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Lowell Herr

 
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  • Benchmarking: Are You Good Or Just Lucky? [View article]
    Good article, Marc, and a topic frequently avoided. I posit many investors do not benchmark their portfolio for several reasons. 1) They really want to remain in the dark as to the performance of their portfolio with respect to an appropriate benchmark. 2) Investors don't know how to measure their portfolio performance or the benchmark performance. 3) Coming up with an appropriate benchmark is difficult.

    I write an investment blog at this address:
    itawealthmanagement.com and I've written about benchmarks several times. Here is the reference to one basic article.
    itawealthmanagement.co.../

    I've finally managed to come up with a way to measure the portfolio performance against a customized benchmark - a benchmark tied to the asset allocation plan for any investor. It does require using an Excel spreadsheet known as the TLH Spreadsheet. While it is not a perfect measurement, it sure beats anything I've found on the commercial market.

    Thanks for bringing this timely topic to our attention.

    Lowell Herr
    Sep 7 01:41 PM | 3 Likes Like |Link to Comment
  • It's Hard To Beat The Market: A Humbling Year-End Review [View article]
    "Overall, the year-end value of the portfolio (cash included) was $144,026 on a principal of $129,673, a total return of about 11.1%. As I have been contributing regularly to the portfolio over the past year, the average duration of each holding was 166 days; therefore, on an annualized basis, the portfolio would be projected to return 26.4%, with weighted standard deviation of 0.229%. For the period of 25 July, 2013 to 25 July, 2014, the SPY's performance was 19.22%, with a standard deviation of 0.163%."

    Investing Doc,

    Caution: Take extreme care when calculating the portfolio return, particularly when new cash is added or withdrawn during the evaluation period. Look up Beardstown Ladies to see what problems this can lead to. Perhaps you are using an Internal Rate of Return calculation and if so, I'll be quiet.

    Lowell
    Jul 28 09:55 PM | 2 Likes Like |Link to Comment
  • What's Even Sadder Than Greg Mankiw's Chart - Harvard Pays 'Professionals' Millions Of Dollars To Lose Billions Of Dollars [View article]
    Mark,

    While not defending any of the above performances, there is a lot of missing information. As you mention, it is not known how much money was contributed to the endowment funds. Neither is it mentioned how much was paid out of the funds for financial aid.

    If the above percentages are real Internal Rate of Return percentages, then the performances are quite poor. I suspect the chart does not take into consideration important variables.

    Lowell
    Jun 29 08:44 AM | 2 Likes Like |Link to Comment
  • Dividend Growth Investors: Do They Have A Point Or Is It Too Close To Call? [View article]
    Bob,

    I don't have the time right now, but it would be interesting to take 10 to 15 of the top DG stocks and run them through the Cluster Weighting Momentum (CWM) analysis going back to before the dot.com bubble burst. I'm confident those 10 to 15 would definitely outperform an index such as the VTSMX as CWM does a very good job of keeping investors out of major bear markets.

    For CWM to work its best, one needs to include low correlated securities in the mix.

    Where do you go to search for DG stock - or the original screen before you begin to analyze the stocks individually?

    Lowell
    http://itawealth.com
    Jun 9 09:17 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Investors: Do They Have A Point Or Is It Too Close To Call? [View article]
    Bob,

    A 15 year comparison is possible. Does someone have 15 or 20 dividend stocks they actually purchased 15 years ago and have held since the original purchase? I still hold index funds I purchased back in the 1990s.

    Here is one point I don't get when it comes to dividend growing zealots. Assume one has a goal of generating 3% (or some other percentage) income from a portfolio. What does it matter whether or not that yield comes from index instruments or individual stocks? The literature is filled with research that selecting individual stocks, be they dividend growers or otherwise, is a loser's game. Granted, much of that research is based on mutual fund managers and they have overhead that is a drag on their funds. The small investor does not have this issue as we do not count as expenses our computers, heating our homes, software expenses, time spent managing the portfolio, etc.

    This is where benchmarking comes into play. If I say I am satisfied with a particular income regardless of market conditions, that is equivalent to going into a high jump competition knowing only the "Western roll" while oblivious to the "Fosbury Flop."

    Lowell
    Jun 9 01:58 PM | 2 Likes Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    "I don't compare my results to a benchmark. I set goals that are specific to my needs. The value of my portfolio at the end of every year, the yield I wish my portfolio to produce and double digit income growth every year regardless of market conditions."

    Chowder,

    The reason I asked it tied to the title of this article as it implies one is making a grave error by using index instruments. Almost by definition, a portfolio constructed from index funds or index ETFs will come close to matching the broad market. If dividend growing stocks are superior, then one can assume such a portfolio will outperform the broad market or a fund such as VTSMX. If this is not the case, and one does not know if no comparison is made, then why the fervor over dividend growers.

    I'm baffled why any investor stakes a claim to coming up with a solid method of investing, yet wanders in the dark as to how well that portfolio is performing with respect to the broad market.

    Lowell
    Jun 6 09:31 PM | 2 Likes Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    "I suggest you read "The Single Best Investment" by Lowell Miller to get a better grasp of what DGI is all about."

    BoomBoom,

    I once had Miller's book, but gave it away as there is an inherent flaw in his argument as to how yield is calculated. According to the copy I had, Miller claimed that yield is based on the purchase price of the security. In other words, Yield = Current Dividend/Purchase Price. This is not true. That logical flaw completely omits the time value of money. Miller's method for calculating yield is only a feel-good calculation and it bears no resemblance to how the yield of a security is actually calculated. Perhaps he revised his position on yield in a later version of his book.

    Lowell
    Jun 3 08:16 PM | 2 Likes Like |Link to Comment
  • Small Cap ETFs Signal Warning Signs [View article]
    David,

    VOE and VBR still have positive acceleration (momentum) when one normalizes performance over the past three months vs. past six months. In other words, these two value ETFs continue to perform very well. VOE is 12.8% and VBR is 11.1%.

    Lowell
    http://itawealth.com
    May 8 06:56 PM | 2 Likes Like |Link to Comment
  • Building A Retirement Portfolio Using ETFs [View article]
    Picolomini,

    If you stick with large non-managed index ETFs, such as the ones mentioned in the article, you should be OK. However, I am not one to completely forget looking at a portfolio for 20 years as it is bound to get out of balance over that period.

    Lowell
    http://itawealth.com
    Apr 6 10:17 AM | 2 Likes Like |Link to Comment
  • Dividend Aristocrats: Investing In The Best While Reducing Risk [View article]
    DlWeiss,

    I am not recommending ADP or any other securities mentioned in the article. Rather, I am laying out a model one might use to manage a portfolio based on an array of stocks, index funds, or ETFs chosen by the manager.

    Lowell
    Dec 4 11:06 AM | 2 Likes Like |Link to Comment
  • Bullish Percent Index And Sector Indicators Dip Further South [View article]
    Bottoms are difficult to pick. Should several of the major indexes dip below the 30% line, it will be time to move all available cash into the market. However, the market could turn around and we never see the 30% level for many months.

    Lowell
    Nov 17 08:42 AM | 2 Likes Like |Link to Comment
  • Vanguard Vs. Schwab: Who Has The Best Suite Of Commission Free ETFs For Portfolio Building [View article]
    In another article you might include the commission free ETFs provided by TD Ameritrade. I know many are Vanguard ETFs, but there are also a number from iShares and other vendors.

    Lowell
    Jul 5 11:23 AM | 2 Likes Like |Link to Comment
  • Flash Crash, 2 Years Later [View article]
    I'd like to see an increased fee accessed to trades held fewer than 30 days. And the fees would be increased the shorter the holding period.

    The argument against such a move is one of liquidity.

    Lowell
    May 6 09:48 AM | 2 Likes Like |Link to Comment
  • The Efficient Market Hypothesis [View article]
    Another view is that there is a lot of noise around the "perfect knowledge" and that noise cancels out leaving a price baseline that quite accurately reflects the price of the investment.

    I don't know of anyone who would argue that there is no irrational uncertainty at work in the markets. The evidence is that very few investors are able to take advantage of those uncertainties on a consistent basis over a lifetime (40 years or more) of investing.

    Lowell
    Apr 19 07:52 PM | 2 Likes Like |Link to Comment
  • Do You Believe In The Efficient Markets Hypothesis Cop-Out? [View article]
    I did read it carefully - at least sufficiently to note that Buffett is spelled with two t's. (g)

    Lowell
    Apr 18 08:42 PM | 2 Likes Like |Link to Comment
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