Comments on: The Noise from Inside http://www.obliviousinvestor.com/the-noise-from-inside/ Index Investing: The Oblivious Investor Fri, 12 Mar 2010 19:19:14 -0600 http://wordpress.org/?v=2.9.2 hourly 1 By: Mark Wolfinger http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3110 Mark Wolfinger Thu, 17 Sep 2009 18:48:14 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3110 ok. Thanks. ok. Thanks.

]]> By: Mike http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3106 Mike Thu, 17 Sep 2009 16:59:29 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3106 Mark: Same answer as before. I understand the benefit of using options for a guarantee against loss in value. But there's a cost that's attached to that guarantee, and I'm not convinced that the cost is worth it (as compared to simply using asset allocation to adjust risk). I've still never seen anybody provide information that options do a more cost-efficient job of reducing risk than asset allocation does. Also, asset allocation <i>can</i> provide guarantees, if that's what you want it to do. Mark: Same answer as before. I understand the benefit of using options for a guarantee against loss in value. But there’s a cost that’s attached to that guarantee, and I’m not convinced that the cost is worth it (as compared to simply using asset allocation to adjust risk).

I’ve still never seen anybody provide information that options do a more cost-efficient job of reducing risk than asset allocation does.

Also, asset allocation can provide guarantees, if that’s what you want it to do.

]]> By: Rob Bennett http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3104 Rob Bennett Thu, 17 Sep 2009 16:55:50 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3104 Thank you for stating things fairly despite our difference in viewpoint, Brian. Rob Thank you for stating things fairly despite our difference in viewpoint, Brian.

Rob

]]> By: Mark Wolfinger http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3105 Mark Wolfinger Thu, 17 Sep 2009 16:55:45 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3105 Mike, 1) The media cannot explain why the market behaves as it does. And no one really cares. So ignoring them is the perfect solution. Agreed 2) I want to raise a question. Please NOTE: this is not necessarily a disagreement, it's just a question: a) "If you have an asset allocation that’s appropriate...there’s nothing you really need to be doing." b) "The more confident you are in the research and data upon which your investment strategy is based, the more confident you’ll be in the strategy itself." Those quotes bring up the question: Why should an investor have confidence that proper asset allocation is the right approach? Sure asset allocation is a positive step, but you suggest it is sufficient. I disagree. I believe it's far more important to protect the value of your assets (guaranteed) rather than hope asset allocation will always work as it is intended. There is more than one way to invest when the goal is to achieve growth, with as much safety as possible, over time. Mike,

1) The media cannot explain why the market behaves as it does. And no one really cares. So ignoring them is the perfect solution. Agreed

2) I want to raise a question. Please NOTE: this is not necessarily a disagreement, it’s just a question:

a) “If you have an asset allocation that’s appropriate…there’s nothing you really need to be doing.”

b) “The more confident you are in the research and data upon which your investment strategy is based, the more confident you’ll be in the strategy itself.”

Those quotes bring up the question: Why should an investor have confidence that proper asset allocation is the right approach?

Sure asset allocation is a positive step, but you suggest it is sufficient. I disagree. I believe it’s far more important to protect the value of your assets (guaranteed) rather than hope asset allocation will always work as it is intended.

There is more than one way to invest when the goal is to achieve growth, with as much safety as possible, over time.

]]> By: Brian http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3102 Brian Thu, 17 Sep 2009 14:59:49 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3102 Mike and Rob have fundamentally different principles on how to execute a passive investment strategy. One approach ignors the "noise", while the other uses the "noise" to adjust accordingly. The fundamental difference between them is that one values the noise and the other doesn't. Keep up the good work Mike! Mike and Rob have fundamentally different principles on how to execute a passive investment strategy. One approach ignors the “noise”, while the other uses the “noise” to adjust accordingly. The fundamental difference between them is that one values the noise and the other doesn’t.

Keep up the good work Mike!

]]> By: Rob Bennett http://www.obliviousinvestor.com/the-noise-from-inside/comment-page-1/#comment-3095 Rob Bennett Thu, 17 Sep 2009 14:10:12 +0000 http://www.obliviousinvestor.com/?p=5066#comment-3095 My favorite way of blocking out the noise is -- Surprise! Surprise! -- paying attention to valuations. All price changes that are greater than 6.5 percent real (the return justified by the productivity of the U.S. economy) or less than 6.5 percent real are neutralized for the Valuation-Informed Indexer. Returns of greater than 6.5 percent real cause diminished returns in future days. So there is as much bad to them as there is good. Returns of less than 6.5 percent real cause enhanced returns in future days. So there is as much good in them as bad. There <i>is</i> no noise for valuation-informed investors. Once you begin looking at stock investing in realistic ways, you see what is really happening when returns are too high or too low and the noise just naturally dissipates. Rob My favorite way of blocking out the noise is — Surprise! Surprise! — paying attention to valuations.

All price changes that are greater than 6.5 percent real (the return justified by the productivity of the U.S. economy) or less than 6.5 percent real are neutralized for the Valuation-Informed Indexer. Returns of greater than 6.5 percent real cause diminished returns in future days. So there is as much bad to them as there is good. Returns of less than 6.5 percent real cause enhanced returns in future days. So there is as much good in them as bad.

There is no noise for valuation-informed investors. Once you begin looking at stock investing in realistic ways, you see what is really happening when returns are too high or too low and the noise just naturally dissipates.

Rob

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