A good friend of mine has an investment management practice in San Diego called Trivant Custom Portfolios. John and Dan, the braintrust, had the following paper published that is a very good read. Check it out and let them know what you think.
Wikinvest Wire
Wednesday, December 13, 2006
Financial Planning Research
A good friend of mine has an investment management practice in San Diego called Trivant Custom Portfolios. John and Dan, the braintrust, had the following paper published that is a very good read. Check it out and let them know what you think.
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8 comments:
How about an old-fashioned actively managed fund which had only one losing year in the past 12 years and lost only 6.3%. Its 10 year annualized return was 11.78%. It has only 50% in stocks and also carries @ 8% in shorts? Want to venture a gues?
Roger, I thought your friend's did a terrific job on their paper. Kudos to them for getting published.
Leisa, thanks I'll pass that on and thanks for reading the paper.
Great link and promo. I enjoy your analysis and market etf views.
I downloaded this report. It is outstanding. Thanks for bringing it to our attention.
Roger, I glanced at the pdf and will read more closely, but can you offer an opinion as to whether or not this article is applicable to passive portfolios, and to what degree actively managed portfolios?
So has New York City increased the likelihood that its citizens are going to outlive their money by taking all of the fatty foods out of the restaurants? I knew that was a bad idea.
They use 10% as the expected return on stocks seems highly uncertain. 10% is what the S&P did over a certain number of years, not necessarily what the future will bring. Part of the S&P's banner years were during the post WW2 boom through the 1960s when the rest of the world was still recovering.
The use of lognormal distribution is interesting. Mandelbrot (and others including Taleb) have pointed out numerous times that the use of lognormal distribution when predicting (almost any) market returns is dangerous. Mandelbrot notes in the "Misbehavior of Markets" that lognormal results that show a chance of ruin at 10 to the -20 power (or 0.0000000000000000001%) can actually be as high as 1/30 or 1/10.
Of course the use of Beta as a set in stone number if returns are not lognormal is also problematic.
i tend to think it applies more to some for of active management but I tend to think the deffinition of active can be very broad. people that pay attention to their account with out trading a lot are managing.
Russell120, i tend to think the concept is more important than the number. The biggest macro for me is taking some of the thought process.
As a practical matter John and I very often view things quite differently but he is a very sharp guy.
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