There is, however, another form of bear market, and, in my
opinion, it is the most pernicious one of all.
That is the bear market that you inflicted it on yourself. That is because, riddled with fear of all the
terrible things that could happen to your portfolio, you never invested at all,
suffering a massive drawdown in opportunity cost. Those foregone gains can never be made good,
as time, your main ally as an investor, is a non-renewable resource, and you
have squandered what time was allotted you.
Lawrence Hamtil
CHART OF THE DAY
RETIREMENT FINANCE AND PLANNING
Life Cycle Goal Achievement or Portfolio VolatilityReduction? Dempster et al. Making use of the same data and market calibrated Monte
Carlo stochastic simulation for all the alternative portfolio
strategies, we find that flexibility turns out to be of key importance to
individuals for both portfolio and spending decisions. The performance of the
adaptive dynamic goal-based portfolio strategy is found to be far superior to
all the industry’s Markowitz-based approaches.
[ Probably useful and interesting but disappointing since it is more or less unreadable by all but academics and advanced retirement income researchers/practitioners.
That's fine but the distance between a paper like this and real life retirees
and what they need and know is vast and it doesn't have to be -- something that I keep hoping will change. Implementation would likely to require 999/1000 retirees to
place their trust and outcomes in the hands of a machine, incomprehensible
jargon, and a very sophisticated planner. I'm not sure I'm on board with that
except for maybe the affluent. Adapting the plan to life as it unfolds, which
is part of the paper but not as clear as it could be, is what most people do
anyway but without the advanced jargon-filled academic papers. ]
Using Reverse Mortgages In A Responsible Retirement IncomePlan, W Pfau. For those thinking about
it, please note that the reverse mortgage should be used as part of a
responsible plan. It allows homeowners to borrow against the value of their
home, creating liquidity from an otherwise illiquid asset, and grants the
flexibility to defer repayment until they have permanently left the home. But
if this liquidity creates the temptation to use the proceeds in an unwise
manner, then you may be better off avoiding it.
Reflation Brewing: Is Your Retirement Portfolio Ready?
AllianceBernstein
How Do US Retirees Compare to Global Counterparts? ThinkAdvisor.com
Retirement Expectations, Experiences Don’t Match for Many,Fedweek.com While the trend toward desiring to push off retirement continues, a
study has found that nearly half of workers leave the workforce earlier than
they had planned–in more than half of those cases because of reasons beyond
their control.
The 4% Withdrawal Rule—Have Planners Been Wrong? Joe
Tomlinson, 2010.
In the Dark about Retirement? SquaredAwayBlog.bc.edu. 81 percent of Americans do not know how much
money they’ll need in retirement
The Importance of Managing Risk in Retirement: Part II Canyou Afford to Be a Passive Investor? David Varadi BlueSky Asset
Management. Failure, in short, isn’t an
option in retirement planning. Investors rarely have the ability to wait years
or even decades to rebuild wealth after the fallout from the periodic crashes
and corrections that inevitably take a toll on their portfolios. This is
magnified even more for a retired investor that is relying heavily on
investment income. Even for that rare individual who can muster the steely
discipline to sit through a long and painful correction or bear market, the
mathematics of withdrawing money during a bout of volatility provides a
sobering reality check.
Multi-Stage Financial Planning Models: IntegratingStochastic Programs and Policy Simulators, Mulvey and Kim The proposed dual strategy provides benefits
over a standalone stochastic program or policy simulator. As a significant
advantage, a policy simulation model can include many real-world
considerations, such as complex regulations, tax laws, and company specific
guidelines. These issues are difficult to embed within a continuous stochastic
program due to non-differentiability, jump functions, and other complications.
On the other hand, a policy simulator requires a predetermined decision/policy
rule… We say that a policy rule that closely approximates the optimal solution
values of the stochastic program is “optimal” in so far as it will
perform well under the developed restrictive conditions. The dual
strategy draws advantages from each of the competing frameworks. [emphasis added] [huh, It took someone else to tell me
that I had actually done this when I added backward induction results into my
simulator. Cool. ]
MARKETS AND INVESTING
Response to Paul A Samuelson letters and papers on the KellyCapital Growth Investment Strategy, Ziemba 2012. I agree that these points of Samuelson are
correct and argue that they all make sense and caution users of this approach
to be careful and understand the true characteristics of these investments
including ways to lower the investment exposure.
Is 1/n Really Better Than Optimal Mean-Variance Portfolio?
Kim, Lee, Ziemba. 2014. Various asset
universes were analyzed, but there were no or little supporting evidence of the
1/n portfolio performing better than the “average” portfolio. Therefore, the
findings from this study suggest that there is nothing special about the 1/n
portfolio. [comment: This paper is a bit beyond me but I
have to say that: a) 1/n is simple and probably a pretty good rule of thumb
when used by non-professors, and b) as an amateur hack I kinda-sorta looked at
something like this in 2016 when I did a backward looking 3D mean variance map
of 5 assets using a 3year 2014-2016 compound return (contra Markowitz who
instructs us to use arithmetic returns) and annualized monthly standard
deviation. In that layman's effort its
pretty easy to see that the 1/n portfolio, the one at the peak of the z axis,
would have been slightly suboptimal wrt the mapped EF for that time frame and
those assumptions. On the other hand it
was better performance than one of my managed strategies. No allocation can be
determined to be definitively optimal except ex-post]
Misattributing Bad Behavior, thinknewfound.com. While the concept of a behavior gap is a good
reminder that investor behavior can be detrimental to portfolio performance,
investors are better served by developing a disciplined investment process they
can adhere to, focusing on achieving goals rather than beating possibly
non-applicable benchmarks.
Buffer Annuities: The Good, the Bad, the Ugly, William H.
Byrnes, and Robert Bloink
Quantitative Investing Is Fundamental, CFA institute.
Portfolio Rebalancing: Common Misconceptions, AQR. While rebalancing to constant capital
allocations maintains long-term risk characteristics better than ‘buy and hold’,
dynamic risk targeting does an even better job.
ALTERNATIVE RISK
Were Fama and French Right about Value and Size? An Ex-Post
Test AdvisorPerspectives.com
Institutional Investors return to VC by new routes. Institutional Investor.
Equity alpha through volatility targeting, sr-sv.com http://www.sr-sv.com/equity-alpha-through-volatility-targeting/
The Biggest Myths in Investing, Part 6 – Gold is a Good PortfolioHedge. Cullen Roche. …the evidence does not support a case for gold as a
substantial part of a diversified portfolio. It is neither an ideal long-term
inflation hedge nor the world’s true safe haven.
Factor Zoo or Unicorn Ranch? Gary Antonacci. The usual
factors may look good in theory and on paper. But the jury is out on whether or
not they can provide superior risk-adjusted real world returns after costs. Those
who are prudent and truly interested in evidence-based investing will remain
cautious. Others will continue to accept what they have been told by product
sponsors and a small number of academic theorists.
The Illusory Nature of Momentum Profits, David A. Lesmond et
al 2002.
Trading Costs of Asset Pricing Anomalies, Frazzini et al
AQR. 2012. Our analysis of long-only strategies
illustrates how a strategy that simultaneously incorporates both value and
momentum outperforms a strategy that combines pure-play value and momentum
portfolios that are formed independently.
Shortcuts to Factor Investing 101, CFA Institute. [pretty
good list of factor links]
Why hedge funds don’t have a clue about how to use theirquants, AI experts and data scientists, efinancialcareers.com “There are around 70 hedge funds who say they
use big data, about 20 of them are really doing in and maybe a handful are any
good at it,” said Beal.
SOCIETY AND CAPITAL
Retirement Policy Directions in 2017 and Beyond. ERBI Notes
Vol 38 No. 4.
The Economics of Kidnap Insurance, Timthy Taylor . The short answer to the concerns over how
kidnap insurance markets are likely to break down is that if all the companies
providing that interact with each other, swap information, and follow common
protocols, then kidnap insurance can function.
The Declining US Labor Share, Explicated, Timothy Taylor.
Millionaire Migrants: Countries That Rich People AreFlocking To, VisualCapitalist.
Vulnerable Jobs and the Desire to Migrate, Timothy
Taylor. The bottom panel shows the share
of workers living in extreme or moderate poverty, which is defines as iving on
less than US$3.10 per day. In emerging countries, this is nearly one-quarter of
all workers; in developing countries, it's about two-thirds of all workers.
A great majority of our nation’s small business owners areold, white men, Washington Post. The
population is changing but the demographics of today’s small business owners
aren’t, start-ups are leaving the heartland and are employing less people. Keep
that in mind when you hear reports of a growing U.S.
economy. “No one lives in the economy,” the report quoted economics and finance
columnist Morgan Housel. “They live in their economy, and the gap between the
averages and people’s personal experiences can be wide.”
Conscious consumerism is a lie. Here’s a better way to helpsave the world, Qz.com. A 2012 study
compared footprints of “green” consumers who try to make eco-friendly choices
to the footprints of regular consumers. And they found no meaningful difference
between the two…Choosing fashion made from hemp, grilling the waiter about how
your fish was caught, and researching whether your city can recycle bottle caps
might make you feel good, reward a few social entrepreneurs, and perhaps
protect you from charges of hypocrisy. But it’s no substitute for systematic
change.
The Decline in US Public Companies, Timothy Taylor. But ultimately, why does it matter if the
number of US publicly listed firms is dropping? Davis
offers two main reasons for concern
No comments:
Post a Comment