Bogleheads.org

It's controversial because John C. Bogle himself believes international investing is not necessary, and says if you want to do it anyway, OK, but don't go over 20% of your stock allocation. Within the forum, that is a minority view and one area in which many Bogleheads are willing to say, simply, &...

The question should be, "Why not diversify internationally?" The answer may be found on pages 251-276 in Common Sense on Mutual Funds . Thanks, Taylor. I hadn't read Mr. Bogle's views on international investing in years and it was a good refresher. But I have to say, re-reading his commen...

We've been 50% stocks/50% bonds since we retired about 10 years ago. I expect we'll keep this same allocation to the end, as it provides us with 2.5% annual withdrawals out of interest and dividends, plus enough growth (so far) to keep the principal at pace with inflation. Our ultimate plan is for b...

So the question is: is there any compelling or even remotely plausible reason that one can use to justify a 100% stock allocation to the United States only? You're searching for justifications, so why not add this one: the U.S. stock market is the largest, most liquid and diverse equity market on t...

The only real surprise is that our plan for retirement has worked out just about as we anticipated. Our investment plan was to withdraw about 2.5% from our slice-and-dice portfolio each year, all from interest and dividends, while our portfolio appreciated at pace with inflation, so we'll have futur...

My suspicion is that proponents of the small cap effect will never give it up nor vice versa for opponents. I have no idea how this holds up in real world investing vs a boring Total Stock Market index fund. This helps me see that there are the alternate views, meaning that it probably doesn't matt...

I wish I had the opportunity to research this topic in more detail, but I suspect the large-cap U.S. stock indexes are now much more correlated with global GDP — global investment spending, commodity demand/prices, exports and FX — than domestic U.S. consumption or housing, which have driven the U.S...

...therefore I predict the phrase: ' the fiscal canyon ' that we have to forge across before climbing back up the other side, but have to wallow in for a while for the sake of ratings... If you'll accept "ravine," your prediction is already coming true, Noobvestor: Will We Get Out of the ...

What do I need to consider when thinking about such a move? The most important thing, IMO, is the strength of your conviction in the small cap premium. Large and small-cap stocks operate in fairly long-term cycles in which large outperforms small, or vice versa, for years at a time (chart below). T...

Either way the divergence is only six months old and on the time-scale that most of us are investing for, that's nothing. But maybe good to keep an eye on... Just wanted to clarify that the chart in the OP is only an example of how financial analysts are increasingly treating the stocks with high f...

If you have the asset returns and standard deviation data for the next 20 years, I'd be happy to include it in the analysis.

I don't think you'll get the level of diversification of IBR from the VG/TRP funds. The relevant consideration for most investors is how much portfolio diversification they NEED. As seen below, simply adding 40% bonds and 20% international equity to a 100% U.S. equity portfolio accomplishes 95% of ...

Not sure if that has swayed anyone's AA. The foreign revenue numbers for U.S. companies shouldn't sway anyone's asset allocation, IMO. What the revenue numbers obscure is the lopsided industry exposures between U.S. and international companies. Looking at total global market cap (below), U.S. compa...

Each year on the Forum, someone posts the annual statistics from S&P showing the percentage of revenue earned overseas by U.S. companies — up from 10% in 1970 to over 46% in 2011. In this post, I'd like to look a bit deeper into this growing trend and explore some of the consequences for the U.S...

It's also interesting to note that, even though active fund management fees have been decreasing over the last 15 years, passive index fees have also been falling by about an equal amount — so the spreads between active and passive fees are still just about where they were 15 years ago (chart below)...

And in short, assuming the gordon equation has some validity over the long term (as I tend to believe), and assuming that inflation rates are hard to predict (just take a look at an old copy of the SBBI and see what they thought inflation would be going forward), then real stock returns should be e...

What I think is more significant is that we consistently misjudge how innovations will be applied and what their long-term social and economic effects are. Absolutely agree. One doesn't have to look very far for examples of where even the practical applications of innovations weren't understood or ...

Given that human beings are not skilled at prediction to begin with, it's always striking how especially hopeless we are at predicting or even envisioning future innovation. Outside of a few gifted visionaries like Leonardo da Vinci or Jules Verne, we humans seem to consistently underestimate our co...

The promise of these tactical asset allocation funds sounds wonderful — brilliant managers switching between asset classes based on proprietary computer models of risk parity or expected returns. However, their results have not historically lived up to their promise. In 2010, Morningstar did a study...

According to the author quoted in Zweig's article, Michael Mauboussin (from his book, The Success Equation ): "There's a quick and easy way to test whether an activity involves skill; ask whether you can lose on purpose . In games of skill, it's clear that you can lose intentionally, but when p...

From the linked article: An eminent economist and a leading money manager have independently concluded that the U.S. economy will expand in the future at only half its long-term historical average. These predictions match the dark mood of many investors who already have given up on the U.S. stock ma...

Realism tempers my optimism, but without optimism, I would not be investing at all. This is my personal view also. To invest in equities with a 20- or 30-year time horizon, one has to have at least some basic confidence and optimism in the global capitalist system. To invest in bonds requires a bel...

This is a quintessential problem of induction . No matter how many times a new technology has silenced skeptics, it will take only one long period without substantial innovations to demonstrate that rapid progress may cease. For at least 400 years, this economic debate has gone on between the "...

Every century has its pessimistic economists who see the end to growth and innovation and nothing but gloom and stagnation on the horizon: • Leading 17th-century intellectuals imagined that all the available inventions were already behind us. • In the 18th century, Adam Smith himself envisioned the ...

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Many Forum members are already aware of the Reinhart and Rogoff work on the aftermath of major postwar banking crises in the developed world — but may not have seen their chart (below) of the unemployment rates following these crisis. This chart shows the "big five" postwar financial crise...

Providing similar evidence from Europe, an October 2012 article from Investment Europe indicates that the decade-long shift from active to passive equity investing is not just a U.S. phenomenon. The article reports that passive equity investments (index funds and ETFs) now make up almost 17% of tota...

Either the simulation is correct (and short-medium TIPS are basically useless during high inflation), or there is something wrong with the simulation. Does anyone have insight into this? Briefly last year, I researched the various synthetic TIPS series and came across this post from stratton in 201...

Morningstar, in their latest fund flow report (11/26/12), attributes the loss of assets in active equity funds to underperformance by active equity fund managers. They report (below) that domestic stock funds overall trailed the S&P 500 Index by 2.5% in 2011 and 1.5% through the first three quar...

It's been well-reported in the financial media that, in aggregate, U.S. equity funds have been losing assets almost steadily over the last five years, ever since the 2007-08 financial crisis. However, a less well-known story is that passive U.S. equity funds and ETFs have actually been gaining asset...

Are you implying that even if the big hedge funds "got it," the next 10 years will not look so rosy due to increased correlation and lower sharpe ratios? Rand, I'm certainly no expert in these matters, but what Swensen and Bernstein appear to be saying, in brief: 1) The excess returns fro...

Rand, you may already be aware that Bill Bernstein has recently published a new Kindle/Nook book aimed at institutional money managers, entitled "Skating Where the Puck Was," which he previews in this thread and he describes as: ..aimed primarily at institutional money managers, and its co...

Thanks for posting the graph, and in particular the Brookings Report URL. I do have a very hard time believing it though, especially for India. You're welcome. Personally, I also don't put much stock in the twenty- or thirty-year projections for one individual country, as there's just too much poli...

Thus average market returns have not changed much but the bond risk free rate of return has declined sharply. Can't say that I haven't given some fleeting thought to the idea of increasing my equity allocation just a tad, given the current expected returns for bonds. But most of the decline in the ...

What can you say about what's going on here? Why would a listed company not be included in the index? Presumably MSCI has access to the listings so the stocks are not unknown to it... what is their criterion for excluding two-thirds of the companies on the list? Not having the opportunity to resear...

What strikes me is how consistently these kinds of endowments are constructed for huge institutions with huge research arms and investments to identify the strategy that truly yields the highest returns (I'm not speaking just of Yale and Harvard but many dozens of Universities across the country). ...

In the real world, you can stratify your odds as follows in terms of residual expense savings: < 10x: Unless both you and your spouse die young and don't have large unexpected expenses, you're sunk. 10-20x: If you're lucky, you just might skate through. 20-30x: You've won the game; most of your mon...

Very nice summary of the global outlook, thanks for posting it. The single, biggest takeaway for me from these commentaries by Gross and others is the idea that our investment futures here in the U.S. (at least on the equity side), whether we are young accumulators or older retirees, now hinge almos...

It's interesting to note how the perception of cash in the portfolio has changed so markedly in the last twenty years. In the first edition of Roger Gibson's classic book, Asset Allocation , published in 1990, cash was considered a legitimate asset class with positive portfolio attributes and divers...

My guess is as a practical matter if NAVs start floating then some sort of bank account will become the transaction account de jour thus forcing this split. Vanguard seems to be thinking along the same lines, as reported in this article from July, 2012: Management at The Vanguard Group Inc. appears...

All interesting questions, Nisi — but as a Vanguard investor, I'm personally not too concerned about the credit quality and NAV fluctuations of Vanguard's Prime Money Market Fund. With the lowest costs in the business, they have the least reasons in the business to take on extra credit risk to cover...

I have no idea what your chart is supposed to be showing, but it isn't showing what happened to shareholders of Reserve Primary Fund. Exactly right, Nisi, the chart isn't showing the history of the Reserve Primary Fund, nor was it ever intended to. What it shows are the historical price fluctuation...

Just to give some idea of the historical scale of NAV fluctuations we are talking about here (note the vertical scale is in thousands of a dollar): http://i47.tinypic.com/28jjibk.jpg Source: J.P. Morgan Asset Management If money market funds are priced at $100.00 per share, the worst fluctuations of...

Do you believe that passive investments are superior for institutions and high net worth individuals (as for the average investor with a long-term time horizon), or is this a special circumstance where active and non-traditional investments are uniquely suited for the client's needs? No expert here...

Gordon, if Vanguard were to offer a frontier markets index fund, personally, I'd limit the allocation to 33% of my existing emerging market allocation or 15% of my total foreign equity allocation (substituting for existing allocations). This is not based on any mean-variance optimization analysis bu...

In the real world, you can stratify your odds as follows in terms of residual expense savings: < 10x: Unless both you and your spouse die young and don't have large unexpected expenses, you're sunk. 10-20x: If you're lucky, you just might skate through. 20-30x: You've won the game; most of your mon...

Since 2000, of course, the largest growth in new company listings and IPOs has come from the emerging economies. Simplegift, since IPOs historically underperform the markets and it appears there is an inverse relationship between rate of economic growth and stock returns, is this all the more reaso...

Keep in mind that, if 10 million people pick stocks, some of them are randomly going to have one-in-a-million success stories to tell.

I disagree about the IRS de minimis rule suggestion since the accounts are taxable and you are taxed now on the interest and should continue to be taxed. The proposals that I've seen (e.g., from Blackrock) would retain the tax on the interest, but suspend any tax accounting on the gains and losses....

...but it's important to notice that the U.S. has been growing, too, and that U.S. capitalization as percentage of global is about the same now as it was in 1990. Nisi, in my view, the chart you posted above is the "frontstory" that we discuss most often here on the Forum, based on the ma...