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Discussion in 'Anesthesiology' started by BLADEMDA, Jan 4, 2016.
This is for Doze and PGG:
Always like coming to SDN to educate myself on investing related topics.
I wonder what some of you think about rob-investing? It seems to be the way of the future. Even fidelity has partner with one of the robot-investing sites.
Does Active Management Add Value in Emerging Markets? - Articles - Advisor Perspectives
Looks like the results are mixed; If i had access to DFA funds then my mix would be 50/50 (passive/active) in my retirement accounts. BUt, since I don't have access to DFA funds I choose ACTIVE management for International equity, emerging markets and emerging market bonds.
The following is a summary of the results:
In the large-growth category, relative to the MSCI index benchmark, all six of the actively managed large growth funds outperformed. The average outperformance was by 1.5%.
In the large-blend category, both active funds outperformed the comparable Vanguard fund by an average of 1.4% and the comparable DFA fund by an average of 1.1%.
In the large-value category, both active funds underperformed the comparable DFA fund by an average of 1.0%.
Results are not mixed at all. Read the rest of the article. The data is decidedly against active management in that article, even in EM.
Why we believe in active and passive—No ifs or buts
Tom Rampulla February 22, 2016 Topics: Portfolio Construction
I’m always a little surprised when people talk about active and passive management as if it’s an either/or question. At Vanguard, we believe the right conjunction¹ is not or. It’s and. Both active and passive strategies have earned spots in your clients’ portfolios. So why do we see so many headlines asking, “Is active management dead?” and its fraternal twin, “Can indexing actually grow too big and fail?” (Vanguard’s answer is a resounding no.)
Coming from the company that popularized indexing, that may sound like heresy, but Vanguard is the third-largest manager of equity mutual funds in the world.² We got our start as an active shop, and today we oversee nearly $1 trillion in actively managed assets, about one-third of our total.
Improving the odds of outperformance
We wouldn’t offer active management if we didn’t believe active managers can succeed. But let’s be frank: It’s difficult. When you discuss with clients the investments you’ll use to help them reach their goals, reframe the conversation. It’s not about active versus passive. It’s about deciding which mix works the best for each client. When active is part of that mix, then it’s about improving the probability of outperformance. Our research has shown again and again that three factors help active funds beat their benchmarks: low cost, top talent, and patience.
Of those three, cost is the most consistent and effective predictor of performance. When it comes to mutual funds and ETFs, you get what you don’t pay for, as this chart shows.
For a more detailed analysis of this chart please see pg. 6 of Keys of improving the odds of active management success.
But can top talent and low costs coexist? Identifying talent is a skill unto itself (read more about our manager-selection process), but once we find it, how do we persuade those managers to work with us? Think about it. Our sheer size allows the managers we select to operate profitably even if fees are relatively small on a percentage basis.
Then there’s patience, which, of course, is essential to any success over the long term. When it comes to active management, the road to outperformance is bumpy, which is why we seek managers who have a competitive advantage that allows them to execute well and consistently over time. Just as we counsel investors to think for the long term, we engage outside managers for the long term—14 years on average. This long-term focus distinguishes us from competitors and is another reason external advisors are eager to work with us.
A performance record you can be proud of too
So you get that we provide superior pricing and, as others will attest, have a rigorous selection and review process, but what’s our track record? We’re in the numbers business, so I’d like to share a few that prove our case.
Over the past ten years, 95% of our actively managed funds have outperformed.³
Our track record has created a lot of value for our shareholders, especially when compared with those who invested in other active funds, as this chart shows.
Vanguard Value Index Fund (VTV), relative to its growth counterpart, the Vanguard Growth Index Fund (VUG), in the past 10 years:
value greatly underperformed growth in the 1990s. Value stocks have higher expected returns than growth stocks...because they are riskier. They can underperform for decades. That said I do tilt my stocks heavily to value. Particularly small value.
Taking a Chance on the Larry Portfolio
Here is why buying your own stocks and building a portfolio of 25 companies may not be the best course of action:
Traditional advice on diversification says you should own at least 15 to 30 stocks in order to reduce your risk. But, in a sequel to his new research paper, Prof. Bessembinder found that a portfolio of 25 stocks still has a 64% chance of underperforming the total market.
Amazon’s 49,000% Gain: The Most ‘Super’ of ‘Superstocks’ Since 1926
I'm sure there are more than a few of you out there invested in FANG stocks making a killing right now; but, maybe the time has come to book some profits and diversify.
So... how is everyone playing this one? Tech has had a good year. Hit hard today. Picked up some Nasdaq 100 today. Should have sold Crus last Friday. Almost did. Helluv a runnup from 5 in 2008 to 64 (still a chip guy with my play funds to some extent). NXPI is is getting bought out by qualcomm .
Looks like a lot of people might be running to bonds. I played that card when they were hit hard at the end of last year. Sitting strong on NUV and NZF.
Probably still a bargain if rates don't run up too fast. Anyways... What are you guys doing?
This has been a very solid thread.
I've kept cash on hand because I've thought since the election that the whole run up was suspect. If the Trump investigations get worse and the markets take more hits I'll deploy it, but probably just in my standard allocation.
A 1-2% drop doesn't impact anything I do any more than a 1-2% jump up does. Well I guess after a drop I take a peek at my watch list to see if anything is approaching a price I'd buy it at. But mostly just ho hum go about your business and make plans for the weekend.
I am 90% passive investor, but when I hear biggest drop in 8 months... my ears perk up and mobilize some funds.
US growth stocks have surpassed "tech bubble" high vs. global value stocks
Adding some Gilead here. Market is pricing in essentially zero growth, but one significant acquisition or management shakeup and the stock will rocket above 70. Also has a 3.2% yield to boot.
Nobel winner Robert Shiller: Stay in the market because it ‘could go up 50 percent from here’
Nobel Prize-winning economist Robert Shiller believes investors should continue to own stocks because the bull market may continue for years.
Shiller helped develop the widely-followed S&P/Case-Shiller Home Price Indices. He was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.
Nobel winner Robert Shiller: Stay in the market because it ‘could go up 50 percent from here’
I have no idea where the market top is going to occur at but it does appear like stocks are going higher before there is any meaningful correction.
Anyone thought of shorting Mednax? There is only a finite amount of practices to eat up and several competitors in a cutthroat market. They won't be able to sustain growth for too much longer.
But, do you know when that will happen? Next year? 2019? Good luck with the short if you don't have any idea on the timing. Instead, wait for the earnings to start missing forecasts, maybe 2 quarters in a row, before initiating any type of short.
Don't forget Mednax could buy any of the following to juice their earnings then fire the unneeded, worthless, lazy management on their acquisition:
1. USAP (they will sell out soon)
2. AMG's AMC in Nashville
3. Team Health
If all else fails they "merge" with another AMC. You could get seriously squeezed hard on that short position.
From what I see, they have missed earnings 4 quarters in a row. For reasons I don't want to discuss on here that I know, I don't see them merging with a chunk of the AMCs.
I think growth stalls substantially. Fruitful markets have been pillaged. Even more fruitful markets bare tough competition that will require higher multiples. It is going to be tough. Let's revisit in a year. Will be fun.
I'm staying out right now but going to keep an ear to the ground.
I hope they all go down. Too much money flowing to the top to people who bring nothing to the table.
The investing upside of having more cash on hand than you need
Research shows a fatter-than-necessary bank account makes us feel more content.
With rates now rising, smart cash management can boost your returns by 1 to 2 percentage points.
Yet we love some liquidity. According to money manager BlackRock , affluent investors (those with more than $250,000 in investable assets) keep more than 40 percent of assets in cash. Fresh research makes the case that the emotional payoff may be worth the opportunity cost.
In a paper called "How Your Bank Balance Buys Happiness: The Importance of 'Cash on Hand' to Life Satisfaction," researchers stacked up the bank account balances for nearly 600 Brits against their reported levels of happiness.
Turns out that liquidity makes us feel better.
"Holding investments and not being in debt are both associated with greater financial well-being, but having cash "on hand" is meaningful above and beyond those measures of wealth," wrote co-authors Peter Ruberton and Sonja Lyubomirsky of the University of California, Riverside, and Joe Gladstone at the University of Cambridge.
"While many individuals believe that increasing income or total wealth will improve their happiness, they may also benefit by building a financial buffer in their checking and savings accounts. We found this buffer to be associated with improved well-being regardless of how much a person earns, invests, or owes," wrote the academics.
Jamie Grill | Getty Images
Beyond the Emergency Fund
Bridget Grimes, founder of WealthChoice, a San Diego financial planning firm, says she has numerous clients whose cash positions are a multiple of the standard recommendation to keep three to six months of living costs liquid. "I am not looking to convince clients that three to six months is what they must do. If owning more cash makes you feel good and sleep at night that's what we need to do," said Grimes.
That's not to suggest there is a free lunch to be had here. What makes you feel more secure is actually losing its purchasing power over time. (Scroll back up to the chart for a reminder of how cash doesn't keep pace with inflation.) "The key is to plan around holding more cash," says Grimes.
Include the excess cash as part of your bond allocation in your investment portfolio. For instance, if your investment asset allocation calls for 60 percent to be invested in stocks, and 40 percent in bonds, consider your excess cash as part of the 40 percent. "If I have a client with 30 percent of her assets in cash and a goal of having a 60/40 allocation, we might end up investing just 10 percent more in bonds," said Grimes.
Earn at least 1 percent on your emergency money. No one is ever going to get rich sitting in cash, but that's no excuse for settling for nothing. The average bank savings account currently pays 0.06 percent in interest. But you're just a few clicks away from earning about 15 times that. "You can easily earn 1 percent interest at an online bank," said Ken Tumin, founding editor of DepositAccounts.com, a website that tracks the best bank deals for consumers.
Granted, today's best savings deal may not be as great three or six months down the line. MaxMyInterest.com has an app just for that. Its service tracks the best savings deals at six online banks and automatically moves client cash into the highest yielding opportunities.
Pete Gardner | Digital Vision | Getty Images
(The online banks: Ally, American Express Bank, Barclays, Capital One 360, Goldman Sachs Bank and UFB Direct.) The average Max client earns about 1.05 percent interest. Even after paying the 0.08 percent annual fee, you're well ahead of what you can earn at your brick-and-mortar bank.
Lift Your Cash Returns with a Barbell Strategy
If you have a hefty cash position, you likely don't really need to keep 100 percent of it in a super-liquid savings account. Tumin suggests keeping just what you need for near term (read: emergency fund) security in an online bank savings account that you can link to your checking account. Then pile the rest of your cash in higher yielding certificates of deposit (CDs).
Deposit at least $25,000 in a three-year CD with Synchrony Bank and you lock in a 1.85 percent yield. A five-year CD at Ally pays 2.25 percent. That's right on par with what a 10-year Treasury note currently pays. Given that the money isn't your emergency stash, chances are you won't need to cash out early, but if you do, Ally's withdrawal penalty is a mild five months of interest. Synchrony's is a stiffer six months for a three-year CD. (This calculator churns out the impact of early withdrawals) Tumin isn't worried about locking in ahead of anticipated Fed rate hikes.
"Yes, rates are going up, but the expectation is that the increases will be mild. You won't regret earning 2 percent or so on your cash," he said.
Given that the average bank checking account is still paying close to bupkes — about 0.06 percent — there is no arguing that sitting in cash is a lousy investment.
In fact, it's always been a lousy investment. Not only does cash (the green in the chart below) dramatically lag the long-term return for stocks and bonds, it doesn't even keep pace with inflation (red.)
The anesthesia business is a relatively small portion of Mednax as an overall company. Whatever you think about their current and future anesthesia business should not majorly impact your overall assessment of the corporation. I personally am not invested in them (outside of whatever is in any mutual funds) and have not thoroughly researched their business enough to make a declaration one way or the other.
Bubble Watch, but the Brooklyn Investor
"Otherwise, we are just, in terms of stock market valuation, in the "zone of reasonableness", to borrow Buffett's phrase from a few years ago."
Me either. Unfortunately.
Unfortunately silver is now down about 6% since your original post, but the Dow is up 8%
I hope you gave up on your silver bet and being out of equities as it doesn't appear to be working out too well.
And I don't want to be mean spirited in any way, it's just that vague bearish predictions are easy and popular to make, but you wanted to be really specific in your bearish prediction which lends itself well to be proven right or wrong.
I've become a Boglehead of sorts. Having read a plethora of good books lately (albeit most geared to the boglehead and Benjamin Graham crowd), I am assured that my "strategy" is sound. No, I can not predict the future. No I will not attempt to time the market. No I will not sit on large sums of cash trying to time the market. I will stay mostly vested (aside from money market for nearer term disposable income). I will invest frequently and dollar cost average to the best of my ability without hoarding cash and then DCA'ing over, like a year (decided against that cuz most will not be vested in such a scenario). I will always refer back to the crises of old and have reference books detailing the "culture" surrounding prior booms and busts.
Still working on asset allocation and am light in Bonds but have Cash Balance/Defined Benefits sitting in CD's (can't lose money or become disqualified), so that's sort of my "fixed income" category. As I build, I'll put some in REITs in tax advantaged accounts. I'll keep expense ratios low (Vanguard for me, for now). I will ride it out and build wealth via high savings rates and EXPECTING corrections. I will look at those as a blessing to then "buy low".
I'm not sure what I'll do if I sense a true mania/bubble. Probably, it will be a sector specific thing (Tulips, Housing, Tech etc.) and will then "rebalance" out of the manic sector. That one will be more difficult I think.
Great thread. And all of my above posting, I need to caveat that I don't know jack..... None of us do. And I've become convinced that accepting that is critical to success. That is not the same, however, as having financial knowledge and developing a sense of things. It's just important to know that it's nearly impossible to accurately predict the future, AND get the timing right. Then again, maybe I'm wrong. I'll pretend I'm right on this one though as evidence suggests such.
Good post. Asset Allocation is key to weathering the storms of long term investing. Precious metals can make up part of that allocation (now is actually a good time to buy) but that should be limited to more than 10% of your portfolio; for me, the metals make up about 3-4% of my total portfolio.
I like Foreign equities right now. They have better long term growth prospects and are cheaper than domestic equities. I am overweight foreign small/mid cap in my portfolio.
A Contrarian bet on energy and financials typically results in long term gains if you have the patience. As such, now is a pretty good time to overweight the hated sector of Energy.
I totally agree it's almost impossible to get the timing right. All you can do is stay diversified, re-balance periodically and look for heavily discounted stocks or sectors relative to their historical norms.
I don't play the options market or day-trade or short stocks but I'm sure there are many that do. I've never been any good at that and typically just lost money so I stick with the basics.
Is it time for a blow off?
Did someone mention euphoria?
But people just LOVE passive investing.
Interesting article I thought.
Stock market risk is much greater than we thought
We could see another 10-15% gain in the market before any pullback occurs. Earnings for the S and P were pretty good this quarter. I do agree that valuations are starting to appear stretched but timing the market is extremely hard to do.
Why picking stocks is only slightly better than playing the lottery
In the abstract of his study, Bessembinder summarized some of his key findings:
The best-performing 4% of listed stocks accounted for the entire lifetime dollar wealth creation of the U.S. stock market since 1926.
Only 42.1% of all the stock returns (both monthly and for as long as a stock was listed) were even positive; by definition, the one-month T-Bill rate was always positive.
Less than half (specifically 47.7%) of one-month stock returns were greater than the T-Bill returns for the same month.
The reason that overall long-term positive stock returns seem so high is statistical: A stock (think Apple, Google, Microsoft) can appreciate by many thousands of percentage points, while a loser like Enron or Washington Mutual can lose only 100%.
Timing may be difficult, but it is so much better to be cautious early, then too late.
Why a toxic mix of low volatility, passive strategies, and high levels of leverage is reason for…
Do you appreciate how low the VIX is right now .. ?
"MONEY"-(LINE) .. "Someone" is going to figure out what IT is someday (at the expense of everyone else of course)
Do you know if they explained what "the entire lifetime dollar wealth creation of the U.S. stock market" means... ? Is that market cap? ...obviously market cap has to be relative ... Sometimes I think laypeople talking about the stock market and economics is about as bad as non-medical people discussing even mildly difficult medical science.. if that makes sense
I'm going to go retire to "my farm" (and try to find new antibiotics in my barn using rainforest soil samples)
since the New England B&B is obviously too complicated
insert trailer to Pacific Height here ... wasn't 1990 wonderful ?
I'm trying to understand what the point of your post was ..
1) summarizing current perspectives on how to time the market
2) active vs passive investing (just in the news lately, obviously the move to passive investing "trend" has only strengthened
3) sharing something else
I'm adding here, just as FYI and curious if this looks familiar (I think Jan 2016 is that big red bar that sort of touches a "trough" in the jaggedy green one (how long that lasted or why it happened ? ?)
To successfully apply the meaning of the red trough and the jaggedy green thing to your market timing, you'll need a chicken, a charcoal grill, and a heavy blunt object.
Bludgeon the chicken to death and cook it. After you've feasted upon it, put its thigh bones back on the grill until the coals go out. Examine the bones. (Be careful, they will still be hot.) Count the number of cracks. If there is an odd number, buy. If even, sell.
Some people will tell you this is nonsense, that you need to cast the chicken's entrails upon the ground first, but they're just nuts who think they can find hidden meanings by looking at the pattern of some squiggly lines.
I understand your premise. But, consider that most gains, as in for the entire year or following any bull market, occur historically, in surprisingly short time intervals. If you miss those (via sitting on the sidelines), you will be buying high. Staying fully vested, diversified, and rebalancing every year or two seems like the best advise I've read, and seen.
I think you've given away investment secrets.. so, we only need to find that tropical paradise and consult the expertise of a few of the local gentlemen... (as portrayed so memorably in this 1977 classic from the novel by Peter Benchley (if real LIFE were so easy) )
OK guys, that's enough pot for tonight. Why don't we just set the bong down, and go to bed. There now - that's better.
Actually, I think that's the world of the strong aperitif (and explosives) .. not me though..
It's a great movie with great acting.. that's Louis Gosset Jr. before Officer and a Gentleman..
Staying fully vested? What do you mean?
Rebalancing is exactly right. Like I said, better to be cautious early.
And your point and short time frame for gains, it's always much shorter for losses.
I mean if you see large run ups and you THINK the market is at a high (who can predict that?), then unless you NEED to rebalance which would warrant some selling (while keeping the rest of your % according to your rebalance (in spite of your thoughts on that asset class being very high)), you would stay vested.
Timing the market by "taking some off the table" and say, into cash, can lead to major missed opportunities. I don't have all the answers and have made the mistake of thinking I do in the past. But, aside from rebalancing, staying fully vested is the way to go because of the fact that most corrections in history (going back a long time) have happened in some very short weeks and months. And if you are on the sidelines then you can easily miss those corrections/gains (unless your timing skills are superhuman).
With another thread asking for investment advice, it's a good time to check in on this. Still waiting for that 25-40% drop in "a few months" and silver up 26 as predicted. I guess I'll keep waiting. It's just bound to happen.
Well, not quite a year but you have a lot of ground to make up on this one!
Ancient system of divination using the entrails of animals. One method was to sacrifice animals to the gods, then inspect the intestines, spleen, kidneys, lungs, gall bladder, and liver. The shapes, colors, and markings of entrails were interpreted. Skilled haruspices or diviners also claimed to be able to interpret the condition of entrails from the outward appearances of animals, such as colors and shapes of eyes, ears, and other organs.
See also market timing, lottery tickets, and stock picking.
Wells Fargo head of equity strategy on his bearish outlook
"Rich stock market valuations with historical low volatility in an extended period (years) of extreme slow economic growth with fiscal uncertainty of free-market growth policies is a prescription for a severe market correction at a minimum!" Conrad Kuhn wrote in The KonLin Letter as cited in the II report.
Retail investors have become even more cautious than the pro side.
In the most recent American Association of Individual Investors survey, bulls stood at just 29.3 percent while the bears were at 35.7 percent.
This book is extremely simple to read but has very useful graphs and timelines showing you how trying to predict/time the market will hurt you in the long run.