Categories

Pragmatic Capitalism

Practical Views on Money, Finance & Life

Market Crashes and Economic Recessions

« Back to Previous Page
0

You never cease to amaze me. I thought you didn’t believe in market timing; that any form of active management would always be outperformed by “passive indexing”.

Closed
Marked as spam
Posted by MachineGhost
Posted on 05/28/2016 5:36 PM
143 views
Private answer

I don’t know how any reader could consistently read this website and conclude that I believe in passive indexing. I don’t even believe there is such a thing as passive investing. That’s been the whole point of about 1,000 posts!

We all have to make active decisions at times. We are all active investors. There are stupid ways to be active and smart ways. What I don’t advocate is day trading or short-term trading that results in high fees and short-term cap gain taxes. What I do advocate is making appropriate portfolio changes that are consistent with a low fee, tax efficient approach to maintaining one’s risk profile….

Marked as spam
Cullen Roche Posted by Cullen Roche
Answered on 05/29/2016 2:30 PM
    Private answer

    Well, it can get very difficult untangling your message from all of the Boglehead propaganda. They are essentially both the same at the surface.

    Besides, I thought the point in informing everyone that they were actually active investors was to point out that ironical fact, not to actually embrace active management full speed ahead! :)

    Marked as spam
    Posted by MachineGhost
    Answered on 06/01/2016 4:03 AM
      Private answer

      BTW, as a USD holder, why would I want to expose myself to foreign currency risk in the GFAP?

      Marked as spam
      Posted by MachineGhost
      Answered on 06/01/2016 4:04 AM
        Private answer

        Im not embracing traditional active mgmt. I’m an advocate of low fee tax efficient indexing. CI rebalances once a year in a low fee portfolio. It’s basically what Bogleheads do, but I rebalance in a smarter way because I actually quantify the risk being taken.

        Marked as spam
        Cullen Roche Posted by Cullen Roche
        Answered on 06/01/2016 4:09 AM
          Private answer

          Foreign currency risk offets domestic currency risk. That’s where a lot of the diversification effect of intl investing comes from.

          Marked as spam
          Cullen Roche Posted by Cullen Roche
          Answered on 06/01/2016 4:11 AM
            Private answer

            Does the CI exploit the momentum effect by using a 1-year lookback period or is it merely any point-in-time? Is it robust to the calendar?

            The closest thing to CI I’ve ever heard of is called the vWave which uses the “ValueLine Appreciation Potential Next 3-5 Year” indicator and is benchmarked vs the maximum appreciation peak which occured during the brutal Nifty 50 bear market (it took 12 years including dividends to get back to breakeven after that, the GD was actually nothing in comparison). So vWave is used to determine the amount of equity exposure with the difference going into cash.

            Marked as spam
            Posted by MachineGhost
            Answered on 06/01/2016 4:31 PM
              Private answer

              BTW, I always find it very eyebrow raising that both ValueLine and Investor’s Business Daily had a go with their strategies in a mutual fund and neither could make it work.

              Marked as spam
              Posted by MachineGhost
              Answered on 06/01/2016 4:34 PM
                Private answer

                I constructed my internal CI model using 70+ years of data. The nice thing about this data is that, because the allocation is purely systematic, this historical data gives you a very good idea of how the portfolio performs in certain environments. SO yes, I would argue that it is very robust to the calendar and based on much more than 1 year look backs. It is, after all, a cyclical approach to investing so anyone using a short-term momentum approach will not find it appealing. If anything it’s closer to a value investing approach in that you are basically underweighting stocks when they become overvalued and overweighting when they become undervalued. Of course, I don’t use traditional “value” metrics to assess this, but it’s the same basic idea. Importantly though, we’re not trying to capture “alpha” in the portfolios. What I am really trying to do is generate an adequate return for someone without exposing them to traumatic permanent loss risk. If we generate some alpha along the way then great, but that’s not part of the financial goal here.

                Marked as spam
                Cullen Roche Posted by Cullen Roche
                Answered on 06/05/2016 2:35 PM