"Staying the Course"

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"Staying the Course"

Postby Taylor Larimore » Fri May 17, 2013 2:25 pm

Bogleheads:

Our mentor, Jack Bogle, wrote in Common Sense on Mutual Funds: "Stay the Course is the most important single piece of wisdom I can give you."

Stay the Course are also the last three words in the last chapter of The Bogleheads' Guide to Investing.

Vanguard concurs:

Staying the Course

Best wishes.
Taylor
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Re: "Staying the Course"

Postby gerrym51 » Fri May 17, 2013 2:26 pm

Especially if you are with Vanguard
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Re: "Staying the Course"

Postby nimo956 » Fri May 17, 2013 2:39 pm

It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?
Last edited by nimo956 on Fri May 17, 2013 2:39 pm, edited 1 time in total.
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Re: "Staying the Course"

Postby Fallible » Fri May 17, 2013 2:39 pm

Taylor Larimore wrote:Bogleheads:

Our mentor, Jack Bogle, wrote in Common Sense on Mutual Funds: "Stay the Course is the most important single piece of wisdom I can give you."

Stay the Course are also the last three words in the last chapter of The Bogleheads' Guide to Investing.

Vanguard concurs:

Staying the Course

Best wishes.
Taylor


Thank you, Taylor. I liked this: "The point isn’t that Vanguard was “right” about what was going to happen; in fact, we were very clear that we couldn’t predict what was going to occur. The lesson is that what often seems obvious as the “smart” thing to do in the short term is often counterproductive to your long-term investing goals."
"The first principle is that you must not fool yourself - and you are the easiest person to fool." ~ Richard Feynman
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Re: "Staying the Course"

Postby EternalOptimist » Fri May 17, 2013 4:19 pm

Thank you Taylor. It is incredible how we fail to realize the power of patience, persistence and perservance. Rafa Nadal could give great insight on this and what it has meant to him. I think Einstein said something along the lines of 'It's not that I am so smart but that I've very persistent.'
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Re: "Staying the Course"

Postby Beagler » Fri May 17, 2013 5:48 pm

It seems that if one owns a VG TR Fund one cannot stay the course because the funds are making fairly frequent changes to important fundamentals, e,g, % equities, and whether or not to add foreign bonds. The first change they made appears to have been to keep up with the equities positions of other TR funds (when stocks were soaring).
Last edited by Beagler on Sat May 18, 2013 12:17 pm, edited 1 time in total.
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Re: "Staying the Course"

Postby The Wizard » Fri May 17, 2013 5:59 pm

nimo956 wrote:It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?

Staying the course doesn't mean your feet stuck in cement for 40 years.
We're certainly allow to tweak our AA as the years go on.
New information and new products become available every decade or so and we're allowed (expected?) to assimilate that into our thinking.
Idea is not to make sudden rash decisions in the sense of Market Timing...
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Re: "Staying the Course"

Postby Savvy » Fri May 17, 2013 5:59 pm

Thanks for the post, Taylor. I always appreciate learning from your years of wisdom. Thank you.
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Re: "Staying the Course"

Postby xram » Fri May 17, 2013 8:39 pm

The Wizard wrote:
nimo956 wrote:It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?

Staying the course doesn't mean your feet stuck in cement for 40 years.
We're certainly allow to tweak our AA as the years go on.
New information and new products become available every decade or so and we're allowed (expected?) to assimilate that into our thinking.
Idea is not to make sudden rash decisions in the sense of Market Timing...

+1
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Re: "Staying the Course"

Postby joe8d » Fri May 17, 2013 8:54 pm

xram wrote:
The Wizard wrote:
nimo956 wrote:It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?

Staying the course doesn't mean your feet stuck in cement for 40 years.
We're certainly allow to tweak our AA as the years go on.
New information and new products become available every decade or so and we're allowed (expected?) to assimilate that into our thinking.
Idea is not to make sudden rash decisions in the sense of Market Timing...

+1


+2
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Re: "Staying the Course"

Postby baw703916 » Fri May 17, 2013 9:07 pm

Right now should be about the easiest time to stay the course. I mean, the market has reached a new high for the first time since 2007, and only the second time since 2000.

I'm not quite sure why the topic is coming up at present.

Any ideas?

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Re: "Staying the Course"

Postby Sidney » Fri May 17, 2013 9:10 pm

baw703916 wrote:I'm not quite sure why the topic is coming up at present.


When equities are moving up steadily, there is a tendency to want to let things roll beyond your re-balance point (for those who use trigger points). Part of staying the course is avoiding this temptation and doing the re-balance during these times.
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Re: "Staying the Course"

Postby steve roy » Fri May 17, 2013 9:28 pm

baw703916 wrote:Right now should be about the easiest time to stay the course. I mean, the market has reached a new high for the first time since 2007, and only the second time since 2000.

I'm not quite sure why the topic is coming up at present.

Any ideas?

Brad


Bonds.
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Re: "Staying the Course"

Postby investingdad » Fri May 17, 2013 9:51 pm

nimo956 wrote:It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?

I've done it for eighteen years and am only turning forty this year. Not terribly hard with a little persistence.
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Re: "Staying the Course"

Postby riskonoff » Fri May 17, 2013 11:22 pm

Taylor Larimore wrote:Bogleheads:

Our mentor, Jack Bogle, wrote in Common Sense on Mutual Funds: "Stay the Course is the most important single piece of wisdom I can give you."

Stay the Course are also the last three words in the last chapter of The Bogleheads' Guide to Investing.

Vanguard concurs:

Staying the Course

Best wishes.
Taylor

I have been off the Form for awhile because I just could not stand the redundant self promotion and the same boring discussions, staying the course has been 'berry berry' good to me. risk remains ON...enjoy the summer and greetings from chicago...sorry to those who have been heavily weighted to VXUS (international)....you can't win em all.
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Re: "Staying the Course"

Postby stemikger » Sat May 18, 2013 2:18 am

I would agree that this is the best piece of advice, but definitely the hardest. I think that is what Warren Buffett means when he says investing is easy but it's not simple.

I have changed my mind about what strategy I want to follow so much I even forget half of the ideas that crossed my mind. I recently did a search with everything I posted here and I was embarrassed for myself.

If I had to be honest with myself, I would be better served by not coming to these boards and never ever reading another financial book again. Stick everything in the Vanguard Balanced Index Fund and forget it until retirement.
Stay the Course!
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Re: "Staying the Course"

Postby Cunobelinus » Sat May 18, 2013 3:43 am

stemikger wrote:I would agree that this is the best piece of advice, but definitely the hardest. I think that is what Warren Buffett means when he says investing is easy but it's not simple.


I don't think you have it quite right. It is: "investing is simple but not easy." It is simple to set up an asset allocation and automatically invest money into index funds and let it ride (tweaking for AA). It is not easy for many humans to do that though. Many of us have a strong desire to tinker here and there based on the latest news.
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Re: "Staying the Course"

Postby stemikger » Sat May 18, 2013 3:46 am

Cunobelinus wrote:
stemikger wrote:I would agree that this is the best piece of advice, but definitely the hardest. I think that is what Warren Buffett means when he says investing is easy but it's not simple.


I don't think you have it quite right. It is: "investing is simple but not easy." It is simple to set up an asset allocation and automatically invest money into index funds and let it ride (tweaking for AA). It is not easy for many humans to do that though. Many of us have a strong desire to tinker here and there based on the latest news.


LOL. Yeah I'm always screwing up quotes I read and hear. But that's the one I meant. You should hear me tell a joke. LOL.
Stay the Course!
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Re: "Staying the Course"

Postby patrick » Sat May 18, 2013 11:41 am

nimo956 wrote:It's funny to see how automatically new, as well as some of the more experienced posters, simply assume that they will easily stay the course for 40+ years. I'd like to see some kind of study showing how often people really make changes to their portfolio. I'm definitely in favor of nisiprius' suggestion of keeping a change journal. The thing is, I think many people are swayed to making changes based on greed and the allure of higher returns rather than fear. There is always going to be new information we didn't have before, new studies being published, new asset classes promising a higher risk-adjusted return. I mean, how on earth did my grandfather manage to save for retirement without investing in emerging market bonds or small cap value international stocks?


Staying the course over the past 40 years would have been a bad idea. There is certainly at least one change that should have been made in that period -- switching to index funds, which only became available to retail investors less than 40 years ago! For the next 40 years I doubt that things will change that much, but you never know...
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Re: "Staying the Course"

Postby The Wizard » Sat May 18, 2013 11:48 am

patrick wrote:Staying the course over the past 40 years would have been a bad idea. There is certainly at least one change that should have been made in that period -- switching to index funds, which only became available to retail investors less than 40 years ago! For the next 40 years I doubt that things will change that much, but you never know...

Correct. Things like TIPS and Ibonds haven't been around that long either. And for some of us, the TIAA Real Estate Account was only opened in 1995...
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Re: "Staying the Course"

Postby mickeyd » Sat May 18, 2013 2:38 pm

I have been viewing a number of threads, here and elsewhere, that include many contributors wringing their hands about bonds and quoting Buffet and other gurus about the advisability of dumping bonds "at this time."

I have been tempted to horn in on the conversation and mention staying the course and following your own Plan, but I have controlled myself and stayed on the sidelines and observe. :shock:
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Re: "Staying the Course"

Postby baw703916 » Sat May 18, 2013 3:06 pm

So, what about bonds? Let's consider the case of someone who owns a three-fund portfolio (I'm assuming this to save myself the calculations), and let's say it's a very conservative portfolio, as someone in retirement might have: 20% TSM, 10% TISM, 70% TBM.

YTD through yesterday, May 17, this portfolio is up 4.38%. Not bad at all.
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Re: "Staying the Course"

Postby Dandy » Sat May 18, 2013 5:02 pm

In general Stay the Course makes sense. So does age in bonds and other words of wisdom. But Jack himself seems to make changes that stray from staying the course - the most recent being talking about more corporate bond exposure in general and in the Total Bond fund. Didn't he also talk about tactical allocations?

If you panic easily, tend to follow trends or "experts" or the last smart person you spoke to, if you tend to act or over react to things or endless fiddle to try to get perfection - then you should hold on to Stay the course like it was the 11th commandment. If not, then
you should usually stay the course, especially when times get tough. But not always under all conditions.

The savings and investment world is dynamic. Is it a "investment sin" to adjust your allocation when there are historically low interest rates? dramatic changes in inflation or deflation? Major tax changes? Changes to money market mutual funds that allow them to break a buck? When FDIC savings or CDs earn more safely than Treasuries or mutual fund money market funds? If a 5yr CD is paying more than a 5yr Treasury then I'm buying the CD no matter what my prior investment plan said. If an FDIC bank money market or savings account is paying more than Prime - I'm out of Prime.
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Re: "Staying the Course"

Postby MoonOrb » Sat May 18, 2013 5:09 pm

We can think of "Stay the Course" as more of a beacon to guide us, or as a state of mind, rather than some rigid, unbreakable rule. To me, "staying the course" means I don't jump in and out of funds to chase performance, it means that I don't panic and sell funds when they're down, and it means that I adhere to the principles of my IPS.

Of course, I am always thinking about what my IPS should say: what is my appropriate asset allocation? Are there ways I can more tax- or cost-efficiently meet the goals of my asset allocation? What do I do when I have new options available in my 401k? So, yes, at a more granular level there may be plenty of activity. But if you're meeting the goals in a big picture level of not chasing performance and not panic-selling (or refusing to rebalance because you want to ride the wave of a bull market), then I think you can fairly be said to be "staying the course" regardless if you've only recently invested in, say, an Extended Market fund, or if you decided you should have a small/value tilt to your equities, or whatever.
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Re: "Staying the Course"

Postby Blues » Sat May 18, 2013 5:14 pm

The well hashed out case for cd's and stable cash instruments aside, the more I read the recent threads discussing / lamenting the current state of the market, the pricing of REITS, whether small/value is overbought, "newly discovered" factors to incorporate into the Fama - French findings...the more appealing Taylor's vaunted market weight "three fund portfolio" becomes, speaking strictly for myself, of course.

Thanks for the wake up call, Taylor. :beer
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"Wake up call."

Postby Taylor Larimore » Sat May 18, 2013 6:46 pm

Blues:
Thanks for the wake up call, Taylor.

You're welcome.

Best wishes
Taylor
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Re: "Wake up call."

Postby Blues » Sat May 18, 2013 7:48 pm

Taylor Larimore wrote:Blues:
Thanks for the wake up call, Taylor.

You're welcome.

Best wishes
Taylor


Image

:mrgreen:
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Re: "Staying the Course"

Postby peppers » Sat May 18, 2013 9:17 pm

The Three Fund just makes good sense to me. What's not to like?
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