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- All Comments on ICF
- General Discussion on ICF
- Housing Prices: Bottom or Temporary Bear Break? [view article]
- Credit Suisse: Housing Bottom More Than a Year Away [view article]
- A 360 View of Returns (July 2008) [view article]
- The ‘No Direction’ Portfolio: S&P 500 Outperformance With Lower Volatility [view article]
- Declines from Peaks in Housing Show Big Disparity [view article]
- June Case-Shiller Housing Numbers [view article]
- Housing Futures Show Signs of Life [view article]
- Income Planning and Safe Withdrawal Rates [view article]
- Real Estate [REIT] ETFs [view article]
- Defining a Set of Core Asset Classes [view article]
- Checking In on the All-ETF Portfolio [view article]
- Black Swans, Real Estate and Financial Stocks [view article]
loading ...Recent ICF Articles
- Housing Prices: Bottom or Temporary Bear Break?
- Credit Suisse: Housing Bottom More Than a Year Away
- Declines from Peaks in Housing Show Big Disparity
- June Case-Shiller Housing Numbers
- Housing Futures Show Signs of Life
- Income Planning and Safe Withdrawal Rates
- Defining a Set of Core Asset Classes
- ETFs In Greatest Demand: Financials, Healthcare/Biotech; India's Signs of Life
- Checking In on the All-ETF Portfolio
- A 360 View of Returns (July 2008)
- Full List of Articles »
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Income Planning and Safe Withdrawal Rates [view article]
If you can live on your Required Minimum Distribution with all of its ups and downs as I do, you will run out of life before you run out of money. See Appendix C, Life Expectancy Tables I-III, IRS Publication 590, pp. 34-40 & 80-104, available here: www.irs.gov/pub/irs-pd... . ReplyReal Estate [REIT] ETFs [view article]
Should you add Cohen & Steers Global Realty Majors ETF (GRI) to the section entitled Broad International REIT Index ETFs? Also, it might help to have the date of the last update in the various sections of the ETF Selector so we know how current it is and don't make the mistake of assuming the lists are full representations of what's available. Reply
Considine
Defining a Set of Core Asset Classes [view article]
I will try to cover a range of questions here. With regard to bonds vs. bond funds, this depends very much on your personal situation. In a hypothetical world, bond funds and bonds accomplish the same thing in a portfolio.With regards to infractructure, if you look at my All ETF model portfolio, you will see that I have utilities, transport, and materials as specific allocations--these are all infrastructure. These come up simply because they have such nice portfolio effects via QPP. I am awaiting a copy of Mr. El-Erian's book to see how he motivates these asset classes in depth.
With regard to the recent losses in commodities: the whole point of asset allocation is offsetting risks. Commodities have had a great run but they cannot out-perform forever. Also, risk and return go hand in hand--you cannot have the returns of commodities unless you take on the volatility. This brings us to the broader issue of whether timing makes sense, etc. I have written about this elsewhere: of course relative value is important--but history suggests that it is secondary to some other factors.
Geoff Reply
Defining a Set of Core Asset Classes [view article]
Thanks for the comment Xu tiu. In my IRA accounts, I can see it makes sense but not sure about the taxable accounts. Perhaps,still better for the equites and mutual funds. ReplyDefining a Set of Core Asset Classes [view article]
Dear 75 and retired. Being in bonds in a mutual fund is not the same as owning the bond itself where the risk is the return of capital and realization of the yield. At your age I would prefer to see you in bonds not funds which removes the interest rate/yield risk and assures your money is returned.On Aug 18 09:20 AM chick wrote:
> Hi Geoff,
>
> I have mostly managed mutual funds with managers I find are some
> of the best, Evillard, Leuthold, Romick, McGregor, Rudolph-Riad Younes,
> Royce, Cuggino. I don't own any bonds or bond funds except those
> in the funds I own. Can those bonds serve as my allocation to bonds?
> If I have 40-50% bonds from those mutual funds, can they be considered
> my bond allocation? I am 75 and only recently retired. Reply
Defining a Set of Core Asset Classes [view article]
Hi Geoff,I have mostly managed mutual funds with managers I find are some of the best, Evillard, Leuthold, Romick, McGregor, Rudolph-Riad Younes, Royce, Cuggino. I don't own any bonds or bond funds except those in the funds I own. Can those bonds serve as my allocation to bonds? If I have 40-50% bonds from those mutual funds, can they be considered my bond allocation? I am 75 and only recently retired. Reply
Defining a Set of Core Asset Classes [view article]
I thought I was doing ok with a managed futures RYMFX fund but not now.finance.yahoo.com/q/ta...
It seems that commodities have disrupted any benefit, in the short term, at least. How can this be prevented? Reply
Defining a Set of Core Asset Classes [view article]
Hi Geoff,I great, helpful article. Thank you for it.
I have a question about core asset classes. I see that you have used the DJ Utilities index as a surrogate for what El-Erian terms as the infrastructure asset class allocation. What other etfs do you see as adequate surrogates? Would railroads or natural gas pipelines count? Should this infrastructure investment be international or domestic etc.
A second question: I notice that pimco has a bond fund that invests in emerging market debt denominated in local currencies. Would participation in this constitute a different asset class or would it be a subset of the bond portion of the portfolio?
Thank you,
null Reply
Payton
Checking In on the All-ETF Portfolio [view article]
Delta,Thanks for the link to the article. I never would have come to the conclusion that the dealings we do here have such a STRONG impact on business abroad. In relation to S&P500, my favorite ETFs for diversification, ADRE and EEM have an r of no less than .6 over the last five years. Thats quite a pitiful performance. However, as a nonactive trader, I still like the idea of global markets ETFs for my portfolio purposes, and Geoff's article and the comments that ensue, are quite helpful and entertaining.
On Aug 04 05:21 PM Delta David wrote:
> Emerging Markets = Diversification? www.indexuniverse.com/...
>
>
> Alisha you might want to read that article before adding Emerging
> Markets for purposes of diversification. Reply
Considine
Defining a Set of Core Asset Classes [view article]
Ranger Ric:Thanks for your comments. The fact that small cap and large cap are highly correlted does not alter the fact that small caps, with higher risk, also yield higher average returns--this is in no way contradictory. A small cap tilt will result in higher returns--no mystery. Equal weighting a portfolio creates such a small cap tilt.
Your point about the stability of correlations is correct, but I have found in long backtests that the stability of the correlations is sufficient via QPP to yield good portfolio outlooks--I have tests going back thirty years in three-year out-of-sample increments. Also, to be clear, QPP does not strictly preserve linear correlations. Reply
Considine
Defining a Set of Core Asset Classes [view article]
Dumbo:The baseline standard for analysis is normally distributed returns, which then leads to a lognormal distribution of prices--and this is what I am using.
Geoff Reply
Defining a Set of Core Asset Classes [view article]
GC, you wrote >>returns are what you are calling Rate of Change -- i.e. basic percentage change in monthly closing prices. <<Correct me if I am wrong, but aren't log-normal returns the "base currency" in quantitative analysis? Reply
Defining a Set of Core Asset Classes [view article]
Geoff:Your finding that there are minimal diversification benefits between large, mid and small cap stocks is interesting. During the first half of this decade my portfolio outperformed the S&P 500 because I was overweighted in small cap stocks which prospered while large cap stocks were flat (This is not any brilliance on my part but simply reflected my opposition to using a market weight portfolio. I equal weighted rather than market weighted different portions of my portfolio giving me a higher smaller cap weighting than if I had had a market weighted cap approach.)
Perhaps the disparity can be explained by findings made by William Coaker in the September 2007 Journal of Financial Planning, "Emphasizing Low-Correlated Assets;The Volatility of Correlation" Coaker compared the long-term correlation of 18 different categories. Nine of the categories were the nine Morningstar categories. He found very high levels of correlations between some categories, large growth-large blend; mid growth-mid blend; small cap-small blend; large value-mid value. He found less correlation, however, between other categories. For example, he found a .96 correlation between large growth and large blend stocks but a .78-.79 correlation between mid blend and each of the small cap categories. This correlation is still higher than he found for other categories like international stocks, bonds and real estate but much lower than other domestic correlations. So perhaps there are some correlation benefits within domestic stocks but investors may need to be more sophisticated than just choosing large, mid and small cap stocks.
I continue to enjoy your insights. Reply
Considine
Defining a Set of Core Asset Classes [view article]
Useful article:finance.yahoo.com/reti...
With explosive growth in emerging markets and more companies with worldwide operations, a corporation's official "headquarters&quo... will become less relevant, says Jeremy Siegel, a professor of finance at the University of Pennsylvania's Wharton School. "People think they're diversifying by investing in a country, and it leads to inadequate diversification," he says, "because the country of origin or incorporation is not the primary influence on the stock price."
Reply
Considine
Defining a Set of Core Asset Classes [view article]
Flav: shorter time horizons have more momentum effects dominating--and this means different models will be preferred. I have done and continue to do work on momentum effects for shorter time horizons but I cannot share it here I'd afraid. There is a substantial literature on momentum effects, however. Reply