Search found 642 matches

by bobsmith
Wed Mar 20, 2024 7:57 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Sounds like OP is itching to play with their portfolio and is fishing for forum justification to do so. I think many on this forum have said they play a bit in non-Boglehead ways, with a small percentage of their assets, maybe 5% of assets. I inherited a few stocks, and that was all the lesson I needed to know I'll never invest in individual stocks. The fact that I'd seen how successful low expense, broad market, index fund investing has been for me probably helped, too. But I've engaged in a tiny bit of market timing around the edges, but mainly when there was a good amount of volatility in the market. The main thing that helped my portfolio a lot was to invest heavily (80-90%) in equities while employed & young enough to ride out mar...
by bobsmith
Tue Mar 19, 2024 12:17 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

Beensabu wrote: Tue Mar 19, 2024 10:43 am
bobsmith wrote: Tue Mar 19, 2024 6:37 am Is it true that in the past many years it has been conventional wisdom that stocks out perform bonds and is that still conventional wisdom today?
Yes. It's a view shaped by post-WWII US stock returns.
Well, just want to say thanks again for all the time you put into this thread and putting up with me. I really will think about what you said, read that article, and play more with PV.

Much appreciated.
:sharebeer



AND OF COURSE THANKS TO EVERYONE WHO POSTED and gave me advice, links, charts, and shared their experiences. :beer
by bobsmith
Tue Mar 19, 2024 7:02 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

This has been a very interesting thread and exercise in following the reasoning being explored. I am very much a newcomer and bow to the many posters in this thread who have been educating readers like myself who've been bystanders, or are discovering the thread late. Just had to pipe in with two, tiny, cents that I hope will add something to the learnings. For the purposes of long term buy and hold index investing, is Vanguard's Total Bond Market Fund (VBTLX) still a good choice in the portfolio despite the fact that it's had negative return in 5 of the last 15 years, including this year and 2023 where it dropped 13% ? If not (as at least one person has suggested), then please suggest a good alternative. I personally consider VBTLX/BND a ...
by bobsmith
Tue Mar 19, 2024 6:37 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

...I still don't see the evidence for the idea that stocks don't outperform bonds over longer time periods. Sometimes they do, and sometimes they don't. Someone tried to point you to McQ's paper early on. Give it another try: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805927 You can download the PDF there or open it in your browser. There's no paywall. okay, took a few tries but I finally got it to work. Before it wouldn't work or wouldn't load. 44 pages! I haven't given it a fair look yet, but i will. Before the thread finally ends, let me ask you. Is it true that in the past many years it has been conventional wisdom that stocks out perform bonds and is that still conventional wisdom today? I know this isn't your view, but is t...
by bobsmith
Mon Mar 18, 2024 8:08 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

In summary, stocks do outperform bonds over time. So far, lately and over the veeeeeeeeeeeeeerrrrrrrrrrrrry long term. Over most ten year or longer periods seems to be the conventional wisdom. We started this with you having to cherry pick timelines where they didn't. I get the argument you're making that a big drop could happened out of nowhere, like the 40% drop that happened in 2008 (followed by a big gain the following year). But being we are both looking at past history to guide our conclusions of the future , howbeit without any certainty, I don't see how you can say that in the long run stocks don't out perform bonds. That said, the fact that you never know when the big crash can occur may offset the rationale of long term stock gai...
by bobsmith
Sun Mar 17, 2024 7:36 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

Sorry, MoneyisTime I somehow didn't notice this post before I responded to you later one. This has caused me to over explain stuff you already knew. @bobsmith- Thanks much for the detailed and personal reply. Your advice and outline is excellent. Yes, I’ve been aware of the Bogle basics for 30+ years. When I started the Vanguard SP500 in my 20yr-ish youth it was after reading (an actual book back then) Bogle’s ideas and other similar analysis. Granted my 95% SP500 was maybe too much, but I had arrived at that with 120 minus my age and...the overconfidence of youth in spades. My risk tolerance was extremely high. Then I promptly forgot to change my AA for way too long and never re-balanced as I aged. A bit too zealous on “set it and forget i...
by bobsmith
Sun Mar 17, 2024 6:39 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

slondr wrote: Sun Mar 17, 2024 11:42 am
bobsmith wrote: Wed Mar 13, 2024 8:48 amAgain, I'm not trying to go down a path of speculation, but if these trends change the fundamentals, they may well be changing the fundamentals of what it means to be well diversified.
That seems like speculation.

You should expect that expectations around the future performance of assets are already priced into the cost of those assets.
Yeah, this got discussed a little more at some point earlier in this long thread. Search "China" (page 2) and you might find it if you care. I now tend to agree it falls under speculation and I should just keep my AA and hold for the long term.
by bobsmith
Sun Mar 17, 2024 6:02 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

@bobsmith- I don’t want to hijack the thread, but I have a small side question. I contemplated a private message to you but thought that might be too “invasive”, so I’m trying posting this first. Iol, there's no hijacking, it's fine. I think I understand the basics of taxes and IRA’s, but your specific language isn't clear to me, so I’m wondering if I am missing some “big thing”. I have combed to Bogle wiki’s and forums (for months before and today), and taxes are convoluted to say the least. But again, I think I understand the broad picture of taxes on IRA’s/etc. My question: Do your comments point to an issue with taxes if virtually all my savings is in a Traditional IRA and Roth IRA? To put a fine point on it, it is my understanding tha...
by bobsmith
Sun Mar 17, 2024 8:29 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

I don't come here enough to know if you are newish to investing or if you're well established. I am very new to the board and eager to learn. I am an average US worker, but age 59 and newly (forced) retired. Blind investing in 95% SP500 since 1990. Recently in 2023 changed to 60/40 stock/bond. Laid off/retired in late 2023 and now joined Bogle board to educate myself on a severe on-ramp. I want to see what I can do to live my retirement. I think, and have gotten a fee-only professional confirmation, I can retire. But...I'm an engineer, so trying to belt and suspenders this one. Well, you seem to grasp at least the basics. That said, if you've essentially been investing in the S&P 500 since 1990, i imagine you've outperformed the vast m...
by bobsmith
Sat Mar 16, 2024 11:12 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

I’ve done my best to comb the thread and hope I’m not repeating per se, but attempting to summarize for my benefit and (hopefully) others. The OP got me thinking of the role of bonds and diversification. It also got me thinking of the larger economy and our ability to grow our wealth or at least remain afloat given changes that WILL happen. Bear with me here, I’m attempting to think of how bonds or diversification factor into our investing needs (or not). Our current world of investing and economy is structured in a certain way. That way can, and will, change. i.e. the original OP’s statement on demographics/etc. There are definitely irrational periods of investing, like the “safe bets” of tulips in 1600 to the stock market right before th...
by bobsmith
Sat Mar 16, 2024 10:47 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

Are you saying stocks don't actually make more in the long run or are you saying that they do but it's just not worth the risk? I'm saying I don't know if they will for my long run, and I invest accordingly. Well, this conversation hasn't been in vain. I have come to more appreciate your perspective with the help of Portfolio Visualizer. I think I found an example that sort of shows our different perspectives. (this will bore you but it helps it sink in for me) AAs of... 100% stock, 80/20 and 50/50. I ran it as far back at it goes, 1972, then ended at 2007. 1. 100 stock - $78,477 2. 80/20 - $71,771 3. 50/50 - $60,515 So, over this time period, about 35 years, the ALL stocks beat 50/50 by 35.5%. That's nearly a lifetime of investing and to ...
by bobsmith
Sat Mar 16, 2024 10:02 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

botched post (again)
by bobsmith
Fri Mar 15, 2024 8:18 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

I believe you that bonds make up an important part of diversification itself, in concept, but I guess I'd have a better understanding and more faith in that if I could see it in real world history. The most striking example might be the 1929 crash followed by the Great Depression. Portfolio Visualizer doesn't go back that far, but there are plenty of charts and tables out there if you do a search. With stocks, I don't think it's controversial to say that, in the long run, you make more money. No guarantees, of course. With bonds you make less, usually. As a general rule, let me know if you don't think this is conventional wisdom. I think this is a popular viewpoint. But unfortunately, that viewpoint essentially dismisses the actual risk of...
by bobsmith
Fri Mar 15, 2024 2:34 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

I don't really get the whole "fall back" fund idea with regards to keeping cash or being afraid of stocks, although I used the metaphor "bucket". I can think of situations where it might matter, like those who insist on investing everything they've got, or those with a lot of debt they are paying off or other special situations, but it's never been an issue for me. I think if you have enough wealth, you can be less afraid of just selling a stock fund to get the money you need. Well, yes, the absolute best form of protection from market swings is to have so much money that you can invest all of it in the stock market and even if you lose 99% of it, you still have so much money that you can support your lifestyle. (Does W...
by bobsmith
Fri Mar 15, 2024 2:07 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

I guess I'm having a hard time accepting that this bond fund of AAA bonds LOST over 13% in 2022 and has had five years of negative returns over the last 15 years (including this year). 5 years? I go back to 2008 if you're saying 15 years (I know that's 16 but wanted to show 2008!) and I see 4 negative years, not 5: https://i.postimg.cc/qv5RcNjM/annual-returns.jpg source: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=3cbDTxHuueG9Od7ft8qUQt I was just engaging in an exercise of VBLX bashing, and I was counting this 2024, which, YTD is already -1.58%. So, including YTD 2024 and going back just 11 more years, you get 5 negative years (and only 4 years above 5%). Is that an unfair cherry picked time frame? Yep (click annuall...
by bobsmith
Fri Mar 15, 2024 1:46 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

There are inevitable changes coming to most all nations that will fundamentally change national ability to keep in place the economic models we've grown used to for several generations. I think we can all agree that that's probably true. (I would add climate change to the list of risk factors for radical economic change.) And we can probably also agree that no one really knows what the consequences will be. In the face of that uncertainty, how can a buy-and-hold investor possibly decide what to do? I agree on climate change, although I do think the markets now have some real awareness built in. Dramatic unpredictable weather probably isn't going to do any harm to the fundamentals of investing. Really all you can do us look at past market u...
by bobsmith
Fri Mar 15, 2024 1:04 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

For the purposes of long term buy and hold index investing, is Vanguard's Total Bond Market Fund (VBTLX) still a good choice in the portfolio despite the fact that it's had negative return in 5 of the last 15 years, including this year and 2023 where it dropped 13% ? If not (as at least one person has suggested), then please suggest a good alternative. This is the question raised by this thread that interests me most, particularly with regard to one possible alternative that you mentioned upthread: simply buying and holding individual bonds until maturity. Let's imagine that in 2018, you bought some 10 year bonds paying 2%, whereas someone else bought the same amount of BND. Your annual returns are roughly the same until the interest rates...
by bobsmith
Fri Mar 15, 2024 12:14 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Bonds aren't for smoothing out volatility, although they can do that, depending on the type of bonds - they're for making a known return over a particular period of time (and in the case of bond funds, a "more known" return than stock funds) . This is the best answer for why hold bond fund in a 3-fund portfolio (emphasis mine). But I was thinking that the important question might be WHEN or WHEN TO START to hold bonds/bond fund vs. why or how much. If you don't already have them as part of your portfolio when 2007 hits, then what questions are we asking? It's too late to buy them when stocks are down 50% for five years. I just decided to have them all the time. After my brief "why not 100% stocks?" period. After playing...
by bobsmith
Fri Mar 15, 2024 11:20 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

For the purposes of long term buy and hold index investing, is Vanguard's Total Bond Market Fund (VBTLX) still a good choice in the portfolio despite the fact that it's had negative return in 5 of the last 15 years, including this year and 2023 where it dropped 13% ? If not (as at least one person has suggested), then please suggest a good alternative. This is the question raised by this thread that interests me most, particularly with regard to one possible alternative that you mentioned upthread: simply buying and holding individual bonds until maturity. Let's imagine that in 2018, you bought some 10 year bonds paying 2%, whereas someone else bought the same amount of BND. Your annual returns are roughly the same until the interest rates...
by bobsmith
Fri Mar 15, 2024 10:21 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Hey Beensabu, Is it really true that a 50/50 AA for a non-retired person is NOT considered a conservative allocation? It's moderately conservative. Or at least, it used to be. Apparently it's less conservative that I thought as you and other posters have shown. But then, the way I happen to go about it wouldn't exactly be called conservative. :) I am aware that diversification is about risk management. Including fixed income in a portfolio is risk management. Including bonds along with stocks is diversification. Honestly, it really seems like we don't understand that much. The greatest appeal to me about the index investing strategy is that it just tries to take a little piece of everything and forget about all the speculation and just ride...
by bobsmith
Fri Mar 15, 2024 7:12 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Is it really true that a 50/50 AA for a non-retired person is NOT considered a conservative allocation? Even Vanguard's 2030 fund which assumes a retirement target of 2026-2030, holds less that 40% bonds. https://investor.vanguard.com/investment-products/mutual-funds/profile/vthrx There is no single authority that defines this, but it’s clear that the definition has changed in common usage over time. My suspicion is that the latest bull market has skewed the definitions towards owning more stock. In my mind a 50/50 portfolio is Moderate and a 20/80 Conservative. A 50/50 portfolio has been a standard recommendation for most Retirees (this was John Bogle’s recommendation among others). Here is what Investopedia says: https://www.investopedia...
by bobsmith
Thu Mar 14, 2024 5:20 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

mikejuss wrote: Thu Mar 14, 2024 9:52 am you're way overthinking this.
Point taken.
by bobsmith
Thu Mar 14, 2024 4:54 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

lol, I just wasted another hour typing a post and losing it. I should know better considering how long I've been posting here. @bobsmith Nothing to do with investing, but just a helpful tip I’ve used to get around the lost posts: Use a Word or other word prosessing tool to compose and then cut/paste. That way nothing is logged out or other sanfu’s. Yeah, I do actually know that but I was being foolish, and I did it twice on this thread. lol Important side note: I have been enjoying the conversation, and have VERY similar questions to what you've been asking. I'm appreciating yours, and everyone's, posts. Really? Maybe the others, but my redundant long winded repetitive narrative? You might want to check this link: https://www.verywellmind....
by bobsmith
Thu Mar 14, 2024 4:49 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

greenrebellion wrote: Thu Mar 14, 2024 1:44 pm
bobsmith wrote: Thu Mar 14, 2024 1:29 pm Well, thank you greenrebellion. I know I shooed you away earlier in the thread, but the fact is you have been helpful at insightful.
No problem, hopefully my latest response helped a bit even if you didn't find much value in my earlier posts.
Yeah, I wasn't communicating very well.

https://www.portfoliovisualizer.com/backtest-portfolio

Here is the link to the portfolio visualizer. Plug in different levels of fixed income vs stocks and see how much it impacts returns as well as volatility. If you find a stock fund and bond fund that have been around for decades, then the tool can show decades worth of history in the analysis.

Good luck whatever you decide!
I'm really liking that Portfolio Visualizer. Thanks again.
by bobsmith
Thu Mar 14, 2024 4:43 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

But apparently, it makes no sense to weight stock and bonds against the whole market because no non-retired person, except the most conservative risk intolerant investors, would advocate a 50/50 stock/bond ratio. I'm a non-retired person with a 50/50 stock/bond ratio. But I wouldn't call myself particularly conservative or risk intolerant, and I don't use the market cap weighting strategy. Is it really true that a 50/50 AA for a non-retired person is NOT considered a conservative allocation? Even Vanguard's 2030 fund which assumes a retirement target of 2026-2030, holds less that 40% bonds. https://investor.vanguard.com/investment-products/mutual-funds/profile/vthrx So, you and many others, seem to be insisting that bonds play a role in AA...
by bobsmith
Thu Mar 14, 2024 1:37 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

In fact, we have numerous examples where stocks and bonds moved together in the positive direction. I don't recall anybody complaining about that. Why folks thought that they couldn't both also go negative at the same time is truly a head scratcher to me. Regardless, they are a long term diversifier in that their long term correlation to stocks has been close to zero. In the medium/short term, though, anything is possible. Note, their ability to be seen as a diversifier depends somewhat on how you intend to use them. In what used to be called "total return" investing where bond funds are considered for their returns, their long term low correlation to stocks makes them an obvious diversifier. Another view, though, might be for th...
by bobsmith
Thu Mar 14, 2024 1:29 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

lol, I just wasted another hour typing a post and losing it. I should know better considering how long I've been posting here. You missed out on a nice thoughtful post. Now I'm gonna just do highlights. For the purposes of long term buy and hold index investing, is Vanguard's Total Bond Market Fund (VBTLX) still a good choice in the portfolio despite the fact that it's had negative return in 5 of the last 15 years, including this year and 2023 where it dropped 13% ? If not (as at least one person has suggested), then please suggest a good alternative. Yes - VBTLX remains a great option. You mention "underperformance" a few times, but not sure where that is coming from. It has perform as expected and remains a good option for the f...
by bobsmith
Thu Mar 14, 2024 8:56 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revisited

Hey folks, This has been a really long thread and I really want apologize for such a lousy OP that didn't do a good job explaining my situation or base knowledge or the criteria for my questions... if you could even find the questions in my rambling post. I'll know better for next time. The support and responses here from people who are just trying to help and inform has been great. To wrap up, here are a few specific questions that have come up in the thread that I'd like addressed if possible. For the purposes of long term buy and hold index investing, is Vanguard's Total Bond Market Fund (VBTLX) still a good choice in the portfolio despite the fact that it's had negative return in 5 of the last 15 years, including this year and 2023 wher...
by bobsmith
Thu Mar 14, 2024 8:23 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Hey beensabu, thanks for taking the time and bearing with me.. Ug, just spend an HOUR on a response, then lost it when I had to re-login. I hate it when that happens. It's made me a bit OCD about going ctrl+a ctrl+c periodically and before clicking one of the buttons lol. So, a lot of what you describe is basic index investing concepts. Again, I've been an index investor for decades so I know what mutual funds are and I understand why its better to hold many stocks rather than put all your eggs in one basket and why this is a good way to lower risk while keeping average gains high. Yup! Index investing basics, revisited. ;) Likewise, you, of course, understand what I mean about bonds being used to address the risk of volatility, but at the ...
by bobsmith
Thu Mar 14, 2024 7:31 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

It's my understanding that the whole point of long term index investing is to take advantage of the typical long term trend of the market to offer positive returns. So the idea is to diversify so you hold the "whole" market and to keep your costs as low as possible. There's no aim to try to beat the market, and you don't make changes based on swings in the market or your emotions. That's what I do. I'm a decades long buy and hold index investor using Vanguard with the usual suspects, VTSAX, VTIAX, VBTLX. In terms of allocation/diversification, the only thing I switched was my US to Intl stock ratio. I did this around the time when Vanguard did (with their Target Retirement/Lifetime funds). I believe it used to be 70/30 US/Int'l s...
by bobsmith
Thu Mar 14, 2024 7:12 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

For example, if I own 60% US stocks to 40% International stocks, part of what's informing my decision would simply be what percentage of US and non-US makes up the world market itself. Should China, India, and Germany suddenly disappear off the face of the earth, that would necessitate me changing my allocation itself simply because, by proportion, the US would suddenly make up more of the world market. This would seem to violate the idea of buy and hold because simply buying and holding wouldn't be enough to keep the correct the diversification in a situation in which the non-US market suddenly got smaller, unless perhaps you just let your allocation drift and never reset it, but that also isn't what I understand to be long term buy and h...
by bobsmith
Wed Mar 13, 2024 8:02 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

I don't think the nature of my questions can be summed up that way. I'm not trying to change from being a long term index investor. I'm just trying to make sure I'm doing it right. If it was clear from shifting demographics that the US had a clear advantage in the future, it is irrelevant as you can't profit or improve your portfolio from that if it unfolds exactly as the market expects. That is because the market will immediately drive the price of US stocks up to the point that it reflects the probability of these shifts happening. When you choose to go down that path, then the only way it can be advantageous to you is if you are betting the market is pricing it wrong. That's not passive investing. The market portfolio, or as close as we...
by bobsmith
Wed Mar 13, 2024 7:49 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

In 2020, a backtesting review of nominal bond performance, especially LTTs, over the prior 4 decades would revealed not only robust consistent real returns but better risk adjusted returns even than US equity over that period. No one in 2020 argued against bonds especially LTT which were at that time declared the safest asset that you could hold. The Forum posts were dominated by bond lovers, especially LTT. There was in fact at the time a massive bubble in the bond market especially LTT brought about by 4 decades of declining inflation and declining rates. Like most bubbles it was invisible to investors at the time. They had been riding happily on the bond gravy train for 4 decades and it's always hard to depart from winners. Then the bub...
by bobsmith
Wed Mar 13, 2024 7:40 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Thanks for your insights and observations. My focus is on your bond question because I hold the same fund (I also hold VFIAX and VTMGX for the equity portion of my 3-fund). For reference since you asked for some baseline information, at 50 years of age, I chose "Age-20" for bond allocation and Int'l = 20% of equity, so US = 56%, Int'l = 14%, Bond = 30%. I manually glidepath each year to what I believe will be a permanent 48/12/40 at retirement = 60 years of age. In the interim, I allow the equity to drift in the 60-70% range before rebalancing at year end if absolute variance > 5% and at mid-year if necessary. Since I am still accumulating, I can elect at anytime to shift my contributions to try to stay within the 60-70% without ...
by bobsmith
Wed Mar 13, 2024 7:08 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

tibbitts wrote: Wed Mar 13, 2024 5:34 pm
Yes, a few minutes ago. I just clicked on it and it worked.

I don't know what to tell you. Can we get a shrug emoji?
by bobsmith
Wed Mar 13, 2024 7:06 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Again, though, this source seems to suggest that the importance of bonds seems to primarily be about risk tolerance and planning for retirement or other goals for wealth. The ultimate point of diversification is actually risk management. A stock index fund vs a handful of individual stocks (i.e. increased number of holdings)? That addresses idiosyncratic risk. Fixed income along with stocks (i.e. multiple asset classes)? That addresses systemic risk. Risk is not just about an individual's perception of their ability to tolerate volatility. It is about one end (the low end) of the range of potential long-term outcomes falling outside what you need for "success". With a single stock, the low end of that range is going to zero on yo...
by bobsmith
Wed Mar 13, 2024 6:47 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

botched post, sorry
by bobsmith
Wed Mar 13, 2024 5:28 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

tibbitts wrote: Wed Mar 13, 2024 4:49 pm
bobsmith wrote: Wed Mar 13, 2024 3:32 pm
tibbitts wrote: Wed Mar 13, 2024 1:03 pm
So I don't know whether anyone has suggested you read McQ's paper discussed in the post "Stocks for the Long Run? Sometimes yes. Sometimes no."? The post is viewtopic.php?t=416861
Shoot, it's behind a paywall.
McQ's link (the second sentence in the entire thread), provided for bypassing the paywall, isn't working?
No, were you able to get it to work?
by bobsmith
Wed Mar 13, 2024 3:32 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

tibbitts wrote: Wed Mar 13, 2024 1:03 pm
So I don't know whether anyone has suggested you read McQ's paper discussed in the post "Stocks for the Long Run? Sometimes yes. Sometimes no."? The post is viewtopic.php?t=416861
Shoot, it's behind a paywall.
by bobsmith
Wed Mar 13, 2024 2:35 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

I don't think the nature of my questions can be summed up that way. I'm not trying to change from being a long term index investor. I'm just trying to make sure I'm doing it right. If it was clear from shifting demographics that the US had a clear advantage in the future, it is irrelevant as you can't profit or improve your portfolio from that if it unfolds exactly as the market expects. That is because the market will immediately drive the price of US stocks up to the point that it reflects the probability of these shifts happening. When you choose to go down that path, then the only way it can be advantageous to you is if you are betting the market is pricing it wrong. That's not passive investing. The market portfolio, or as close as we...
by bobsmith
Wed Mar 13, 2024 2:25 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

Ultimately you either believe "this time is different" or you don't. And if you do believe this time is different then you should just invest according to how you believe the future will play out. I don't think the nature of my questions can be summed up that way. I'm not trying to change from being a long term index investor. I'm just trying to make sure I'm doing it right. The quote was more about the responses to the "long run" thread I referenced than this one. There's always an argument about how much and whether history is relevant. I get what you're saying and I appreciate your responses. I just wanted to be clear that I don't think I know or am able to know if "this time will be different" although I w...
by bobsmith
Wed Mar 13, 2024 2:11 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

I guess I'm having a hard time accepting that this bond fund of AAA bonds LOST over 13% in 2022 and has had five years of negative returns over the last 15 years (including this year). As indicated by Morningstar, US government bonds are the largest portion, and they're rated AA. According to Portfolio Visualizer, total bond had a CAGR above 8% across 2019-2020, and much of that was rates lowering across the period. The entire government yield curve was under 1.7% at the end of 2020, including good portions under 0.5%. Increasing rates would have a reverse effect. It was basically a given that if short-term rates were raised quickly to fight inflation that bonds could potentially end up losing value. For whatever reason, even CFA education...
by bobsmith
Wed Mar 13, 2024 1:41 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

It's always generous of people to sincerely offer help as you're clearly doing. However, no offense, but your many responses show you haven't bothered to read my OP or other responses enough to know the context of my questions or the limitations I'm trying to put on the discussion (i.e. not considering retirement age, not realizing I've already accounted for concerns you are raising, etc.) Honestly many of us don't read every post in every thread when we try to reply to the original questions. [/quote] Very true and very understandable. Meh.. I don't want to say more. Anyone can scroll up and see the progression if they want, and I've no doubt everyone posting on this thread is doing it out of a sincere effort to be of help. So I don't kno...
by bobsmith
Wed Mar 13, 2024 12:55 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

greenrebellion wrote: Wed Mar 13, 2024 12:10 pm But maybe someone else can help you better than I can.
Let's go with that. Thanks for your sincere desire to assist. Have a good one! :happy
by bobsmith
Wed Mar 13, 2024 12:52 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

... I guess I'm having a hard time accepting that this bond fund of AAA bonds LOST over 13% in 2022 and has had five years of negative returns over the last 15 years (including this year). And I'm still struggling to understand my primary question which is whether or not bonds are needed in terms of "diversification" rather than as a means to address risk tolerance. VBTLX Performance Before 8/1/2020 VBTLX Performance After 8/1/2020 Clearly, VBTLX performed well for nearly 20 years after its inception but has performed poorly over the last 3½ years. This is an unambiguous signal to abandon your investment plan's asset allocation and dump VBTLX. :beer Okay, but has VBTLX performed poorly simply as a reflection of what the total bon...
by bobsmith
Wed Mar 13, 2024 12:05 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

And I'm still struggling to understand my primary question which is whether or not bonds are needed in terms of "diversification" rather than as a means to address risk tolerance. I guess the easiest way to think about this is are you okay if stocks drop 70% leaving your portfolio at 30% of what it is today. There was a recent forum thread about going 100% stocks once financially independent. If you have so much money that a 70% drop in stocks is no problem AND you have no risk tolerance issues, then sure, go 100% stocks. But if you are like most of us and a 70% drop would wipe out our retirement picture, than bonds are quite important for diversification. Again, you are talking about "bonds" in terms of risk tolerance ...
by bobsmith
Wed Mar 13, 2024 11:52 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

My question is, how important are bonds in terms of having a DIVERSIFIED allocation? Pretty important. Never Bear Too Much Or Too Little Risk [A]s we age, we usually have (1) more wealth to protect, (2) less time to recoup severe losses, (3) greater need for income, and (4) perhaps an increased nervousness as markets jump around. All four of these factors suggest more bonds as we age. — Common Sense on Mutual Funds, John Bogle Thanks. Good link. Again, though, this source seems to suggest that the importance of bonds seems to primarily be about risk tolerance and planning for retirement or other goals for wealth. This is the only quote I found regarding diversification: Over time, stock prices roughly follow the trend of the economy, which...
by bobsmith
Wed Mar 13, 2024 11:31 am
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 133
Views: 9525

Re: Index Investing Basics - Revsited

So, in particular, I have a question about VBTLX, Vanguard's index bond fund. Has it been keeping up with the overall market on bonds? Just from my own observations it seems like it's been under performing. In particular, I thought the conventional wisdom was bonds act like a counter to stocks such that when stocks are bearish, bonds are bullish and vice verse. That is not true. When stocks are down, sometimes bonds are up and sometimes bonds are down. So bonds sometimes make returns better, and we hope that generally they do not make returns worse. I'm not entirely sure which of my points is being labeled untrue here. The "conventional wisdom." But isn't the long term assumption that bonds make returns worse? The trade off is le...