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Sure. My point is that I'm a little suspicious of 10 year terms on some ARMA or GARCH model. Maybe let's stick to five years? This is a really good point. I agree that the economy has changed a lot. I am suspicious of using utilities data from the 1920s, when it was basically a tech sector...

There are a few other choices here, too: We can: -assume the null hypothesis (stock market returns aren't possible to predict) -depend on human beings finding patterns that don't really exist, then bet against them. -Explain 19x earnings as natural in a low-rates environment. -Be contrarians...

Good point. It's always important to shop your mortgage. Most homebuyers remember to shop from banks, but a lot forget to shop credit unions. From what I have seen in shopping for mortgages, credit unions are about as competitive as local banks on rates, but they sometimes do a little better...

Ummm, hi. I'm one of those greedy corporate bankers. (OK, I worked as a strategist in trading at an investment bank.) 1.) 30 year mortgages have been around since dinosaurs roamed the earth. 30 year mortgages issued at 6% in 1970 put a lot of thrifts into trouble when interest rates were...

Well, it's a bit more complicated than the AR 1 model/strict weiner integral described by Malkiel. Lakonishok Schliefer and Vishney published a paper showing that stocks with cheap PEs tend to do better over the long term than more expensive "glamour" stocks; it stands to reason that the same...

I think there are going to be a lot of very unhappy people in fixed rate bonds when rates start to rise. I'd consider looking at a mix of fixed rate bonds and floating rate bonds rather than fixed rates. I'd consider Series I savings bonds and annuities too- any kind of fixed income product...

To be fair, not every country is trading with the US's valuation. France and Germany are a bit cheaper than the US and aren't total economic basketcases. Actually, most countries are cheaper. This isn't a 1960 world where your choices are the United States, bombed-out Europe and Japan, and...

This is a good point. A 30 year mortgage gives you more flexibility. But right now it comes at about a 1% cost in terms of interest rates. That's about $160/month on a $200K mortgage. One other mortgage to just consider might be a 10/1 ARM with an interest rate cap. This may be a good...

Is this a stable career? Is it like working as an engineer at GE where he can expect to get laid off once every 30 years but not once every 3-5? If he can make the payments, and if he isn't too worried about how big or expensive his house is, I'd steer him towards a 30-year mortgage. He...

Hi Deb. This kind of situation might be a good place for some sort of longevity insurance or a lifetime inflation-adjusted annuity. I would not invest everything with one insurer. I would not stick everything in annuities either. I would shop for the best deal from a highly rated insurer...

Ok, but what factor model are they using? CAPM (just the S&P 500)? Fama-French? (3 factors). BARRA? (~70 factors, industry standard for hedge funds). There aren't a whole lot to choose from, but a good risk model is going to factor out the trends. After applying the factor model, you're...

Do you have a more recent empirical study that completely contradicts this? This study is still commonly cited in academia, so it would just strike me as odd. More recently, apparently, Jan and Hung (2004) also find short-term persistence, well after the start of the dot-com era. Even more...

But a state insurance guaranty fund has never gone bankrupt. It's also created by state statute. There would also be a great deal of political pressure to bail it out. I'd treat this like an MBS issued by Fannie or Freddie pre-08. Technically there is a default risk... but if you stay below...

According to Carhart "Persistence in Mutual Fund Performance" (Journal of Finance, March 1997), there's actually A LOT of persistence from year to year. In fairness, Carhart's research includes some survivorship bias- he looked at returns over five years, but he was studying the correlation of...

Sure, but OP has other fixed income products, likely, that he can reallocate to the market. He may also be able to buy on margin at a lower rate than 3%. My point is that this annuity is one of the later things OP should be liquidating to put more funds in the market, and for most people...

The problem is that the stats say otherwise. There are a few funds that statistically outperform even after taking out the effects of cherry picking. Incidentally those funds tend to have higher fees so the manager collects most of the alpha. At the end of the day, most investors should stick...

That's largely true, but not 100% true. With a T-stat of 2.2, Vanguard Windsor (VWNFX) has outperformed the market with an alpha of 2.6% over the past 20 years. The Sequoia Fund (SEQUX) has achieved an alpha of 5.6% with a t-stat of 2.5. The odds of that happening randomly are about 1 in...

OK. So that does it for me. I wouldn't buy one of these illiquid things, pay the bid/ask spread or sales charges etc, to hold it just 18 months to hedge yourself against rent increases in a completely different area. Stick the money you were going to invest in a well-diversified national...

So then why can't OP do that with his annuity? When stocks go down, he can cancel the annuity and stick the proceeds in the stock market. Meanwhile, instead of earning 2.5% in corporate bonds you're getting 3%. Not a bad deal IMO. 1.) It's generally insured by the state- actually by other...

You don't have to be friends with the guy; you have to know him or of him. He can't have a reputation for being shady. Having done previous business with him and having had things work out makes this better. The state authorities will be, though. You can't just sell completely unregistered...

My rebalancing rule is the exact opposite of Onward. In order to avoid market timing, I try not to rebalance more than 1-2% at any given time and to do so slowly and incrementally. Both rules can work. Both rules can fail. Both rules are better than having nothing to fight behavioral biases.

Here is where a local REIT may make some sense: 1.) You know the guy running it. He's an honest, responsible, shrewd person. Expenses are low. 2.) There's a liquid local market. Ideally, you're buying the shares second hand, and the shares are more liquid than houses. 3.) You rent. You may...

The sales agent was paid many years ago. Those were all sunk costs. Right now, 3% is not such a bad deal. So are CDs, bonds, and all fixed income instruments except for munis. Unlike those fixed income instruments, annuities are tax deferred, which make things a little more fair. Same as...

I think you're getting there, but you're not quite safe yet. A lifetime inflation adjusted annuity could really help here and might be something to think about. But I'd wait for long-term interest rates to go up a little more.

Here's the problem with looking at only expense ratios. I used to work on an Equity Sales and Trading desk. I was the programmer there. In order for these ETFs and mutual funds to stay index funds, they have to trade stock to track the index. And some of these funds pay a wider bid/ask than...