A Passive Investment Portfolio Built For Low Risk And Long-Term Success [View article]
HeWho:
By low-risk I am not saying that this portfolio is extremely risk-adverse and is as safe as a bond portfolio. I am simply making the argument that this portfolio will track the market with lower risk than most portfolios based on the return that you're getting. Risk and return are both significant measures and you cannot look at one without the other. Achieving 9% annualized returns (while not a long time frame) using this portfolio I believe is taking on less risk than other portfolios that may be achieving 9% annually for three years. The primary reasons are the general makeup of the portfolio and the low expenses and fees. I view paying a higher expense as taking on more risk because it eats into your return to a greater degree (especially over a long time frame).
The portfolio is essentially: US Stock 50% (different types, small cap, large cap value, etc) REIT (a small % because higher risk) 5% Bond 18% (short and intermediate term) International 24% (Europe and Asia primarily) Gold 3%
"Bear markets are when risk management is most important because that's when the chance/magnitude of loss would be highest."
I agree, perhaps I should have quantified my risk specifically for bull and bear markets.
In the future I will throw in some specific risk measurement metrics, thanks for the comment.
A Passive Investment Portfolio Built For Low Risk And Long-Term Success [View article]
HeWho:
Thanks for the comment. Risk management is certainly crucial, for the sake of this article I did not focus much on beta, volatility, and correlation. However, I know that most broad based index funds are less risky than many actively managed funds due to actively managed investors taking bigger bets in attempts to achieve market risk premiums or above market returns. Although rare, some managers can do this effectively and it is worth it to pay a premium for their expertise. Also, lowering taxes and fees makes your implied risk lower.
Also, I initially had a longer time frame but many of the funds would have came up with no values because they are relatively new. Therefore, in order to get a full picture and all data included, I used a small time frame. Sorry for the inconvenience. Hypothetically speaking, based on this data, if i were to use a time frame of 10 years I believe you would see correlation between the returns of each individual ETF with what it tracks (at a lower expense than other funds) so a slightly higher after expense return would be achieved.
I may create another portfolio with funds that have been around for a longer time period and compare them with other mutual funds so you can really get the big picture.
Coach Is Undervalued By 25% And Analysts Are On Board [View article]
This article was presented very well. Some of the negative aspects of Coach are the same store sales growth relative to peers. Positive aspects are Coach's profitability and low P/E relative to peers. I think the latter is more important for long-term success. More reward than risk in Coach at the current levels, analyst target price is near 60 which is right at where my analysis measures it. I'll have an article up soon. :) Long COH
I agree their is risk involved here and they had an upsetting sales number this quarter. While this does raise alarm I simply believe the risk/reward here is great.
I believe this is a great price level for Kohls and the Kohls stores near me do extremely well. In fact, on December 1st I saw a line with over 25 people and I couldn't believe it. I live in the Midwest where the stores seem to do well - I understand this isn't true for all locations around the country.
Appreciate your comments and opinions Johnara. I agree that the percent off coupons can be overdone. However, I believe that this can also be a strength of Kohls. If you get a percent off coupon you are probably more likely to go there and shop. Kohls has a pricing strategy to increase prices (prices are higher than they were in 2011). And part of my title was to stress that there are always sales going on at Kohls and buying things at regular prices almost seems completely out of the question.
I believe they have to improve their online shopping as well, however, I am happy to see they are spending more resources on improving their online platform.
4 'Hidden Danger' Auto Stocks That Could Sink Your Portfolio Now [View article]
I thought the article was decent considering you put your own spin on the negative looming news. I personally believe Honda is a good long-term investment but maybe I don't realize how major these head winds are?
I also agree that Caterpillar is a long-term buy right now. I disagree with your statement regarding the tone of Caterpillar's management. I'm sure they wanted to sound less excited because they were recently criticized by Jim Cramer in the Q2 earnings report for being too optimistic. Overall, good earnings report and good indicator of the global economy in 2013. Cat is cheap right now and should have a good 2013 and onward regardless of who is elected Nov 6th
Baidu's Long-Term Prospects Sound Despite Its Mobile Monetization Woes [View article]
BIDU is a story stock with more growth to come. At prices near $100 BIDU is a good bet because earnings and sales are projected to grow and many believe a Chinese economic recovery is inevitable.
A Passive Investment Portfolio Built For Low Risk And Long-Term Success [View article]
By low-risk I am not saying that this portfolio is extremely risk-adverse and is as safe as a bond portfolio. I am simply making the argument that this portfolio will track the market with lower risk than most portfolios based on the return that you're getting. Risk and return are both significant measures and you cannot look at one without the other. Achieving 9% annualized returns (while not a long time frame) using this portfolio I believe is taking on less risk than other portfolios that may be achieving 9% annually for three years. The primary reasons are the general makeup of the portfolio and the low expenses and fees. I view paying a higher expense as taking on more risk because it eats into your return to a greater degree (especially over a long time frame).
The portfolio is essentially:
US Stock 50% (different types, small cap, large cap value, etc)
REIT (a small % because higher risk) 5%
Bond 18% (short and intermediate term)
International 24% (Europe and Asia primarily)
Gold 3%
"Bear markets are when risk management is most important because that's when the chance/magnitude of loss would be highest."
I agree, perhaps I should have quantified my risk specifically for bull and bear markets.
In the future I will throw in some specific risk measurement metrics, thanks for the comment.
Stay tuned
A Passive Investment Portfolio Built For Low Risk And Long-Term Success [View article]
A Passive Investment Portfolio Built For Low Risk And Long-Term Success [View article]
Thanks for the comment. Risk management is certainly crucial, for the sake of this article I did not focus much on beta, volatility, and correlation. However, I know that most broad based index funds are less risky than many actively managed funds due to actively managed investors taking bigger bets in attempts to achieve market risk premiums or above market returns. Although rare, some managers can do this effectively and it is worth it to pay a premium for their expertise. Also, lowering taxes and fees makes your implied risk lower.
Also, I initially had a longer time frame but many of the funds would have came up with no values because they are relatively new. Therefore, in order to get a full picture and all data included, I used a small time frame. Sorry for the inconvenience. Hypothetically speaking, based on this data, if i were to use a time frame of 10 years I believe you would see correlation between the returns of each individual ETF with what it tracks (at a lower expense than other funds) so a slightly higher after expense return would be achieved.
I may create another portfolio with funds that have been around for a longer time period and compare them with other mutual funds so you can really get the big picture.
Coach Is Undervalued By 25% And Analysts Are On Board [View article]
If You Can Beat Them, Why Join Them? ETFs As Viable Long-Term Investments [View article]
Please keep contributing!
Buy Kohl's At 20% Off [View article]
I agree their is risk involved here and they had an upsetting sales number this quarter. While this does raise alarm I simply believe the risk/reward here is great.
Buy Kohl's At 20% Off [View article]
I believe this is a great price level for Kohls and the Kohls stores near me do extremely well. In fact, on December 1st I saw a line with over 25 people and I couldn't believe it. I live in the Midwest where the stores seem to do well - I understand this isn't true for all locations around the country.
Buy Kohl's At 20% Off [View article]
I believe they have to improve their online shopping as well, however, I am happy to see they are spending more resources on improving their online platform.
4 'Hidden Danger' Auto Stocks That Could Sink Your Portfolio Now [View article]
How To Invest In Obama's Second Term: Part I [View article]
5 Stocks For A Great 2013 Growth Portfolio [View article]
Caterpillar 3Q Earnings Analysis: Management Discussion, Margins And Valuation [View article]
Market Outlook: Bearish Tripwires [View article]
However, I still believe long-term the market is too high right now so you should be "holding or selling" not getting new positions in most cases.
Stocks Expected To Outperform Corresponding Sector ETFs In 2012 [View article]
Good analysis
Baidu's Long-Term Prospects Sound Despite Its Mobile Monetization Woes [View article]