Stock Index and Total Bond Index has done well enough even for the vast majority of people who never bothered with "Quantitative analysis" or "portfolio efficiency"

The limitations are big enough to make it mostly a waste of time, in my opinion. But that's just my opinion.

And I could totally be wrong (See if you can get Swedroe or Asness to ever say that!) :)
Well shoot, how do you know the right mix of stocks and bonds?
Well, that's the point... Any somewhat balanced mix has worked pretty well in the past... anything between 70/30 and 30/70 has been decent over the past 30 years. Most people didn't have to really think about it at all. Just buy every paycheck into their 401k, buy and hold, and stay the course.

Trying to do any kind of "quantitative analysis" would probably have been counter-productive for most people. Following Swedroe's recommendations would have cost people money so far.

But bond yields are super low now, so maybe the next 30 years it will be more important to do actual calculations.
I started investing in earnest in 1984, right at the time a great bull market was just starting. Interest rates were also falling and continued to fall for over 30 years after that. Inflation was falling and stayed low. We were also on the cusp of an economic boom. So we had not only the wind at our backs but hurricane force winds at our back. The dual bull markets for both stocks and bonds guaranteed the success of the balanced portfolios that you described above. Bull markets make geniuses of us all.

My sense is that future returns will be muted but I really hope that my prediction will be wrong. Somewhere on the forum, I did my best Jim Kramer imitation and put a buy recommendation on US Large Value, US Mid Value, and US Small Value. I even hit the buy button. Buy-buy. Buy-buy-buy-buy-buy. I did my best screaming maniac impression but contrary to my best efforts, Value took its sweet time to outperform, it didn't start happening until the second half of 2020. It was done light heartedly, I think St Lutz put me up to it.

Sometime before that, I pounded the table and recommended Large Value. Large Value had one good year and then the market reverted back to its Growth phase. So despite all my huffing and puffing, I couldn't blow the house of Large Growth down. We might be starting a longer term Value trend but it is too early to tell, I got fooled 4-5 years ago. The wait has tried my patience and I even joked about waiting in the pumpkin patch waiting for Asness and Swedroe to come to deliver the Value premium to all of the good little boys and girls.

I even resorted to reverse psychology and joking about voodoo dolls. I named certain Small Value factor true believers and dared them to capitulate. I trolled the Small Value threads. None of that worked but desperate times called for desperate measures.

So certainly my own track record of forecasting has been really spotty. I couldn't predict the economy, election results, or the market. But I do have some knowledge of market history. When a bear market happens, I know the odds are awfully good that the markets will recover. In the US, it has so far been 100% certainty, we just don't know when. I also know that markets have long term trends and we see Growth and Value, Large and Small, US and International take turns in leading each other. So while I have poor predictive powers, I do have enough knowledge and perspective of market history to stay the course when things look bad. I know that a better day is coming. There really is a reversion to the mean.

Larry and Cliff have not made precise predictions and they have not claimed precision. The Academic Research has been all about securities characteristics, certain characteristics tend towards better performance than others. Larry and Cliff aren't about precision but improving the odds for future investing performance. Value has had a tough decade and this had a big effect on their reputations. I am so old that I remember the financial press saying that time had passed Warren Buffett by back in the late 1990s. The 2000's vindicated Buffett in spades. If the Value premium has returned like I think that it has, Larry and Cliff will look a lot better given some time. Shoot, even the much maligned QSPIX fund has shown signs of life in 2021. As Mark Twain famously said, "The rumors of my death have been greatly exaggerated."
My problem with Larry's most recent article on the value premium https://t.co/8c6v5BMbc1 is that it looks like Larry is saying, oh look, there's new research that suggests you have to do something different to capture the "value premium." To which I'd reply, aren't you just pointing out that what you suggested didn't work and now you're saying that more recent research suggests if you had just done something else you would have done better?

Am I supposed to be investing in whatever combination of characteristics has more recently performed well or not? Because it's starting to look like Larry and others are just constantly changing the criteria for selecting stocks. I'd say he's going down the slippery slope of performance chasing but it looks like he's already gone down it.

If the criteria for choosing "value" stocks constantly changes, then the "factor" is absolutely useless to buy and hold investors.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: Latest Thoughts from Larry Swedroe

Post by Grt2bOutdoors »

Value is still at a substantial discount to growth as we are very early in the first inning of this rotation into value. Buy value.
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Re: Latest Thoughts from Larry Swedroe

Post by whereskyle »

Grt2bOutdoors wrote: Sun May 09, 2021 7:46 am Value is still at a substantial discount to growth as we are very early in the first inning of this rotation into value. Buy value.
And what is value exactly? Seems like Larry is changing his formula for identifying it every year.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: Latest Thoughts from Larry Swedroe

Post by Grt2bOutdoors »

whereskyle wrote: Sun May 09, 2021 8:36 am
Grt2bOutdoors wrote: Sun May 09, 2021 7:46 am Value is still at a substantial discount to growth as we are very early in the first inning of this rotation into value. Buy value.
And what is value exactly? Seems like Larry is changing his formula for identifying it every year.
Well, it's not an equity selling at 10x book value with a p/e of 50+. If you have a question, why not email Larry directly and ask him? I use VIOV and VBR but there are other etf's out there you can use if you are really interested in it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
typical.investor
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Re: Latest Thoughts from Larry Swedroe

Post by typical.investor »

whereskyle wrote: Sun May 09, 2021 8:36 am
Grt2bOutdoors wrote: Sun May 09, 2021 7:46 am Value is still at a substantial discount to growth as we are very early in the first inning of this rotation into value. Buy value.
And what is value exactly? Seems like Larry is changing his formula for identifying it every year.
To be honest HmL hasn’t been considered a great measure for a long time. Larry confounds the issue by suggesting people are re-thinking value since it has underperformed so much since 2017.

It been shown long before that though part of book value is really irrelevant to earning a value premium. Book value can be divided into contributed capital and retained earnings. Contributed capital has little predictive use in predicting returns and earring the value premium.

Sure HmL works, but really what you are seeing is a value premium in companies that can retain earnings at a good price. (Of course dividends and buybacks count too, the company doesn’t actually have to keep them). DFA added a profitability screen some years ago to address this.

HmL is simply still around because it’s been used and is established.

And Larry has long said multiple measures are better than one.

I really don’t see anything new here that wasn’t know when I started a value tilt in 2013.
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Re: Latest Thoughts from Larry Swedroe

Post by FiveFactor »

typical.investor wrote: Sun May 09, 2021 8:56 am
whereskyle wrote: Sun May 09, 2021 8:36 am
Grt2bOutdoors wrote: Sun May 09, 2021 7:46 am Value is still at a substantial discount to growth as we are very early in the first inning of this rotation into value. Buy value.
And what is value exactly? Seems like Larry is changing his formula for identifying it every year.
To be honest HmL hasn’t been considered a great measure for a long time. Larry confounds the issue by suggesting people are re-thinking value since it has underperformed so much since 2017.

It been shown long before that though part of book value is really irrelevant to earning a value premium. Book value can be divided into contributed capital and retained earnings. Contributed capital has little predictive use in predicting returns and earring the value premium.

Sure HmL works, but really what you are seeing is a value premium in companies that can retain earnings at a good price. (Of course dividends and buybacks count too, the company doesn’t actually have to keep them). DFA added a profitability screen some years ago to address this.

HmL is simply still around because it’s been used and is established.

And Larry has long said multiple measures are better than one.

I really don’t see anything new here that wasn’t know when I started a value tilt in 2013.

HmL is around because it’s empirical, pervasive, persistent, and explainable.
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Re: Latest Thoughts from Larry Swedroe

Post by willthrill81 »

nedsaid wrote: Sat May 08, 2021 9:36 pm Larry and Cliff have not made precise predictions and they have not claimed precision. The Academic Research has been all about securities characteristics, certain characteristics tend towards better performance than others. Larry and Cliff aren't about precision but improving the odds for future investing performance. Value has had a tough decade and this had a big effect on their reputations. I am so old that I remember the financial press saying that time had passed Warren Buffett by back in the late 1990s. The 2000's vindicated Buffett in spades. If the Value premium has returned like I think that it has, Larry and Cliff will look a lot better given some time. Shoot, even the much maligned QSPIX fund has shown signs of life in 2021. As Mark Twain famously said, "The rumors of my death have been greatly exaggerated."
I think that a big part of the issue that is ever present in these sorts of discussions is that certain factors, asset classes, etc. may have a premium, but that premium may be zero or even negative for what seems to be a long time to most investors. It takes a lot of conviction (or ignorance of what's going on) to hold an underperforming factor, asset class, etc. for a decade or longer, more conviction than most investors have. And on top of that, investors have no assurance that the premium they are anticipating will manifest itself in their own investment horizon, if it ever manifests itself at all.

That said, even the market beta premium has been negative in real dollars for ~20 years before, so expecting other premia to be positive over much shorter time frames seems unrealistic to me.

Investors have to deal with uncertainty, imprecision, a lack of reliability in market behavior, recency bias, and a host of other relevant issues.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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nedsaid
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

whereskyle wrote: Sun May 09, 2021 6:57 am
My problem with Larry's most recent article on the value premium https://t.co/8c6v5BMbc1 is that it looks like Larry is saying, oh look, there's new research that suggests you have to do something different to capture the "value premium." To which I'd reply, aren't you just pointing out that what you suggested didn't work and now you're saying that more recent research suggests if you had just done something else you would have done better?

Am I supposed to be investing in whatever combination of characteristics has more recently performed well or not? Because it's starting to look like Larry and others are just constantly changing the criteria for selecting stocks. I'd say he's going down the slippery slope of performance chasing but it looks like he's already gone down it.

If the criteria for choosing "value" stocks constantly changes, then the "factor" is absolutely useless to buy and hold investors.
Yes, there is frustration in trying to apply the lessons learned from Academia. It is sort of like the search for the Fountain of Youth, something that you never can quite achieve. I don't like making an investment and then a few days later reading that you did it all wrong.

There are a couple of lessons from the research that do resonate with me. First, Value is associated with negative momentum. I noticed that Value stocks tended to go down for a while after I bought them. Second, Value does better if you also screen for Quality. Stocks that I bought because they were very cheap tended to just flounder and flounder and flounder, they most often just never did much of anything. Stocks of good or great companies that were temporarily out of favor or facing temporary problems tended to do much better. So from that standpoint, I agree with the research.

Like you, I get frustrated with the continuous tweaking by the Value practitioners. The Small Value investment you so carefully chose somehow just never seems good enough. I will just save you a lot of trouble, if you want both Mid Cap and Small Cap Value, pick the Vanguard Small Cap Value Index that is based on the CRSP Index. If you want a Small Value investment that screens for earnings, which gives you a bit of Quality and is truly Small Cap, buy an index fund or ETF based on the S&P 600 Small Cap Value Index. If you want to follow what the Academics suggest, buy an Avantis or DFA product. Each product has its good points and each product has its drawbacks.

My two main Small Cap investments are the Vanguard Small Cap Value Index ETF (VBR) and the iShares S&P 600 Small Cap Value Index (IJS). If it isn't good enough for Larry, to heck with it. Close enough is close enough. Good enough is good enough.
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

gtwhitegold wrote: Sat May 08, 2021 11:31 pm

I certainly do hope that the time for quants does arrive, but I'm in no hurry at this time for it to arrive. I still have quite a few years left to save even assuming that I decide to retire early. So far I haven't capitulated. The only changes that I have made have been to get more focused on factor exposure. The only change aside from that is trading QMHNX for AMFAX which may or may not be a better mouse trap.

I feel like it's going to work going forward, but my crystal ball is as cloudy as anyone else's.
I think the day is here, the Great Swedroe and Mr. Asness have arrived at the Pumpkin Patch giving out the Value premium to all the good little boys and girls who kept the faith. Value and particularly Small Value have been outperforming for about a year now. Too early to say that the tide has turned, but so far so good.

I suspected that the worm was about to turn as Taylor Larimore issued more or more shrill warnings about how dangerous Small Value investing was to a portfolio. Sort of like warning little kids not to play with matches. I regarded him as sort of a contrary indicator, it stiffened my resolve to stay the course. All of the "Death of Value" threads were yet another indicator as was the capitulation of the weak hands here on the forum. In a fun and sort of wicked sort of way, I tried to get the strong hands to capitulate as well but save for one, they didn't budge. Only one did and then he went back to a Small Value tilt.

The aftermath of the Covid-19 Pandemic did what the not so mighty Nedsaid could not do, that is bringing back the Value premium. I felt like Frank Morgan bellowing into a microphone and spinning the controls as the little dog Toto pulled back the curtain.
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Re: Latest Thoughts from Larry Swedroe

Post by nedsaid »

willthrill81 wrote: Sun May 09, 2021 10:31 am
nedsaid wrote: Sat May 08, 2021 9:36 pm Larry and Cliff have not made precise predictions and they have not claimed precision. The Academic Research has been all about securities characteristics, certain characteristics tend towards better performance than others. Larry and Cliff aren't about precision but improving the odds for future investing performance. Value has had a tough decade and this had a big effect on their reputations. I am so old that I remember the financial press saying that time had passed Warren Buffett by back in the late 1990s. The 2000's vindicated Buffett in spades. If the Value premium has returned like I think that it has, Larry and Cliff will look a lot better given some time. Shoot, even the much maligned QSPIX fund has shown signs of life in 2021. As Mark Twain famously said, "The rumors of my death have been greatly exaggerated."
I think that a big part of the issue that is ever present in these sorts of discussions is that certain factors, asset classes, etc. may have a premium, but that premium may be zero or even negative for what seems to be a long time to most investors. It takes a lot of conviction (or ignorance of what's going on) to hold an underperforming factor, asset class, etc. for a decade or longer, more conviction than most investors have. And on top of that, investors have no assurance that the premium they are anticipating will manifest itself in their own investment horizon, if it ever manifests itself at all.

That said, even the market beta premium has been negative in real dollars for ~20 years before, so expecting other premia to be positive over much shorter time frames seems unrealistic to me.

Investors have to deal with uncertainty, imprecision, a lack of reliability in market behavior, recency bias, and a host of other relevant issues.
Yep, long periods of underperformance are a big reason that the premiums exist in the first place. This is true even of the Equity Risk Premium.
A fool and his money are good for business.
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Re: Latest Thoughts from Larry Swedroe

Post by whereskyle »

nedsaid wrote: Sun May 09, 2021 10:55 am
whereskyle wrote: Sun May 09, 2021 6:57 am
My problem with Larry's most recent article on the value premium https://t.co/8c6v5BMbc1 is that it looks like Larry is saying, oh look, there's new research that suggests you have to do something different to capture the "value premium." To which I'd reply, aren't you just pointing out that what you suggested didn't work and now you're saying that more recent research suggests if you had just done something else you would have done better?

Am I supposed to be investing in whatever combination of characteristics has more recently performed well or not? Because it's starting to look like Larry and others are just constantly changing the criteria for selecting stocks. I'd say he's going down the slippery slope of performance chasing but it looks like he's already gone down it.

If the criteria for choosing "value" stocks constantly changes, then the "factor" is absolutely useless to buy and hold investors.
Yes, there is frustration in trying to apply the lessons learned from Academia. It is sort of like the search for the Fountain of Youth, something that you never can quite achieve. I don't like making an investment and then a few days later reading that you did it all wrong.

There are a couple of lessons from the research that do resonate with me. First, Value is associated with negative momentum. I noticed that Value stocks tended to go down for a while after I bought them. Second, Value does better if you also screen for Quality. Stocks that I bought because they were very cheap tended to just flounder and flounder and flounder, they most often just never did much of anything. Stocks of good or great companies that were temporarily out of favor or facing temporary problems tended to do much better. So from that standpoint, I agree with the research.

Like you, I get frustrated with the continuous tweaking by the Value practitioners. The Small Value investment you so carefully chose somehow just never seems good enough. I will just save you a lot of trouble, if you want both Mid Cap and Small Cap Value, pick the Vanguard Small Cap Value Index that is based on the CRSP Index. If you want a Small Value investment that screens for earnings, which gives you a bit of Quality and is truly Small Cap, buy an index fund or ETF based on the S&P 600 Small Cap Value Index. If you want to follow what the Academics suggest, buy an Avantis or DFA product. Each product has its good points and each product has its drawbacks.

My two main Small Cap investments are the Vanguard Small Cap Value Index ETF (VBR) and the iShares S&P 600 Small Cap Value Index (IJS). If it isn't good enough for Larry, to heck with it. Close enough is close enough. Good enough is good enough.
Thanks for the recommendations. I've started tilting small, but not to "value," via VB and IJR. "Small" is a criterion that I can anticipate staying fixed!
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: Latest Thoughts from Larry Swedroe

Post by jocdoc »

Regarding the comments on the tweaking of value definition and the best etf to capture the premium there is little difference in the performance of all the SCV etfs. Research affiliates suggests some of the etfs may provide a higher expected premium but the majority are grouped together with similar expected returns. .

https://interactive.researchaffiliates. ... strategies

JC
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