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  • Equity Investing Or Index Investing [View article]
    Christine,

    Nor do they meet my requirements. This also replies to many high yielding dividend growing stocks.

    Lowell
    Dec 4, 2014. 02:40 PM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Dnorm1234,

    I agree with your last two paragraphs. While I do not dispute the fact that there are some stock pickers who will outperform the S&P 500 or a more appropriate benchmark, the vast majority do not. However, nearly all the data for this conclusion comes from studying professional money managers rather than individual investors as the data is not available to examine how individuals are performing with their portfolios. Here are some of the advantages I see to Dividend Growth Investing (DGI).

    1. These investors have a plan and it includes saving early in life. This basic idea applies to both indexers and stock picking DGI managers.
    2. DGI investors select their stocks from a list of companies that have long records of success. This reduces the emotional drive to run after high flyers.
    3. DGI investors focus on income vs. overall return as they are interested in providing sufficient income to maintain their living style during their retirement years. This same goal is possible if one chooses to use index funds or ETFs.
    4. While related to point #1, I admire the discipline I see in the DGI community. They also seem to be patient investors with a 30-50 year outlook.

    While I may have missed it among all these comments, DGI investors seem to assume that indexers only use the S&P 500 (SPY) to populate their portfolios and therefore the income is insufficient. This is an incorrect assumption. It is possible to build a portfolio using low-cost, commission free ETFs that also provides adequate income for the retirement years.

    Lowell
    http://itawealth.com
    Dec 4, 2014. 08:11 AM | 2 Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Bob,

    While it has been a long time since I read Lowell Miller's book, I recall what I call a "feel good" calculation he pushed in order to emphasize dividends. Miller liked to calculate yield based on original price. Here is an example, based on my memory from reading his book.

    Assume one purchased stock XXX for $50 and it paid a dividend of $2 per share for a yield of 4%. Sometime later the stock rose to $100 and paid a dividend of $4.00 or a yield of 4% - no change. Miller was fond of telling the reader that the yield was actually 8% based on $4.00/$50 (original purchase price) = 8%. The yield did not change, but the "feel good" yield calculation did. This way of calculating yield is misguided at best.

    Lowell
    Dec 3, 2014. 04:06 PM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Chowder,

    If you check the SA ETF screening option, and set the yield to >6%, you will find the ETFs. (http://bit.ly/1jb8qkS#) While I am not recommending one invest in high yield ETFs, I thought I would bring up the idea.

    On a rare occasion I will take a flyer with a high yield ETF in a tax deferred account, but not frequently as they generally lag the total U.S. Equities market.

    You may recall that I wrote an article for SA (http://seekingalpha.co...) that supported your thesis of dividend investing, but it really is a close call, at least over the time frames tested.

    Lowell
    http://itawealth.com
    Dec 3, 2014. 01:22 PM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    If dividends are all important, why not invest in a wide variety of ETFs that have yields higher than 6% or even 10%. The risk is spread out over hundreds of companies. Right now I can find 7 ETFs that have yields in excess of 10%. What is the drawback of such an approach if dividends is all I am after?

    Lowell
    Dec 3, 2014. 11:39 AM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Chowder,

    Thank you for the interesting article. I did not completely understand the following paragraph.

    "The equity portfolio, while underperforming the S&P 500 in total return generated 55.4% more in income. That's a considerable amount of money that the S&P 500 can't make up for in total return and by selling some shares to make up the difference."

    The above paragraph implies that dividends from the equity or dividend oriented portfolio were not part of the Internal Rate of Return (IRR) calculation. I must be missing something. If selling shares of the S&P 500 index cannot make up for the dividend advantage that comes from the equity portfolio, then the equity portfolio must have outperformed the S&P 500 in total return.

    What was the IRR comparison or difference between the S&P 500 index and the equity portfolio over the 20-year period?

    Lowell
    Dec 3, 2014. 07:37 AM | 2 Likes Like |Link to Comment
  • Who Will Manage The Family Portfolio When I Die? [View article]
    If one wished to keep it simple for the uninterested spouse, invest in three or four ETFs. Those would be: VTI, VEA, and TLT and/or BND. Then select a percentage for each that fits the risk level for your family. Rebalance according to those stated percentages once every year or two. This approach really keeps it simple.

    One level up in complexity is to follow the modified Dual Momentum model as it reduces risk. That model is explained in this Seeking Alpha article. Both models avoid the complexity of selecting individual stocks.

    http://seekingalpha.co...

    Lowell
    Dec 2, 2014. 12:41 PM | Likes Like |Link to Comment
  • Who Will Manage The Family Portfolio When I Die? [View article]
    Critical,

    "To discard the only viable option here IMHO of a trusted, paid advisor as being too expensive (0.5-1.5% for fund management fees isn't that much, don't know what paid advisors of firms would cost), isn't realistic in my view."

    Feeding the Fee Machine costs more than most investors realize. I could not disagree with you more on the point of paying out fees. Using conservative assumptions, over a 30-year period, a 1% of assets annual fee will cost the investor a third of future real investment returns. That is huge.

    One is much better off to set up a "Swensen Portfolio" (http://seekingalpha.co...) and teach the disinterested spouse how to rebalance.

    Lowell
    Dec 1, 2014. 08:01 AM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Marc,

    No, I have not performed back-tests using different intervals. Much too time consuming. When this model was initially set up, it was designed to be robust, but not tweaked in an effort to fit the data. Therefore, "curve fitting" was ruled out as historical data will differ from future data.

    The 10 ETFs (plus SHY) were selected as they provide global diversification and have low correlations. Low defined as <0.80.

    Lowell
    http://itawealth.com
    Nov 26, 2014. 09:13 AM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    91656,

    I think this article is exactly what you are looking for. Check it out.

    http://bit.ly/1yNj6sD

    Lowell
    http://itawealth.com
    Nov 25, 2014. 10:19 PM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Don,

    High volatility is considered bad. The 20% allocated to volatility is a way to find ETFs (or other securities) that have low volatility.

    Lowell
    http://itawealth.com
    Nov 25, 2014. 10:11 PM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Spangler,

    What you say above is what I observe in my portfolio tracking. When the market begins to sag, the portfolios improve with respect to the benchmarks. However, when the market takes off, portfolio returns lag the benchmarks.

    While I am not wishing for a bear market, neither do I dread a correction as I want to see how the momentum model works with out-of-sample data.

    Lowell
    Nov 25, 2014. 12:18 PM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Stephen,

    Return issues are related to the long (12-month) look-back period. I use a ranking combination that uses the model discussed in the article.

    I'm testing this approach going forward as that is the real proof as to whether the model works. In addition, I have three passively managed portfolios I'm tracking as a relative check on portfolio performance.

    Lowell
    Nov 25, 2014. 12:13 PM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Tmow,

    Another variation is to hold ETFs that continue to outperform SHY, but may not be in the top two performing securities. This will reduce portfolio churning and has a greater chance of including VTI, a well diversified ETF as it covers the entire U.S. Equities market.

    Lowell
    Nov 25, 2014. 07:54 AM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    Spangler,

    Good point as there is the possibility, in the above portfolio, of ending up with all investments concentrated in commodities (DBC) and gold (GLD). While this is unlikely, it is still a possibility. I'm not sure how comfortable I would be if that is what the model recommended. It comes down to - What confidence do I have in the model?

    An alternative is to increase the number of possible holdings from two to something higher, an application I use for larger portfolios. Back-testing shows the returns are lower, as you suggest, when the number of holdings are increased.

    Lowell
    http://itawealth.com
    Nov 25, 2014. 06:24 AM | 1 Like Like |Link to Comment
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