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Frequent Contributor

Analysis - My thoughts and thanks

Here, as in most discussions, there is a disconnect between (basically) three types of investor:  There are the efficient market folks who buy the market (index) and let it ride.  Then there is the group who, like @chang , look for the best investment in any given area over a long time frame (but not infinite like the first group).  Imo, like @chang's, rolling returns are best for identifying THOSE.  Finally, there is the group who looks for outperformers over a shorter time frame (time frame to vary depending on the individual).  @FD1001  would be an example of this group.  These three groups are not going to agree on THEIR choices; as they invest fundamentally differently.

My own opinion, for what that's worth, is that the efficacy of an investment is best identified by it outperforming its peers (an identification problem in itself) year in, year out; over a long time (that definition varying with the individual) - rolling returns.  The momentum play is effective, I believe, but I also think the momentum often comes as the result of fortunate circumstance and not 'skill' - right place, right time.  I've seen a LOT of charts, convering multiple years, where an obvious difference between two investments boiled down to something that happened over a few weeks or a couple of months.  That wouldn't identify a 'better' investment in an absolute sense (imo), but it MIGHT help identify a better MOMENTUM trade at the time. 

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment; if for no other reason than a TRADE has to happen decisively.  A momentum trade is also going to require deep analysis of some kind.  Easiest of course, is to buy the index and hold on; which is probably what most should do.

The type of stuff @FD1001  does is not easily duplicated by anyone else.  In that respect, he is a lot like @capecod was. The cef guys in general are often traders; so deep analysis applies there as well: @aubergine, @Beliavsky, @keppelbay, @acamus, come to mind.  @dtconroe also does a lot of analysis, but his time frame is longer, and he wouldn't consider himself a 'trader' (though efficient market folks would).  In the equity area, @Holiday is currently THE guy.  Like most folks, I think, the analysis stuff is interesting to me and helps me to identify investments I'd like to look at in terms of my own criteria.  So I'll extend my appreciation to everyone mentioned (and probably a few I missed) for all the analysis they provide us.

 
 
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Frequent Contributor

Re: Analysis - My thoughts and thanks


@racqueteer wrote:

Here, as in most discussions, there is a disconnect between (basically) three types of investor:  There are the efficient market folks who buy the market (index) and let it ride.  Then there is the group who, like @chang , look for the best investment in any given area over a long time frame (but not infinite like the first group).  Imo, like @chang's, rolling returns are best for identifying THOSE.  Finally, there is the group who looks for outperformers over a shorter time frame (time frame to vary depending on the individual).  @FD1001  would be an example of this group.  These three groups are not going to agree on THEIR choices; as they invest fundamentally differently.

My own opinion, for what that's worth, is that the efficacy of an investment is best identified by it outperforming its peers (an identification problem in itself) year in, year out; over a long time (that definition varying with the individual) - rolling returns.  The momentum play is effective, I believe, but I also think the momentum often comes as the result of fortunate circumstance and not 'skill' - right place, right time.  I've seen a LOT of charts, convering multiple years, where an obvious difference between two investments boiled down to something that happened over a few weeks or a couple of months.  That wouldn't identify a 'better' investment in an absolute sense (imo), but it MIGHT help identify a better MOMENTUM trade at the time. 

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment; if for no other reason than a TRADE has to happen decisively.  A momentum trade is also going to require deep analysis of some kind.  Easiest of course, is to buy the index and hold on; which is probably what most should do.

The type of stuff @FD1001  does is not easily duplicated by anyone else.  In that respect, he is a lot like @capecod was. The cef guys in general are often traders; so deep analysis applies there as well: @aubergine, @Beliavsky, @keppelbay, @acamus, come to mind.  @dtconroe also does a lot of analysis, but his time frame is longer, and he wouldn't consider himself a 'trader' (though efficient market folks would).  In the equity area, @Holiday is currently THE guy.  Like most folks, I think, the analysis stuff is interesting to me and helps me to identify investments I'd like to look at in terms of my own criteria.  So I'll extend my appreciation to everyone mentioned (and probably a few I missed) for all the analysis they provide us.

 
 

Racq, I think that is a fair analysis. Since you mentioned my name, I would just add my investing history is a time limited approach to my investments (traditionally with the intent of holding an investment for a year), and then at the beginning of the year, I re-evaluate and make those modifications I consider appropriate for the next year.  However, when a significant market crash occurs, or significant correction, I will resort to more trading than normal, as a  measure of preserving principal and avoiding major portfolio harm.  I did that in the March market crash, selling to preserve principal, and then using more trading to cope with volatile market circumstances, to recoup losses and take advantage of unique market opportunities.  I don't like trading, do not think I am a good trader, but will become a "reluctant trader" under unusual market conditions.

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Participant ○○

Re: Analysis - My thoughts and thanks

@racqueteer,

Great post!  There is another kind of investor, maybe a subset of the momentum investor.  That would be a risk parity investor.  I’ve linked an article from SA that explains it.  It’s somewhat a variation of Harry Browne’s permanent portfolio.

To quote the author “The idea behind risk parity is simple: build a portfolio of uncorrelated assets, weighted according to their volatilities.”

I don’t use HY bonds (JUNK BONDS) or gold miner stocks but I do use both long-term treasuries and volatile equities. 

I don’t have the inclination or time to spend all day in front of a computer, but I do believe this method gives me a reasonable chance to manage volatility and earn enough return to fund my retirement. 

helmut

 

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Participant ○○○

Re: Analysis - My thoughts and thanks

FD and capecod are freaks. Meant as a complement.

My daughter exercises by walking from tree to tree over a wobbly twisty nylon band. I'll call it extreme balance beaming.

That's how I view FD and capecod. Highwire artists. I enjoy their posts. I understand what they're doing. But I've never liked heights. Now I like them less. 

So like with my daughter I watch while knowing that if I try it I'll break my neck.

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Frequent Contributor

Re: Analysis - My thoughts and thanks


@galeno wrote:

FD and capecod are freaks. Meant as a complement.

My daughter exercises by walking from tree to tree over a wobbly twisty nylon band. I'll call it extreme balance beaming.

That's how I view FD and capecod. Highwire artists. I enjoy their posts. I understand what they're doing. But I've never liked heights. Now I like them less. 

So like with my daughter I watch while knowing that if I try it I'll break my neck.


I think that sums things up nicely!  :*)

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Frequent Contributor

Re: Analysis - My thoughts and thanks

More than that I think 100% bond OEFs or CEFs are not widely held here.

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Frequent Contributor

Re: Analysis - My thoughts and thanks

Although I am a dare to be dull retiree, I commend Racqueteer's excellent OP.  

Bob

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Explorer ○○○

Re: Analysis - My thoughts and thanks

You say in an interesting post that the "efficacy of an investment is best identified as outperforming its peers..." For me, that would mean stocks like Berkshire Hathaway, Amazon, etc., none of which pay a dividend. As I am pretty much a buy and hold investor, I would receive no benefit from such investments, but my estate would. I do invest in individual stocks, but instead of focusing on each stock's performance, I consider the portfolio as a whole and attempt over time and different markets to beat the S&P 500 while having a lower Beta and a higher dividend yield than that average. To me, that is outperformance. 

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Frequent Contributor

Re: Analysis - My thoughts and thanks

So much to comment and not enough time.  There are so many subjects and ideas that relate to investing.

IMO, you can't make up any groups since there are so many subgroups.  Then we can talk about how many funds someone owns, what age and goals are we looking at.  What kind of a trader are you? do you trade weekly, monthly, yearly, every 3-5 years? what % are you trading?  Do you have different trades for different types of funds, market conditions? have you changed your style over the years?  

And as usual Racq, The following is the most problematic, in the end, it's all about specifics, at a certain point the generics end and the real data/analysis/funds/performance begin.  It all boils down to what you actually are doing. Philosophy is a good subject at university but not in the real world  :-) any time you trade no matter how often you do it, you can turn a good system to a worse one. 

Lastly, I like to make up my own crazy rules and then try to solve this formula.  When I was younger, I was more flexible but now when I got a nice portfolio my rules are tougher.  So pretend you must achieve my rules making 6% annually with SD < 3 and never lose more than 3% from any last top.  Over the years I have dealt with many investors who contacted me with specific challenging needs/goals, these are the ones that make my life interesting.

I do believe that most investors should use a simple formula such as the followings: 1) use up to 5-7 funds  2) use indexes for 60-80% of their portfolio  3) Use core funds at about 70-80%  4) Use up to 20% for exploring  5) trade only once annually using up to 30-40% of your portfolio. 

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Participant ○○○

Re: Analysis - My thoughts and thanks

1. We could do it with 2 ETFs. We use 6. Port looks sexier.

2. Indexed 100%

3. & 4. are N/A.

5. Yes annually. Keep trading to an absolute mínimum. 

"I do believe that most investors should use a simple formula such as the followings: 1) use up to 5-7 funds  2) use indexes for 60-80% of their portfolio  3) Use core funds at about 70-80%  4) Use up to 20% for exploring  5) trade only once annually using up to 30-40% of your portfolio."

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Participant ○

Re: Analysis - My thoughts and thanks

 

This corona virus I'm[act seems to be  a difficult situation which will last for one or two years. Only certain sectors and certain stock seems to do OK or good in this environment. I am having two allocation funds, 6 sector funds, 5 sector etfs, 8 stocks and one muni bond fund and 4 multisector bond funds. I feel it is lot of work, but is necessary to break even this and next year.

I am forced to buy and sell lot more than I ever did. Constantly I watch my sector allocation and cash position using Fidelity full view and fidelity analysis tool. I am maintaining 40% equity 30% bonds and 30% cash or Gold. 

I am using this forum and CNBC.  The annual return may be between -10% to +5%.This is the best I can do and I can live with it.

SRT

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Participant ○○○

Re: Analysis - My thoughts and thanks

Straight up devout Boglehead convert. Since 2006. Mix in some William Bernstein and Frank Armstrong.

Retiree port = 50% World Stocks + 45% USD Investment Grade Bonds + 5% Cash. We use the 4% rule.


@sthanga wrote:

Galeno,

In this very confusing situation, it would help to know your strategy. 

SRT

 


 

 

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Frequent Contributor

Re: Analysis - My thoughts and thanks

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment.”

No question about it. IMO “momentum” is largely un-actionable. A chart tells you what already happened. Once it’s happened, the trade is over.

If XYZ went up today, tomorrow it might go up or down (ignoring the possibilities that it stays flat, or that tomorrow is a holiday). If it goes up, you can call that “momentum” if you want to, but was it tradeable? That’s a question for debate, but I think the answer is, generally speaking, no.

Imvho, T/A is complete nonsense, and there is really no tradeable value in chart reading, trend or momentum analysis.

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Frequent Contributor

Re: Analysis - My thoughts and thanks

I usually have a set of complementary growth funds with more stable balanced funds. Then fill in the gaps with simple well constructed bond funds for ballast.  It is more an exception for me to invest in higher yielding bond funds. I have always preferred my risks be taken on the equity side.I feel more confident researching stocks than I do bond funds. Much of what I absorbed here is insights on bond funds. 

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Participant ○

Re: Analysis - My thoughts and thanks

Galeno,

Thanks

SRT

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Frequent Contributor

Re: Analysis - My thoughts and thanks

Very conservative allocation,100% indexing, (+- 5%) tweaking (or nicely coined re-balancing); no need for any modeling, analysis, curves, or guidance for us (from here or anywhere else).

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Re: Analysis - My thoughts and thanks


@racqueteer wrote:

Here, as in most discussions, there is a disconnect between (basically) three types of investor:  There are the efficient market folks who buy the market (index) and let it ride.  Then there is the group who, like @chang , look for the best investment in any given area over a long time frame (but not infinite like the first group).  Imo, like @chang's, rolling returns are best for identifying THOSE.  Finally, there is the group who looks for outperformers over a shorter time frame (time frame to vary depending on the individual).  @FD1001  would be an example of this group.  These three groups are not going to agree on THEIR choices; as they invest fundamentally differently.

My own opinion, for what that's worth, is that the efficacy of an investment is best identified by it outperforming its peers (an identification problem in itself) year in, year out; over a long time (that definition varying with the individual) - rolling returns.  The momentum play is effective, I believe, but I also think the momentum often comes as the result of fortunate circumstance and not 'skill' - right place, right time.  I've seen a LOT of charts, convering multiple years, where an obvious difference between two investments boiled down to something that happened over a few weeks or a couple of months.  That wouldn't identify a 'better' investment in an absolute sense (imo), but it MIGHT help identify a better MOMENTUM trade at the time. 

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment; if for no other reason than a TRADE has to happen decisively.  A momentum trade is also going to require deep analysis of some kind.  Easiest of course, is to buy the index and hold on; which is probably what most should do.

The type of stuff @FD1001  does is not easily duplicated by anyone else.  In that respect, he is a lot like @capecod was. The cef guys in general are often traders; so deep analysis applies there as well: @aubergine, @Beliavsky, @keppelbay, @acamus, come to mind.  @dtconroe also does a lot of analysis, but his time frame is longer, and he wouldn't consider himself a 'trader' (though efficient market folks would).  In the equity area, @Holiday is currently THE guy.  Like most folks, I think, the analysis stuff is interesting to me and helps me to identify investments I'd like to look at in terms of my own criteria.  So I'll extend my appreciation to everyone mentioned (and probably a few I missed) for all the analysis they provide us.

 
 

IMO, H as always, there are only 2 types of investors, those who focus on the Total Return of an investment/portfolio and those who focus on the income thrown off by an investment/portfolio.  There's little that you posted that would seem to apply to those of us who frequent the Income & Dividend Investing forum.

ElLobo, de la casa de la toro caca grande
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Re: Analysis - My thoughts and thanks

An investor can be both a growth and income investor. 70% of my assets are in growth stocks such as FAANGs, QQQ, as well as pharma E.g., JNJ, recovery stocks, e.g., HD that also pay dividends. 20% is invested in high yield dividend equities such as T, VZ, UTG that deliver 50% of my investment income along with long term appreciation that I would not get with fixed income.Rest is in fixed income and cash.

I don’t believe in chasing total return and I accept what ever return I get each year. Every year I calculate the Investment return by subtracting the value of the prior years assets at year end from the current year. I do not include investment income or retirement distributions that are used to pay expenses which reduces the return by 2-3%. I don’t try to beat last years number just to see if I can do better. 

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Re: Analysis - My thoughts and thanks


@ElLobo wrote:

@racqueteer wrote:

Here, as in most discussions, there is a disconnect between (basically) three types of investor:  There are the efficient market folks who buy the market (index) and let it ride.  Then there is the group who, like @chang , look for the best investment in any given area over a long time frame (but not infinite like the first group).  Imo, like @chang's, rolling returns are best for identifying THOSE.  Finally, there is the group who looks for outperformers over a shorter time frame (time frame to vary depending on the individual).  @FD1001  would be an example of this group.  These three groups are not going to agree on THEIR choices; as they invest fundamentally differently.

My own opinion, for what that's worth, is that the efficacy of an investment is best identified by it outperforming its peers (an identification problem in itself) year in, year out; over a long time (that definition varying with the individual) - rolling returns.  The momentum play is effective, I believe, but I also think the momentum often comes as the result of fortunate circumstance and not 'skill' - right place, right time.  I've seen a LOT of charts, convering multiple years, where an obvious difference between two investments boiled down to something that happened over a few weeks or a couple of months.  That wouldn't identify a 'better' investment in an absolute sense (imo), but it MIGHT help identify a better MOMENTUM trade at the time. 

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment; if for no other reason than a TRADE has to happen decisively.  A momentum trade is also going to require deep analysis of some kind.  Easiest of course, is to buy the index and hold on; which is probably what most should do.

The type of stuff @FD1001  does is not easily duplicated by anyone else.  In that respect, he is a lot like @capecod was. The cef guys in general are often traders; so deep analysis applies there as well: @aubergine, @Beliavsky, @keppelbay, @acamus, come to mind.  @dtconroe also does a lot of analysis, but his time frame is longer, and he wouldn't consider himself a 'trader' (though efficient market folks would).  In the equity area, @Holiday is currently THE guy.  Like most folks, I think, the analysis stuff is interesting to me and helps me to identify investments I'd like to look at in terms of my own criteria.  So I'll extend my appreciation to everyone mentioned (and probably a few I missed) for all the analysis they provide us.


IMO, H as always, there are only 2 types of investors, those who focus on the Total Return of an investment/portfolio and those who focus on the income thrown off by an investment/portfolio.  There's little that you posted that would seem to apply to those of us who frequent the Income & Dividend Investing forum.


I wouldn't go THAT far (two groups), but I'd agree that there might be a group I missed that should be included in the three general groups I listed.  I would note, however, that that income should really be something that is actually being generated by the portfolio (profits) and not simply roc in some form.  That's a fine line on which (apparently) there is not universal agreement among income investors (or at least about which YOU don't seem to be overly concerned).  As FD notes, you can divide this up into a LOT of different little niches if you're so inclined.  Investing is ultimately a very individualized proposition.

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Re: Analysis - My thoughts and thanks


@racqueteer wrote:

@ElLobo wrote:

@racqueteer wrote:

Here, as in most discussions, there is a disconnect between (basically) three types of investor:  There are the efficient market folks who buy the market (index) and let it ride.  Then there is the group who, like @chang , look for the best investment in any given area over a long time frame (but not infinite like the first group).  Imo, like @chang's, rolling returns are best for identifying THOSE.  Finally, there is the group who looks for outperformers over a shorter time frame (time frame to vary depending on the individual).  @FD1001  would be an example of this group.  These three groups are not going to agree on THEIR choices; as they invest fundamentally differently.

My own opinion, for what that's worth, is that the efficacy of an investment is best identified by it outperforming its peers (an identification problem in itself) year in, year out; over a long time (that definition varying with the individual) - rolling returns.  The momentum play is effective, I believe, but I also think the momentum often comes as the result of fortunate circumstance and not 'skill' - right place, right time.  I've seen a LOT of charts, convering multiple years, where an obvious difference between two investments boiled down to something that happened over a few weeks or a couple of months.  That wouldn't identify a 'better' investment in an absolute sense (imo), but it MIGHT help identify a better MOMENTUM trade at the time. 

FWIW, I think it's FAR harder to successfully identify a MOMENTUM trade than it is to identify a long-term better investment; if for no other reason than a TRADE has to happen decisively.  A momentum trade is also going to require deep analysis of some kind.  Easiest of course, is to buy the index and hold on; which is probably what most should do.

The type of stuff @FD1001  does is not easily duplicated by anyone else.  In that respect, he is a lot like @capecod was. The cef guys in general are often traders; so deep analysis applies there as well: @aubergine, @Beliavsky, @keppelbay, @acamus, come to mind.  @dtconroe also does a lot of analysis, but his time frame is longer, and he wouldn't consider himself a 'trader' (though efficient market folks would).  In the equity area, @Holiday is currently THE guy.  Like most folks, I think, the analysis stuff is interesting to me and helps me to identify investments I'd like to look at in terms of my own criteria.  So I'll extend my appreciation to everyone mentioned (and probably a few I missed) for all the analysis they provide us.


IMO, H as always, there are only 2 types of investors, those who focus on the Total Return of an investment/portfolio and those who focus on the income thrown off by an investment/portfolio.  There's little that you posted that would seem to apply to those of us who frequent the Income & Dividend Investing forum.


I wouldn't go THAT far (two groups), but I'd agree that there might be a group I missed that should be included in the three general groups I listed.  I would note, however, that that income should really be something that is actually being generated by the portfolio (profits) and not simply roc in some form.  That's a fine line on which (apparently) there is not universal agreement among income investors (or at least about which YOU don't seem to be overly concerned).  As FD notes, you can divide this up into a LOT of different little niches if you're so inclined.  Investing is ultimately a very individualized proposition.


Regardless, there was little that you posted that applies to me, nor to most yield focused investors that frequent D&I.  For example, yield focused investors are usually NOT market index investors, so we're not in your first group.  Then you mention Chang and 'rolling returns' as indicative of your second group.  Yield focused investors focus on yield, not returns, by my definition of two groups.  And, using FD as an example of your third group simply means he's in a world of his own, whatever he is doing!

Yield focused investing focuses on divey, interest, and distribution yields, NOT on growth, or TR.  We focus on the quality of that income, not whether we expect share prices/fund NAVs to go up or down.  Momentum, for us, means that, ifn a stock, or fund, has a historical yield history (dividend growth, for example) we expect it to continue, going forward.  So, if a stock paid a $1/share dividend last year, we expect it to pay $1/share this year.  And next.  And so forth.

So, knowing all of those who you mentioned in your OP, I can quite comfortably say that nobody, other than those who post on D&I, invest as those in your 3 groups invest!

ElLobo, de la casa de la toro caca grande
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