Why do so many do the opposite of Mr. Bogle suggests?

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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby YDNAL » Mon Jul 15, 2013 6:54 am

stemikger wrote:The Vanguard target Retirement funds and lifestyle funds are balanced funds, so I guess you agree.
I do like them both, but feel they add things that are not really necessary and I'm not a big fan of the Target Retirement Funds changing course several times since they have been introduced. To be honest, it makes me a little nervous. However, if I die before my wife and she sticks everything into one of these funds I will not come back to haunt her. I just feel the unloved Balanced Index Fund is the purest form of indexing without any professional second guessing what the market is going to do. I love everything about this unappreciated little guy. The only way I would love it more is if they had one that was 50/50 but since they don't I'll settle for 60/40. I intend to keep this allocation forever. It gives me the confidence that I will be able to withstand bear and bull markets but still feel like I'm participating and getting decent growth.

Stemikger,

There is nothing wrong with the Balanced Index fund itself. Regardless of what Jack Bogle may have said at one point or another or regardless how you prefer to invest, investors should not ignore over 50% of the market capitalization of public companies in World stock exchanges.

That said, you have no basis to comment in the original post that many other strategies are implemented to "make it look super complex or sophisticated." This is just nonsense.
stemikger wrote:... There are so many that are adding so many funds to their portfolio that it looks like a professional did it to make it look super complex or sophisticated and I definitely do not agree with adding international bonds on top of slicing and dicing equities to the point where asset allocation will become a part time job.

If we really wanted to follow his advice we would basically pick the Total Stock Market and the Total Bond Market. Two funds and if you feel inclined a splash of international or even better one fund: The Vanguard Balanced Index Fund.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby IlliniDave » Mon Jul 15, 2013 6:56 am

stemikger wrote:
Blue wrote:Answering your question with a question.....

Why does the firm he built also offer active mutual funds?


This is a problem I also have with Vanguard, but when you think about it. They could not stay in business without offering other options. They have a handicap of having to offer what the other fund companies are offering to try to please everyone and be competitive. I really can't blame them for that.

Mr. Bogle also still owns Wellington which he admits he is not ready to give up because of his history with the fund.

I guess I just value the fact that investing can be really as simple as one balanced fund. I guess that is my message above all else. Can you do better. I'm sure you can. Can the simple strategy do well. My bet is it will and my life will be less stressful.

I truly feel in this field knowing too much may become a handicap.


The firm he built had it's genesis in a takeover, if you will, of the Wellington Fund which is "actively" managed. Active funds in the Vanguard family preceded index funds. Bogle is not anti-active management. If you read his book The Clash of the Cultures you'll see that Wellington is every bit as special to him as his SP 500 Index Trust, and he's quite proud of its performance since the establishment of Vanguard. There's a distinct difference between the high fee, high turnover (hence high trading cost), high tax liability funds he warns against and the passive-style management of the non-index funds at Vanguard.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Mon Jul 15, 2013 9:25 am

cheesepep wrote:
avalpert wrote:
cheesepep wrote:
InvestorNewb wrote:
cheesepep wrote:Me. I hold individual stocks. Has been wildly successful for me with a continuous stream of dividends every month. Takes more work for sure, but I enjoy it.


How do you compare against the S&P? And how long has it been successful for you?


It is a different comparison because my goal as a dividend investor is not the same for people who do index investing. As an index investor, your aim is to build a sizeable nest egg when you retire and to live off the nest egg using the 4% principle or other related ideas.

As a dividend investor, your goal is to increase how much annual (or monthly) dividend you can get without touching the principle. Very different goals. And I have been successful in this. I have more than doubled my annual dividend income from X to 2X in the last two years, where X was already a large number. If the dividend investor can also reach the S&P, then that is just added gravy.

Please, there is not such thing as an index investor or a dividend investor. An investor is an investor - the goal is always to get the maximum return for a given level of risk. That you use mental accounting or anchors to trick yourself into thinking dividends are a special form of return doesn't change that.


Yes, we are both investors, but how we obtain our goals is different, thus the two different names. There is more than one way to skin a cat.


That's all well and good, but if while skinning the cat your way you ignore its entire underside you are doing it wrong. The goal is the same, skinning the cat, your goal is not different than the 'index investor' even if you use a different means and if your means results in lower total return for the same risk than it is an inferior method.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby staythecourse » Mon Jul 15, 2013 9:52 am

I am sorry, this is a nonsense thread. There is a cult like/ kool aid mentality on this board for Mr. Bogle. I respect him much, but I am sorry to tell folks that he is human and YES he has been wrong. He has been wrong on international. Now he feels TBM is not that right balance as he did previous. He suggests dividend stocks and REITS a bit more out of the equity end. He has changed his mind and will surely do it again. The past data has shown there are MANY, MANY folks allocations that have been more fruitful then Mr. Bogle's. Harry Browne alone of PP fame is just one of them yet folks don't idolize him as much.

In life it is NEVER a good idea to follow anyone just because they say so. People will differ, but I think it shows lack of intelligence and naivete to just go "Well Mr. Bogle says so, so it must be true." The sign of an intelligent individual is one who listens to all views, thinks about the pros and cons of each view, and then decides what is best for their situation. This is what I am going to teach my child as she grows up. It surely won't be "Do what person X says just because they say so."

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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby stemikger » Mon Jul 15, 2013 10:55 am

Posted by YDNAL
That said, you have no basis to comment in the original post that many other strategies are implemented to "make it look super complex or sophisticated." This is just nonsense.


You are right. When I wrote this I was thinking out loud to something Rick Ferri said about a recent post of mine where I showed the new offering in my 401K. It was a fund of funds product by Morgan Stanley using all ETFs. I know nothing about ETFs so I asked about it. He basically took a look at it and said it was designed to look complex and sophisticated but is nothing more then replicating the total stock, total international and total bond indexes which I could easily get using the three fund portfolio.

So when I said that, I was wondering how many use all these different funds thinking that is what they need to do to be a successful long-term investor.

There are some people here when they post their portfolio allocations I scratch my head because many have anywhere from 12 funds and beyond. So that is what I was talking about when I said that.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby stemikger » Mon Jul 15, 2013 10:57 am

staythecourse wrote:I am sorry, this is a nonsense thread. There is a cult like/ kool aid mentality on this board for Mr. Bogle. I respect him much, but I am sorry to tell folks that he is human and YES he has been wrong. He has been wrong on international. Now he feels TBM is not that right balance as he did previous. He suggests dividend stocks and REITS a bit more out of the equity end. He has changed his mind and will surely do it again. The past data has shown there are MANY, MANY folks allocations that have been more fruitful then Mr. Bogle's. Harry Browne alone of PP fame is just one of them yet folks don't idolize him as much.

In life it is NEVER a good idea to follow anyone just because they say so. People will differ, but I think it shows lack of intelligence and naivete to just go "Well Mr. Bogle says so, so it must be true." The sign of an intelligent individual is one who listens to all views, thinks about the pros and cons of each view, and then decides what is best for their situation. This is what I am going to teach my child as she grows up. It surely won't be "Do what person X says just because they say so."

Good luck


Ouch! :( :) :D :happy :oops: :beer
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby pastafarian » Mon Jul 15, 2013 11:32 am

IlliniDave wrote:I agree, although I'd be inclined to go with Wellington if I had to decide today. While I like to think I'll be a lean, mean, investing machine to the end; I'm beginning to concede that in reality at some point I'll probably be best off raking everything into one pile for the sake of simplicity/ease. Let someone else keep it balanced and automatically deposit the distributions in my bank account.

Portfolio simplicity in terms of fewer funds is driven by 1) my wife's lack of interest, 2) less vulnerability for me to "tinker" 3) less tracking error regret. My wife has no interest in this topic, so I've put together written guidance for her suggesting suitable single fund solutions (and to consult a fee-only financial planner) if I die before her.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby 1210sda » Mon Jul 15, 2013 11:51 am

dickenjb wrote:I am a three fund disciple so I can not explain why others choose to make the simple complex. I would rather keep my portfolio simple and spend my time on other things. I have a PhD and an MBA and am proficient with Excel so it's not like I could not handle the complexity. I just choose not to.


Don't have a PhD, but otherwise, I completely agree with this viewpoint. I too love Excel spreadsheets, but my wife doesn't. She's younger than me by several years, so it is probable that she will outlive me.

The Three Fund Portfolio she can handle.

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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby cheesepep » Mon Jul 15, 2013 11:57 am


That's all well and good, but if while skinning the cat your way you ignore its entire underside you are doing it wrong. The goal is the same, skinning the cat, your goal is not different than the 'index investor' even if you use a different means and if your means results in lower total return for the same risk than it is an inferior method.


If ignoring the entire underside means ignoring the rotting parts, then it is a good idea to ignore the underside. To each his own - my method works perfectly well for me (and I have been extremely successful at it) and I am sure yours does the same for you.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Mon Jul 15, 2013 1:06 pm

cheesepep wrote:

That's all well and good, but if while skinning the cat your way you ignore its entire underside you are doing it wrong. The goal is the same, skinning the cat, your goal is not different than the 'index investor' even if you use a different means and if your means results in lower total return for the same risk than it is an inferior method.


If ignoring the entire underside means ignoring the rotting parts, then it is a good idea to ignore the underside. To each his own - my method works perfectly well for me (and I have been extremely successful at it) and I am sure yours does the same for you.

If principle appreciation is the 'rotting part' than I'm not sure what you are looking keep. Yes, to each his own, but on a forum where many people are reading without the base of knowledge or willingness to ignore total returns they should be reminded that it is a mental accounting trick that restricts accurate analysis of risk/reward trade offs.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby stemikger » Mon Jul 15, 2013 1:25 pm

pastafarian wrote:
IlliniDave wrote:I agree, although I'd be inclined to go with Wellington if I had to decide today. While I like to think I'll be a lean, mean, investing machine to the end; I'm beginning to concede that in reality at some point I'll probably be best off raking everything into one pile for the sake of simplicity/ease. Let someone else keep it balanced and automatically deposit the distributions in my bank account.

Portfolio simplicity in terms of fewer funds is driven by 1) my wife's lack of interest, 2) less vulnerability for me to "tinker" 3) less tracking error regret. My wife has no interest in this topic, so I've put together written guidance for her suggesting suitable single fund solutions (and to consult a fee-only financial planner) if I die before her.


+1
This is one of my driving forces too.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby SSSS » Mon Jul 15, 2013 1:34 pm

When was "opposite" redefined to mean "not absolutely identical"?
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Mon Jul 15, 2013 2:23 pm

SSSS wrote:When was "opposite" redefined to mean "not absolutely identical"?

I think they had a meeting about it last night.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby DiscoBunny1979 » Mon Jul 15, 2013 2:45 pm

In answer to the OP's question as to Why do so many do the opposite of Mr. Bogle . . .

The main reason is that most people interested in getting rich or wealthy do not want to be average. Those people that don't want to be average, want someone, like an advisor to recommend funds that will give them superior returns than the average. . . which means Index Funds are not the answer because they are the answer to get average market returns. Have you ever heard someone say they are investing in the market to get average market returns? No . . . most that invest want to make money and obtain higher than average results. This is evident even with Bogleheads that want to 'tilt' to value to get some extra 'return' based on supposed past performance.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Mon Jul 15, 2013 3:18 pm

DiscoBunny1979 wrote:In answer to the OP's question as to Why do so many do the opposite of Mr. Bogle . . .

The main reason is that most people interested in getting rich or wealthy do not want to be average. Those people that don't want to be average, want someone, like an advisor to recommend funds that will give them superior returns than the average. . . which means Index Funds are not the answer because they are the answer to get average market returns. Have you ever heard someone say they are investing in the market to get average market returns? No . . . most that invest want to make money and obtain higher than average results. This is evident even with Bogleheads that want to 'tilt' to value to get some extra 'return' based on supposed past performance.

Wow, so you are conflating hiring advisors to recommend funds with not using index funds with not hiring an advisor and using index funds in a value tilted portfolio.

I'm not sure you answered the original question at all but you certainly spun a nice bit of propaganda to rival any investing newsletter I've seen.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby MoonOrb » Mon Jul 15, 2013 3:41 pm

If you are asking why most people in general don't follow Mr. Bogle's advice (assuming they're aware of it), I have three answers:

(1) they learned of it too late and don't want to change horses in the middle of the stream;
(2) the perception that taking what the market gives produces just an "average" return and the corresponding belief that they can do better than average because they are smarter/better educated/better connected than the average investor;
(3) they just do the easy thing, rather than put work into learning more about why Mr. Bogle is probably right--it's easy to not worry about the future because it always feels so far away.

If you're asking why people in this community don't follow Mr. Bogle's advice, my answer is twofold:

First, the vast majority of people here do follow his advice, at least the core concepts of it: diversify, keep costs as low as possible, stick to an asset allocation that is right for you, hold for the long-term, don't mess with market-timing.

Second, to the extent people deviate, they're not rejecting the major principles, they're fiddling with the edges. In these situations, it's because:

(1) people have the hubris to believe they can do even better;
(2) people think it's fun to tinker around the edges to see if they can push their returns higher;
(3) having multiple buckets (401k for yourself and your spouse, IRAs, Roth IRAs, taxable accounts) makes slicing and dicing more of an option than it would be if your money would all be in one giant bucket.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby SGM » Mon Jul 15, 2013 6:41 pm

Observing people outside of this forum, many think that you get what you pay for. Of course, as Jack Bogle has stated this is true in many situations, but it is generally the exact opposite in investing. It is a difficult concept for people to understand. Furthermore, people are scared to make decisions for themselves concerning investing. It is a frightening thing for most to put your assets at risk. So they pay expensive advisors and pay higher ERs and other fees. Others are too busy and leave it all up to someone else.

Regarding the arguments on this forum, I am with Taylor. There are many roads to Dublin.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby Default User BR » Mon Jul 15, 2013 7:26 pm

avalpert wrote:
SSSS wrote:When was "opposite" redefined to mean "not absolutely identical"?

I think they had a meeting about it last night.

It was the opposite of last night, late last evening.


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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Mon Jul 15, 2013 8:12 pm

SGM wrote:Observing people outside of this forum, many think that you get what you pay for.

People who believe they get what they pay for have never worked in procurement
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby LadyGeek » Tue Jul 16, 2013 5:49 pm

I removed several off-topic posts. As a reminder, see: Forum Policy

We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones... Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby BestWishes » Tue Jul 16, 2013 7:46 pm

staythecourse wrote:The sign of an intelligent individual is one who listens to all views, thinks about the pros and cons of each view, and then decides what is best for their situation.

+1

Our portfolio is pretty different from the Bogleheads philosophy but we have been very successful. We agree with most of the philosophy and try to apply what make sense for us. When we started investing years ago, we didn't know about the Bogleheads. Now that we do, even though we would like to simplify our portfolio, we can't. Selling many of our stocks and funds would trigger huge taxes.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby Rodc » Tue Jul 16, 2013 7:55 pm

Jack, while a great human being, is not even consistent with "Boglehead" dogma. Nor is he entirely consistent over time. Has a huge home market bias, suggests it is ok to market time from time to time, just do it with a modest amount of your money. Etc.

Nor is he the only well meaning smart person to discuss investing.

He is smart, well meaning, experienced. I trust him to be sincere. I don't trust him to be right 100% of the time and I certainly would not follow his advice blindly. After all he is human.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby InvestorNewb » Tue Jul 16, 2013 8:05 pm

cheesepep wrote:

That's all well and good, but if while skinning the cat your way you ignore its entire underside you are doing it wrong. The goal is the same, skinning the cat, your goal is not different than the 'index investor' even if you use a different means and if your means results in lower total return for the same risk than it is an inferior method.


If ignoring the entire underside means ignoring the rotting parts, then it is a good idea to ignore the underside. To each his own - my method works perfectly well for me (and I have been extremely successful at it) and I am sure yours does the same for you.


Not to sound nosy, but would you care to share your method/portfolio?
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby stemikger » Tue Jul 16, 2013 8:17 pm

Rodc wrote:Jack, while a great human being, is not even consistent with "Boglehead" dogma. Nor is he entirely consistent over time. Has a huge home market bias, suggests it is ok to market time from time to time, just do it with a modest amount of your money. Etc.

Nor is he the only well meaning smart person to discuss investing.

He is smart, well meaning, experienced. I trust him to be sincere. I don't trust him to be right 100% of the time and I certainly would not follow his advice blindly. After all he is human.


That is the beauty of indexing. It's more like horseshoes where you do not need to be 100%. Following Jack's approach gets you where you need to be with much less stress.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby avalpert » Tue Jul 16, 2013 8:20 pm

stemikger wrote:
Rodc wrote:Jack, while a great human being, is not even consistent with "Boglehead" dogma. Nor is he entirely consistent over time. Has a huge home market bias, suggests it is ok to market time from time to time, just do it with a modest amount of your money. Etc.

Nor is he the only well meaning smart person to discuss investing.

He is smart, well meaning, experienced. I trust him to be sincere. I don't trust him to be right 100% of the time and I certainly would not follow his advice blindly. After all he is human.


That is the beauty of indexing. It's more like horseshoes where you do not need to be 100%. Following Jack's approach gets you where you need to be with much less stress.

What is your evidence that it comes with 'much less stress' as a general rule? I don't find that my tilted portfolio brings me any real stress so I'm not sure why I would expect to be less, let alone what it would mean for it to be 'much less' if I moved to a 3 fund version.
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby pennstater2005 » Tue Jul 16, 2013 8:24 pm

To each their own. It's that simple. Right? :confused
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Re: Why do so many do the opposite of Mr. Bogle suggests?

Postby Rodc » Tue Jul 16, 2013 9:01 pm

stemikger wrote:
Rodc wrote:Jack, while a great human being, is not even consistent with "Boglehead" dogma. Nor is he entirely consistent over time. Has a huge home market bias, suggests it is ok to market time from time to time, just do it with a modest amount of your money. Etc.

Nor is he the only well meaning smart person to discuss investing.

He is smart, well meaning, experienced. I trust him to be sincere. I don't trust him to be right 100% of the time and I certainly would not follow his advice blindly. After all he is human.


That is the beauty of indexing. It's more like horseshoes where you do not need to be 100%. Following Jack's approach gets you where you need to be with much less stress.


Oh, to be clear I think Jack's advice is fine. I don't follow all of it. I slice and dice, and he does not. I do not do any tactical asset allocation and he is fine with it in moderation. But if one does a super simple three fund portfolio, does the buy and hold and rebalance (and does tactical allocation in moderation), has a huge home bias (if in the US like Jack), and they put away a good amount of money month in and month out from age 25 to 65, they will be fine. I offer no strong objections.
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