Check out this link to an article on "The Impact of Taxes on Investor Returns."

http://tinyurl.com/hkj...]]>

Check out this link to an article on "The Impact of Taxes on Investor Returns."

http://tinyurl.com/hkj...]]>

To limit volatility, I think risk averse retirees might want to choose 30% VFINX and 70% VBIIX. A little less gain (.03%) for quite a bit less volatility (looks about .375%), with a much lower duration for the bond allocation.

Using ETFreplay, a portfolio of 30% IEF (intermediate Treasury bonds) and 70% SPY (S&P 500) shows a cumulative annual growth rate of 6.8%, a volatility of 6.0%, and a Sharpe ratio of .77 since July 2002. Not half bad for retirees.]]>

To limit volatility, I think risk averse retirees might want to choose 30% VFINX and 70% VBIIX. A little less gain (.03%) for quite a bit less volatility (looks about .375%), with a much lower duration for the bond allocation.

Using ETFreplay, a portfolio of 30% IEF (intermediate Treasury bonds) and 70% SPY (S&P 500) shows a cumulative annual growth rate of 6.8%, a volatility of 6.0%, and a Sharpe ratio of .77 since July 2002. Not half bad for retirees.]]>

verb (used without object), Australian Slang.

1.

to make or give a speech, especially extensively or elaborately; spiel; orate.]]>

verb (used without object), Australian Slang.

1.

to make or give a speech, especially extensively or elaborately; spiel; orate.]]>

The random variation issue is, as you point out, a serious one that rarely gets discussed in articles like this. Lowell Herr had a nice article on the topic earlier this year. ]]>

The random variation issue is, as you point out, a serious one that rarely gets discussed in articles like this. Lowell Herr had a nice article on the topic earlier this year. ]]>

I did something similar using the four LifeStrategy funds plus VFISX, Vanguard's short-term Treasury fund, with a three-month lookback, starting in January 2000 and ending in April 2015. The final balance, however, was only $31,899, perhaps because my analysis excluded the boom years from 1996-2000. The CAGR, however, was in the same ballpark at 8.04%.

What my analysis further showed was that almost 88% of the time the portfolio was invested in either Growth (VASGX=55.8%) or short Treasuries (VFSIX=32.0%). The intermediate allocations (Income, Conservative Growth, or Moderate Growth) didn't play much of a role. Did you find any similar patterns in your analysis? Or were the choices more evenly represented?

It appears that you can do without the intermediate allocations and get similar results. When I excluded them the final balance was $31,376, the portfolio being invested in VASGX 60% of the time and VFISX 40% of the time.]]>

I did something similar using the four LifeStrategy funds plus VFISX, Vanguard's short-term Treasury fund, with a three-month lookback, starting in January 2000 and ending in April 2015. The final balance, however, was only $31,899, perhaps because my analysis excluded the boom years from 1996-2000. The CAGR, however, was in the same ballpark at 8.04%.

What my analysis further showed was that almost 88% of the time the portfolio was invested in either Growth (VASGX=55.8%) or short Treasuries (VFSIX=32.0%). The intermediate allocations (Income, Conservative Growth, or Moderate Growth) didn't play much of a role. Did you find any similar patterns in your analysis? Or were the choices more evenly represented?

It appears that you can do without the intermediate allocations and get similar results. When I excluded them the final balance was $31,376, the portfolio being invested in VASGX 60% of the time and VFISX 40% of the time.]]>

However, using the data from 2014 in the spreadsheet just above the Key Takeaways section, I calculate that an allocation of 45% stocks / 55% bonds during that year produced a true bond allocation of 39.67% (~ 40%).

Using ETFreplay, I found that a 45% SPY / 55% IEF allocation that year resulted in an 11.0% total return, 2.27 Sharpe ratio, -2.11% max drawdown, and 4.5% volatility.

By comparison, VBINX, Vanguard's 60/40 index fund, recorded a 9.8% total return, 1.33 Sharpe ratio, -4.07 max drawdown, and 6.7% volatility.

So the author's argument seems to be valid. Thanks for the article.]]>

However, using the data from 2014 in the spreadsheet just above the Key Takeaways section, I calculate that an allocation of 45% stocks / 55% bonds during that year produced a true bond allocation of 39.67% (~ 40%).

Using ETFreplay, I found that a 45% SPY / 55% IEF allocation that year resulted in an 11.0% total return, 2.27 Sharpe ratio, -2.11% max drawdown, and 4.5% volatility.

By comparison, VBINX, Vanguard's 60/40 index fund, recorded a 9.8% total return, 1.33 Sharpe ratio, -4.07 max drawdown, and 6.7% volatility.

So the author's argument seems to be valid. Thanks for the article.]]>

Does ANYONE know the prices of all asset classes throughout the history of the world? ;-)]]>

Does ANYONE know the prices of all asset classes throughout the history of the world? ;-)]]>

Even without looking at the underlying asset allocations, I would be inclined to buy both BRUFX and PRPFX just because of their negative correlation. When one goes up, the other goes down, and the combined volatility is less than the volatility of either one alone.

For example, the ten-year standard deviation for BRUFX is 12.03% and for PRPFX 9.94% (Morningstar). The minimum volatility allocation is 55.5% PRPFX and 44.5% BRUFX, which produces a low combined standard deviation of only 4.12%.]]>

Even without looking at the underlying asset allocations, I would be inclined to buy both BRUFX and PRPFX just because of their negative correlation. When one goes up, the other goes down, and the combined volatility is less than the volatility of either one alone.

For example, the ten-year standard deviation for BRUFX is 12.03% and for PRPFX 9.94% (Morningstar). The minimum volatility allocation is 55.5% PRPFX and 44.5% BRUFX, which produces a low combined standard deviation of only 4.12%.]]>

"As previously announced, the board of directors of FS Investment Corporation (FSIC) approved the declaration and payment of regular cash distributions to FSIC's stockholders on a quarterly rather than monthly basis, effective January 1, 2015."

Next dividend Declaration Record Payment Amount

Normal cash 1/13/2015 3/25/2015 4/02/2015 $0.22275]]>

"As previously announced, the board of directors of FS Investment Corporation (FSIC) approved the declaration and payment of regular cash distributions to FSIC's stockholders on a quarterly rather than monthly basis, effective January 1, 2015."

Next dividend Declaration Record Payment Amount

Normal cash 1/13/2015 3/25/2015 4/02/2015 $0.22275]]>

On the other hand the Roman Empire started about 31 BC, so 1500 years later is about 1500 AD, just when the Renaissance was spreading from Italy to the rest of Europe. That must mean you regard the Renaissance as representing the rise of a new political (and economic?) order.

Just curious.]]>

On the other hand the Roman Empire started about 31 BC, so 1500 years later is about 1500 AD, just when the Renaissance was spreading from Italy to the rest of Europe. That must mean you regard the Renaissance as representing the rise of a new political (and economic?) order.

Just curious.]]>

By now it's pretty clear that stock index changes don't follow a normal (i.e. Gaussian) distribution, but rather exhibit fat tails. Suppose one assumes instead that stock prices follow a Cauchy distribution. In that case the math and the probabilities are quite different, since both the mean and the variance are undefined. Assuming a normal distribution makes the math relatively straightforward, but if the assumption is wrong, so are the results.]]>

By now it's pretty clear that stock index changes don't follow a normal (i.e. Gaussian) distribution, but rather exhibit fat tails. Suppose one assumes instead that stock prices follow a Cauchy distribution. In that case the math and the probabilities are quite different, since both the mean and the variance are undefined. Assuming a normal distribution makes the math relatively straightforward, but if the assumption is wrong, so are the results.]]>

"Analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change."

If we average 20% and 80%, we get 50% or the equivalent of a coin toss. And 0% to 20% accuracy on the degree of change is hardly reassuring. In particular, I wouldn't touch AT with a ten-foot pole after their two recent dividend cuts. Although I'm not an analyst, I'm guessing that AT's dividend will hit zero in the near future.

Nevertheless, thanks again for the enjoyable read.]]>

"Analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change."

If we average 20% and 80%, we get 50% or the equivalent of a coin toss. And 0% to 20% accuracy on the degree of change is hardly reassuring. In particular, I wouldn't touch AT with a ten-foot pole after their two recent dividend cuts. Although I'm not an analyst, I'm guessing that AT's dividend will hit zero in the near future.

Nevertheless, thanks again for the enjoyable read.]]>

I assume the point of the article was to think about buying the stocks they are buying, rather than buying the mutual fund itself.]]>

I assume the point of the article was to think about buying the stocks they are buying, rather than buying the mutual fund itself.]]>

Is this true? I thought Vanguard had a pretty aggressive policy against frequent trading of mutual funds.

Also the article seems to deal solely with EFTs , not mutual funds. ]]>

Is this true? I thought Vanguard had a pretty aggressive policy against frequent trading of mutual funds.

Also the article seems to deal solely with EFTs , not mutual funds. ]]>

The up-to-date data for 54% TLT / 46% SPY from 16 Sept. 2004 - 15 Sept. 2014 are 7.3% CAGR, .58 Sharpe ratio, -17.72% max drawdown, 101.8% total return (88.1% of SPY), and 8.8% volatility (43.3% of SPY). (ETFreplay)]]>

The up-to-date data for 54% TLT / 46% SPY from 16 Sept. 2004 - 15 Sept. 2014 are 7.3% CAGR, .58 Sharpe ratio, -17.72% max drawdown, 101.8% total return (88.1% of SPY), and 8.8% volatility (43.3% of SPY). (ETFreplay)]]>