Author Topic: Other Asset Classes and their allocations  (Read 12861 times)

investforfreedom

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Re: Other Asset Classes and their allocations
« Reply #15 on: April 09, 2013, 11:33:49 PM »


My over all strategy is to develop an investment philosophy that keeps pace with the S&P500 in good times, and eeks out smaller gains in bad times.  I started investing in 1999, right out of college, and I've been burned twice by the "buy and hold" and "dollar cost averaging" strategy, and I've sworn to not get burned again.  One reason why I like Lending Club is that it can act as an foundation for positive returns, even in bad times.  I did my homework with the LC data from inception, and I found that the rate of return during 2009, which was a terrible year for the economy, was something I could live with during a recession.  I mostly invest in A & B rated loans since I'm looking for a steady growth engine rather than banking on larger, but riskier, gains.  For now, I feel like my riskier investments are better rewarded in the stock market, and it's much easier to get out of ETFs than LC notes. 


I beg to differ here.  I started investing at around the time you started--in fact at the height of the dot.com bubble.  And I lost money, as many did.  I traded short-term for quite a while, learning all the stuff about technical analysis, intermarket analysis and so forth.  For the few mutual funds I have been dollar-cost averaging since 2002-3, I have actually been doing quite well--in fact better than what I did with short-term trading.  They have been clocking at over 13% on average for the last 10 years, despite the 2008 financial debacle.   And their volatility is rather subdued relative to that of S&P500.   I think you just have to pick the right managed mutual funds for long-term dollar-cost averaging.  Index funds aren't usually a good vehicle for dollar-cost averaging, IMO, but unfortunately, that's what most 401(k)s only offer. 
« Last Edit: April 09, 2013, 11:35:54 PM by investforfreedom »

dontvote

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Other Asset Classes and their allocations
« Reply #16 on: April 10, 2013, 12:34:54 AM »
Since mutual funds lag their index returns by an amount approximately equal to their fees, I'm not sure why dollar cost averaging an etf is a bad idea?
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investforfreedom

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Re: Other Asset Classes and their allocations
« Reply #17 on: April 10, 2013, 08:59:19 AM »
Since mutual funds lag their index returns by an amount approximately equal to their fees, I'm not sure why dollar cost averaging an etf is a bad idea?

The couple of managed funds I have been investing have outperformed SPY by 150% in the last 10 years such that even after discounting the higher fees, I still come out better than, say, investing in SPY, plus lower volatility as well.  You should take Jack Bogle with a grain of salt.  There are managers out there who consistently outperform indices in the long term.  I am not suggesting that you should bet your farm on managed funds.  I don't either.  I have money invested in index funds as well--but I just don't like the volatility of stock index funds.  Managed funds, if well chosen, could be part of your portfolio. 
« Last Edit: April 10, 2013, 09:03:51 AM by investforfreedom »

berniemadeoff

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Re: Other Asset Classes and their allocations
« Reply #18 on: April 10, 2013, 11:23:19 AM »
Has anybody tried Wealthfront?  Seems like a decent alternative to using a traditional advisor. They do asset allocation, rebalancing and tax loss harvesting automatically for a 0.25% fee.  I can't use them, but I would recommend to friends and family...

Fred

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Re: Other Asset Classes and their allocations
« Reply #19 on: April 10, 2013, 10:41:05 PM »
Interestingly the 10yr yield hit a YTD low on Friday.

Friday was a bad day because of the unemployment numbers.  I think it was a "blip".

IMHO, the yield pressures on US Treasuries will slowly diminish as people are moving towards equities nowadays.

Fred

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Re: Other Asset Classes and their allocations
« Reply #20 on: April 10, 2013, 10:43:45 PM »
Back to OP's question on "Other Asset Classes", since many in this Forum are doing active management, has anyone successfully played with equity options?

Fred

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Re: Other Asset Classes and their allocations
« Reply #21 on: April 11, 2013, 01:09:08 AM »
Has anybody tried Wealthfront?  Seems like a decent alternative to using a traditional advisor. They do asset allocation, rebalancing and tax loss harvesting automatically for a 0.25% fee.  I can't use them, but I would recommend to friends and family...

berniemadeoff, thanks for the info on Wealthfront. 

Getting tips like these is probably the best perk of this Forum.

I am still weighing whether I should focus on Vanguard (essentially "free") or move to Wealthfront (0.25% fee), though.

berniemadeoff

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Re: Other Asset Classes and their allocations
« Reply #22 on: April 11, 2013, 07:34:27 AM »
We'll see if we have another "sell in May" in equities.  It all depends on global GDP outlook and the daily datapoints that drives this sentiment. If things get choppy on macro, then perhaps people pour money back into treasuries.  Bill Gross is saying that the falling Yen is driving Japanese investors into all kinds of US/European denominated assets, including US treasuries.  I'm not sure this dynamic can offset global money flows into riskier assets, but the size of household savings and pension funds sitting in cash and Japanese debt suggests they have a lot of firepower.

I think the decision on using something like Wealthfront is interesting.  I think the most powerful benefit of this type of service or even the full service financial advisors that charge 1%+ is protecting oneself from emotionally driven, poor decision making.  For example it's tough to rebalance asset classes because it's against human nature to buy beaten up things and sell high flying things. Also, doing the tax loss harvesting has a lot of value but its a hassle to do. 

One solution may be to put some % of money with them to give it a "test drive." For the record, I am not affiliated with them nor am I advocating them here...