Roger Nusbaum

Portfolio strategy, etf investing, foreign companies
Roger Nusbaum
Portfolio strategy, ETF investing, foreign companies
Contributor since: 2004
Company: AdvisorShares
I am more concerned with probabilities than trying to appear to make a big call for the simple reason that clients are more interested in reducing volatility of their portfolio than whether I appear to be correct or incorrect about a call. Additionally I say in the post that I raised cash in August and that I would have taken more defensive action between when this was written (which was Jan 17th) and when it was published and I did very early in Tuesday's session.
I don't follow your last comment, I never go 100% cash, not even close, for reasons address in this post.
the above captures actively managed ETFs
Actual bear markets tend to bottom when the broad index is something like 10-15% below it's 200 DMA (you may want to double check that it is not 20% below) which tends to coincide with panic and/or hysteria.
In terms of guessing when a sector might bottom, like energy, it is just that, a guess. There is less risk of a large decline in a sector after a large decline which is where we are now with energy. There are companies that will fail/default and ones that will not. Sticking to ones that have a lower likelihood of failing, buying or adding to positions after s 20-30% decline is not the worst thing you can do even if there is more downside which there very well could be.
thank you for sharing this story
fair point, that is price action not total return
Yahoo Finance usually quotes IIVs for ETFs. Additionally when you want to place a trade for an ETF your broker should be able to tell you what the IIV while you place that trade online.
I might swap the word 'losses' for 'declines' in your first sentence. A diversified portfolio of funds and high quality individual issues tend to decline and come back without permanently impairing capital. Obviously not every holding can come back but I agree with the Benartzi premise that most of it is behavioral in nature.
I did not say it was better but you're looking backwards at a time when inflation was almost nil, arguably not enough inflation based on the Fed's stated objective. If there is ever inflation (as measured by CPI) it would makes sense to expect that TIPs (the treasury product, not necessarily a particular ETF) would outperform.
"and from Bodie's viewpoint, INFLATION risk should be mitigated by the TIPS exposure."
the answer lies in sequence of returns. 70/30 for the guy who retired July 1st, 2007 very reasonably became very problematic especially if they had a market weight to dividend paying financial stocks.
yes, I still believe in 'whatever you got, 4%' more practically 1% every three months, of course less would be better if possible.
a diversified portfolio will have some amount of yield (dividend and fixed income interest payments). maybe the yield is somewhere between 250 and 300 basis points meaning that another 100-150 basis points might need to be realized to get to 4%.
in a diversified portfolio that includes individual issues and ETFs (this what the portfolios I manage look like) there are always names doing very well and some that are not doing as well. Just about any time I have needed to sell there have been at least a couple of names that can afford to be sold down some to be closer to their original intended target weight.
Another source is selling (in the right type of account) for tax reasons like realizing a loss or gain or offsetting the capital loss/gain of a previous trade.
Yet another source is from when tactical trades occur in the portfolio. Of course there is usually, but not always, visibility for needing to raise cash so selling a $20,000 position for tactical reasons maybe only $15,000 or $16,000 gets reinvested.
It seems like you're having a different conversation. The question was about "solid dividend stocks" and that is what I gave my opinion on. There are more "solid dividend stocks" from the financial sector that went on to fail or close to it than we are likely to remember.
And obviously companies with long track records of dividend growth will occasionally cut or eliminate their dividends. We know this is true as the constituency of SDY has changed over the years.
Fannie, Freddie, Lehman, Merrill Lynch, Wachovia, AIG, Citi are examples of failures or near failures with "solid" histories. Many of the other big banks were forced to cut their dividends to a nickel per quarter.
That is the simple explanation to the reader's question. Your comments read like they are emotional, maybe they aren't but that is how they read, I am not comparing anything, I am addressing the readers's question about possible drawbacks to just owning "solid dividend stocks."
'failure' refers to companies that failed not a strategy
15 or 20 years ago a portfolio of "solid dividend paying stocks that raise their dividend payouts each year" wold have reasonably included a healthy dose of financial companies that of course failed a few years later. The widespread failure caught many people off guard as evidenced by the weighting that financial stocks had in the broad indexes and the widespread fallout to many professionally managed portfolios as well as DIY portfolios. Is a smaller scale but similar event unfolding now with energy stocks and MLPs?
Presuming to outguess the next one is a risky proposition IMO. Additionally I don't believe a portfolio with nothing but 3-5% yielders is very well diversified as opposed to a portfolio comprised of stocks with different types of attributes.
what you outline is the opposite of panic selling but I am telling you people panic and sell indiscriminately at a point of heightened emotion and desperation.
even modest price appreciation from the equity portion of the portfolio can mitigate the loss of purchasing power. Year 1 take 4% of $500,000, year two take 4% of $512,000 and so on. market declines might mean taking less which is part of the flexibility I'm talking about.
I did not take the Pfau article to be a sales brochure for annuities. I am not licensed to sell annuities and have never sold one but I know plenty of people with them and they love them (I don't get it but there you go).
As far as the 1% assumption for fees, I am pretty sure he is assuming that people hire an advisor.
no symbols mentioned in the post, as I understand it you disclose when you mention something you own.
Well the link provided discusses the term. Additionally I've written dozens of articles about liquid alternatives/diversifi... I have 11 years of context in past posts that I am working with, there is not enough room in a new post to recreate all that context.
He used the term dividend zealots, funny, I thought that one was mine, nice article Dave.
be careful for the recoil, meaning something like the flash crash or other distortion. Your stop limit at $30 on a stock that was at $40 gets elected on a gap down to $20 and you now have a limit in at,say $29, the distortion the corrects itself and the stock then races up, executes your limit at $29 and closes the day at $40 where it started all while you are doing errands. Extreme example but this is essentially what happened.
you are correct, I misread the search result.
what percentage of your portfolio is in cash, how long has it been in cash and how much of the bull market has occurred without that cash? have you ever bought "some DGI stocks at a discount" in the face of a 20% decline ever before?
you can do a search for "Roger Nusbaum 200 DMA" either on seeking alpha, or google and probably 500 posts that answer your question.
the article was written on June 29th and posted July 2nd
"... This type of investing strategy would not serve the short-sighted goals of investment advisors and brokers since it would deprive them of the large quantity of commissions that are coincident with the churn that has brought them their riches."
This is more of a 1980's or 1990's line of thinking.
The argument against DGI, is doing it (or any strategy) exclusively which can make for poor diversification to the extent that a lot of the stocks fitting the DGI description are vulnerable to the same things.
I realize most of this group won't care too much about this point but is more the case against it from advisors than quoted excerpt.
finding a job obviously can be difficult, I think maybe the context I really mean is creating your own job which is why I talk about planning early, monetizing a hobby and generally being as outside the box as possible.
obviously there will be far fewer people with pensions unless you are including Social Security in your comment.
certain cities sure, we live in a low cost, semi-rural area and need vehicles.
Thank you yes, if I was not clear my personal intention is to work (because I enjoy it) and wait.
Of course who know where they will be or how their interests might change in 10 or 20 years, so I try to be cognizant of that as well.
Thanks again
thanks for the kind word...I should have mentioned my parents split when I was a kid so her benefit did double but yes you are very right that it would have been a hit to her if they'd stayed together
the $450k income issue is not something I am burdened with LOL