AAII Orange County Chapter Q & A

On July 22, 2023 Chris Pedersen gave a 2 hour online presentation to the Orange County Chapter of the American Association of Individual Investors (AAII).  The title was “Best In Class Fund Selection and Behavior.”  Over 650 people attended the presentation, a record turnout for our presentations. 

The video will be available in the coming weeks.  While  Chris answered  many questions during his presentation, there were over 60 questions remaining unanswered.  In this podcast and several to follow Chris and Paul will try to answer all of the questions.  Here are the answers to the first 16 questions:

1. Should investors limit their bond holdings to short term bond funds?
2. Are CDs a good place to park cash right now?
3. Do you think investing in an internationally diversified index fund is a good way to manage currency risk?
4. My wife and I are 70 with our portfolio 75% in cash.  Is now a good time to invest and should we put it all in now or dollar cost average?  Chris mentions a podcast on dollar cost averaging vs lump sum investing by Rob Berger.
5. Dimensional Small Cap Value Fund appears to have less than a 2% return over the last 16 years.  Could that be true?
6. For retired investors wouldn’t it be prudent to apply a market timing system that will protect against a big selloff?
7. How does your Ultimate Buy and Hold Portfolio compare to your other portfolios in terms of risk and return?  Paul mentions Table H1 at this link.
8. Would an investor be better served in a target date fund or managing a simple 3 Fund Bogleheads portfolio?  Paul mentions H1 here as well.
9. Why not put your bond holdings into a diversified stock fund that pays dividends, like the Schwab U.S. Dividend Equity ETF (SCHD)?
10. What is average maturity of the short-term bond funds you recommend?
11. If I don’t have small cap value available in my 401k, should I substitute a small cap blend fund in my 2 Funds For Life portfolio?
12. How does Portfolio Visualizer work on target date funds?
13. Your charts show the possibility of an 81% decline.  Does that mean the fund could see the value fall from $100,000 to $19,000?
14. Please explain the term investment factor.
15. Instead of comparing different market factors, how would you compare the returns of different market sectors?
16. Would you consider producing a factor regression video/course so do it yourself investors could learn to evaluate funds for themselves?