Vanguard Total Stock Market Index

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aristotelian
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Re: Vanguard Total Stock Market Index

Postby aristotelian » Mon Jul 17, 2017 12:03 am

reriodan wrote:We need someone smart like nisiprius to come in here and own this guy. Should I go get a goat or are there other ways to summon him? :P


jbolden is either a genius or a lunatic. I am going to sit back and watch this thread play out.

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aegis965
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Re: Vanguard Total Stock Market Index

Postby aegis965 » Mon Jul 17, 2017 12:24 am

aristotelian wrote:
reriodan wrote:We need someone smart like nisiprius to come in here and own this guy. Should I go get a goat or are there other ways to summon him? :P


jbolden is either a genius or a lunatic. I am going to sit back and watch this thread play out.


Where have all the quants/factor people on this board gone to? I can imagine Larry or Robert T making similar comments. When did this become lunatic?
I came, I saw, I purchased at a low multiple.

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patrick013
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Re: Vanguard Total Stock Market Index

Postby patrick013 » Mon Jul 17, 2017 11:08 am

jbolden1517 wrote:
The simple answer is I did slightly better than something like 50% TSM, 50% Total International with much less risk. However the portfolio for anyone but me would likely have more risk though possibly not as much as the 3 fund at 50/50/0.



I keep Dev-Intl and EM to about 5% apiece mostly because I think
it's a casino plus I hate the lack of info, all the info is from 2nd and 3rd
party sources and their evaluations, sales pitches, and whatever.

Ever consider VPU or XLU both utility index funds. Decent dividends
and a few percent price gains, plus the lowest beta's I can see. You
know Walmart can close 100 stores and a developed market can have
super low interest rates but utility still plugs along rather stable and
has that diversifying effect everyone desires.
age in bonds, buy-and-hold, 10 year business cycle

CantPassAgain
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Re: Vanguard Total Stock Market Index

Postby CantPassAgain » Mon Jul 17, 2017 1:50 pm

aegis965 wrote:
aristotelian wrote:
reriodan wrote:We need someone smart like nisiprius to come in here and own this guy. Should I go get a goat or are there other ways to summon him? :P


jbolden is either a genius or a lunatic. I am going to sit back and watch this thread play out.


Where have all the quants/factor people on this board gone to? I can imagine Larry or Robert T making similar comments. When did this become lunatic?


Really, seems like the opposite...lots of johnny come latelys with all kinds of nutty ideas, so much so that it seems like the message is kind of getting lost. The place is called bogleheads, after all. This is supposed to be a place where the ordinary shmo can learn how to get a fair shake....keep costs low, use index funds, save more, never bear to much or too little risk, etc. What's the regular guy to make of jboldens posts, especially a young, inexperienced person like the OP? I have to imagine he didn't do him any favors.

aristotelian
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Re: Vanguard Total Stock Market Index

Postby aristotelian » Mon Jul 17, 2017 2:09 pm

aegis965 wrote:Where have all the quants/factor people on this board gone to? I can imagine Larry or Robert T making similar comments. When did this become lunatic?


It's not so much the quant/factor approach. I can read Swedroe's books and blogs and make sense of what he is saying, even if I disagree sometimes. I cannot make head or tail of jbolden, and yet he is writing as if he is both completely sure of himself, and stating what should be obvious to the rest of us.

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Re: Vanguard Total Stock Market Index

Postby Dottie57 » Mon Jul 17, 2017 2:45 pm

aristotelian wrote:
reriodan wrote:We need someone smart like nisiprius to come in here and own this guy. Should I go get a goat or are there other ways to summon him? :P


jbolden is either a genius or a lunatic. I am going to sit back and watch this thread play out.



Me too. i understand part of what is said about value stocks, but I think they sometimes do well and sometimes don't. Jbolden also uses language about being able to decipher what will do well and what won't. I don't have that ability.

So I think I will stick with my simple portfolio and maybe after more research tilt a bit to small cap. But as a mostly know nothing, I have done very well by saving the max in 401k. Saving in order to invest has been the key for me.

aristotelian
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Re: Vanguard Total Stock Market Index

Postby aristotelian » Mon Jul 17, 2017 2:56 pm

Dottie57 wrote:Me too. i understand part of what is said about value stocks, but I think they sometimes do well and sometimes don't. Jbolden also uses language about being able to decipher what will do well and what won't. I don't have that ability.

So I think I will stick with my simple portfolio and maybe after more research tilt a bit to small cap. But as a mostly know nothing, I have done very well by saving the max in 401k. Saving in order to invest has been the key for me.


Exactly. I would argue that time is the ultimate diversifier, much more so than picking different sectors or funds. If you hold the total stock market over a long period of time under numerous conditions and circumstances, history says you are bound to get good overall returns. There is no need to make 10% every year if your timeframe is 20 years. As your timeframe gets shorter, your best hedge against the risk of stocks is not this or that stock fund, but rather bonds.

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Re: Vanguard Total Stock Market Index

Postby Miriam2 » Mon Jul 17, 2017 4:52 pm

jbolden1517 wrote:
Miriam2 wrote: If our accounts are at Vanguard and our 401k's are with T. Rowe Price, what would be "a safe fund to invest aggressively in as our core stock holding for 30+ years"??
Do you mean funds like Windsor II, Primecap, Capital Appreciation? The OP is interested in Vanguard.

Vanguard has lots of good funds which stay away from the worst of the market: VEIPX (non taxable), VHDYX, VVIAX, VWNDX, VWNFX, VCVLX, VASVX, VEVFX, VSTCX, VIHAX, VTRIX, VGSLX as pure equity plays plus things like VWELX as a more mixed fund. TSM ain't there only fund.

Thank you for your ideas.

Do you really mean that one should use VHDYX (Vg High Dividend Yield), VWNDX (Vg Windsor), VEVFX (Vg Explorer Value), VSTCX (Vg Strategic Small Cap Equity), and so on, as "a safe fund to invest aggressively in as a core stock holding for 30+ years" instead of Vg Total Stock Market?

The key words are "core stock holding" - as the core stock holding of our portfolio? To me, "core stock holding" means the largest percentage of one's equity portfolio around which one can add a smaller percentage of other types of equity funds to capture more of a certain type of equity.

Perhaps I misunderstood you, but the OP asked: "I was looking at funds and technically since it (Vg Total Stock Market Index Fund) is diverse in stocks would it be a reasonably safe fund to invest agressively for the next 30+ years?"

Would you really suggest that OP use Vg Explorer or Vg Strategic Small Cap Equity - not Total Stock Market - as his core stock holding as a "safer" fund for 30+ years?

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 4:54 pm

Miriam2 wrote:Do you really mean that one should use VHDYX (Vg High Dividend Yield), VWNDX (Vg Windsor), VEVFX (Vg Explorer Value), VSTCX (Vg Strategic Small Cap Equity), and so on, as "a safe fund to invest aggressively in as a core stock holding for 30+ years" instead of Vg Total Stock Market?

The key words are "core stock holding" - as the core stock holding of our portfolio? To me, "core stock holding" means the largest percentage of one's equity portfolio around which one can add a smaller percentage of other types of equity funds to capture more of a certain type of equity.

Perhaps I misunderstood you, but the OP asked: "I was looking at funds and technically since it (Vg Total Stock Market Index Fund) is diverse in stocks would it be a reasonably safe fund to invest agressively for the next 30+ years?" Would you really suggest that OP use Vg Explorer or Vg Strategic Small Cap Equity - not Total Stock Market - as his core stock holding as a "safer" fund for 30+ years?


Yes that is what I mean though I'd also include international value in the core of the mix. Large cap growth (or funds heavily weighted towards it like TSM) is fine as a diversifier but shouldn't be the core.

jbolden1517
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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 5:03 pm

patrick013 wrote:Ever consider VPU or XLU both utility index funds. Decent dividends
and a few percent price gains, plus the lowest beta's I can see. You
know Walmart can close 100 stores and a developed market can have
super low interest rates but utility still plugs along rather stable and
has that diversifying effect everyone desires.


I think those are great funds if you want to cap weight. I don't like the biggest holdings like Nextera and Duke so I'm happier getting the exposure via. non cap weighted, but if you want to overweight utilities you might be overpaying a bit but those are stocks you can hold comfortably.

Miriam2
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Re: Vanguard Total Stock Market Index

Postby Miriam2 » Mon Jul 17, 2017 5:03 pm

jbolden1517 wrote:Yes that is what I mean though I'd also include international value in the core of the mix. Large cap growth (or funds heavily weighted towards it like TSM) is fine as a diversifier but shouldn't be the core.

I don't understand. You would have TSM as the core fund and build others around it? Or you would use a large cap growth fund (I assume like Windsor) as the core fund and build TSM around it?

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 5:17 pm

aristotelian wrote:Exactly. I would argue that time is the ultimate diversifier, much more so than picking different sectors or funds. If you hold the total stock market over a long period of time under numerous conditions and circumstances, history says you are bound to get good overall returns.


I think you may want to look a little more closely at history. History does not teach that individual country equity is perfectly safe. History is replete with all sorts of previously safe assets going into bears that they don't recover from or that last far longer than a few decades. Moreover the worse the quality of an investment the longer it takes to recover. What you buy does matter.

That being said, I think TSM is high but not horrifically overvalued. I think float manipulation bleed on high P/E SP500 stocks is a threat and likely a bleed of about 150 basis points per year. I think value and small are likely to outperform as usual and outperform even more than usual given the bleed. I do think that people who are worried about 20 basis points of ER shouldn't be so blasé about 400 basis points / yr bleeding off sideways. But while that will hurt, TSM is very likely going to still produce so-so or better returns.

The same sort of advice I'd give someone in mutual funds holding good stuff but with an ER of 200 basis points.
Last edited by jbolden1517 on Mon Jul 17, 2017 5:26 pm, edited 1 time in total.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 5:26 pm

Miriam2 wrote:
jbolden1517 wrote:Yes that is what I mean though I'd also include international value in the core of the mix. Large cap growth (or funds heavily weighted towards it like TSM) is fine as a diversifier but shouldn't be the core.

I don't understand. You would have TSM as the core fund and build others around it? Or you would use a large cap growth fund (I assume like Windsor) as the core fund and build TSM around it?


I assume you meant large cap value. I'm actually advocating tilting small as well as value. Windsor is large cap value mixed with bonds. I think Windsor while not an ideal core is a fine core. It will mostly keep you out of the bad stuff. Around Windsor you could hold something like 5% VMGRX /VMGMX (though other companies than Vanguard are better at aggressive growth) as a satellite. Or heck if you like and really want TSM, the bleed on 10% TSM isn't going to do the kind of harm that 50% TSM would.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 5:30 pm

CantPassAgain wrote:Really, seems like the opposite...lots of johnny come latelys with all kinds of nutty ideas, so much so that it seems like the message is kind of getting lost. The place is called bogleheads, after all. This is supposed to be a place where the ordinary shmo can learn how to get a fair shake....keep costs low, use index funds, save more, never bear to much or too little risk, etc. What's the regular guy to make of jboldens posts, especially a young, inexperienced person like the OP? I have to imagine he didn't do him any favors.


The regular Joe can do SIP which will put him in low cost passive funds without needing to understand anything. The reasons that TSM is bad are complicated. A reasonable (though far less than ideal) what to do about it is not.

Now I'm going to counter editorialize. Years ago, I was a pretty regular participant on the grandfather and father/mother boards of this board (though until now never here). This discussion is far less complex than what people had to debate in the 1990s when the vehicles were far worse, the theory of investing less mature and the vehicles for investing higher cost and less accurate. I don't think you should be taking pride in the fact that: basic portfolio theory and quantitative factors are considered novel topics.

I'm loving the fact that active traders in today's world are value investors. The generation of young investors today coming from Tradeking, OptionsHouse, Tastytrade... who want a simpler portfolio are going to be coming from a place where they are used to splicing assets into constituent risks and pricing those risks. If you are going to be able to defend TSM to millennials: how much I am I getting paid for holding market volatility, how much am I paying for the dividend yield, which riskless rate are you using in your TSM pricing models?

Your answer to that is "don't worry about it. Just throw your money into this big messy TSM pile of complex risks and everything will work out fine." I suspect they are going to ask you, "why shouldn't I worry about it?" And your answer will be what? That Jack Bogle said so?

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Taylor Larimore
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Re: Vanguard Total Stock Market Index

Postby Taylor Larimore » Mon Jul 17, 2017 7:30 pm

And your answer will be what? That Jack Bogle said so?

jbolden1517:

I wish I had listened to Jack Bogle earlier. I would be far richer today.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

jbolden1517
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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Mon Jul 17, 2017 8:26 pm

Taylor Larimore wrote:
And your answer will be what? That Jack Bogle said so?

jbolden1517:

I wish I had listened to Jack Bogle earlier. I would be far richer today.

Best wishes.
Taylor


I wish I'd listened to Steve Jobs. I'd be extraordinarily rich. :) But I do understand the point lots of people lost a lot of money in fees. Vanguard has done a lot to make investors understand how much fees matter. They also are one of the few mutual fund companies that I believe always acts in what they perceive as the best interests of their shareholders. They may be wrong but they are never slimy.

Dottie57
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Re: Vanguard Total Stock Market Index

Postby Dottie57 » Mon Jul 17, 2017 8:49 pm

aristotelian wrote:
Dottie57 wrote:Me too. i understand part of what is said about value stocks, but I think they sometimes do well and sometimes don't. Jbolden also uses language about being able to decipher what will do well and what won't. I don't have that ability.

So I think I will stick with my simple portfolio and maybe after more research tilt a bit to small cap. But as a mostly know nothing, I have done very well by saving the max in 401k. Saving in order to invest has been the key for me.


Exactly. I would argue that time is the ultimate diversifier, much more so than picking different sectors or funds. If you hold the total stock market over a long period of time under numerous conditions and circumstances, history says you are bound to get good overall returns. There is no need to make 10% every year if your timeframe is 20 years. As your timeframe gets shorter, your best hedge against the risk of stocks is not this or that stock fund, but rather bonds.


I agree about fixed income - 50% of my portfolio. Retirement within 5 years.

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Re: Vanguard Total Stock Market Index

Postby CantPassAgain » Tue Jul 18, 2017 11:30 am

jbolden1517 wrote:
CantPassAgain wrote:The generation of young investors today coming from Tradeking, OptionsHouse, Tastytrade... who want a simpler portfolio are going to be coming from a place where they are used to splicing assets into constituent risks and pricing those risks. If you are going to be able to defend TSM to millennials: how much I am I getting paid for holding market volatility, how much am I paying for the dividend yield, which riskless rate are you using in your TSM pricing models?

Your answer to that is "don't worry about it. Just throw your money into this big messy TSM pile of complex risks and everything will work out fine." I suspect they are going to ask you, "why shouldn't I worry about it?" And your answer will be what? That Jack Bogle said so?


Well, to start with most Millennials (along with the rest of the population) aren't going to even be asking those questions and indeed wouldn't even understand the questions if they were asked. Most people are focused on their families/careers and just want to put money away so they can retire somewhat comfortably some day. They have no intention of becoming the type of financial wizard that you fancy yourself to be.

Consider your audience. Have you read the OPs other posts? You steer him away from TSM because it is so "high" and point at things like the Vanguard Explorer fund as a core holding??? That's nuts! How about "yes, TSM is a good fund but realize that stocks are risky. You probably want to mitigate that risk by also holding a quality intermediate term bond fund or other fixed income instrument (CDs/stable value funds/etc). Read the getting started section of the Wiki. Watch the videos."

Most people need training wheels when learning to ride a bike. Your method is to hand them a 1,000 page instruction book written in a different language, and then push them off of a cliff.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Tue Jul 18, 2017 5:05 pm

CantPassAgain wrote:
jbolden1517 wrote:The generation of young investors today coming from Tradeking, OptionsHouse, Tastytrade... who want a simpler portfolio are going to be coming from a place where they are used to splicing assets into constituent risks and pricing those risks. If you are going to be able to defend TSM to millennials: how much I am I getting paid for holding market volatility, how much am I paying for the dividend yield, which riskless rate are you using in your TSM pricing models?


Well, to start with most Millennials (along with the rest of the population) aren't going to even be asking those questions and indeed wouldn't even understand the questions if they were asked. Most people are focused on their families/careers and just want to put money away so they can retire somewhat comfortably some day. They have no intention of becoming the type of financial wizard that you fancy yourself to be.


I didn't say most Millennials. I was quite specific the ones who are getting a financial education today.
CantPassAgain wrote:Consider your audience. Have you read the OPs other posts? You steer him away from TSM because it is so "high" and point at things like the Vanguard Explorer fund as a core holding??? That's nuts!


I most certainly did nothing of the kind. I mentioned (I did not advocate) Vanguard Explorer as a satellite not a core after explaining the difference between satellites and core repeatedly. Mostly incidentally in the context of explaining what sorts of funds Vanguard offers that could act as satellites for Vanguard's value offering.

CantPassAgain wrote: How about "yes, TSM is a good fund but realize that stocks are risky.


Because, as I've said repeatedly, I don't think TSM is a good fund. I don't think the 3 fund portfolio is a good idea. And I think there are far easier and far better alternatives available at both a similar level of cost and complexity, like SIP.

CantPassAgain wrote: You probably want to mitigate that risk by also holding a quality intermediate term bond fund or other fixed income instrument (CDs/stable value funds/etc).


Because I don't think those things mitigate risk very much. What they do mostly is dilute risk, which is not the same thing at all. I'm disagreeing with your content being true. For someone who wants to start investing and actually wants a "why" the distinction between mitigating risk and diluting risk is the sort of distinction they should understand.

CantPassAgain wrote: Most people need training wheels when learning to ride a bike. Your method is to hand them a 1,000 page instruction book written in a different language, and then push them off of a cliff.


Nonsense. I've advocated SIP for people who don't want to learn. That's even easier than the 3 fund portfolio. For people who do want to learn I've explained things. For people who want to argue though, then the complexity goes up.

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Taylor Larimore
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Vanguard Total Stock Market Index Fund?

Postby Taylor Larimore » Tue Jul 18, 2017 5:50 pm

jbolden1517:

Welcome to the Bogleheads Forum. 106 posts in your first 9 days may set a record.

Perhaps you will tell us something about your background (assuming you are not a troll).
jbolden1517 wrote:As I've said repeatedly, I don't think TSM is a good fund.

Your quote is very unusual. I've never heard anyone else say that TSM is not a good fund. Morningstar gives it 4-Star and GOLD analyst ratings. It may not be the best fund, but it is my favorite and the favorite of many experts:

Baer & Ginsler study: "The returns of actively managed funds were 20 to 25% more volatile than the broad market."

Christine Benz, Morningstar Director of Personal Finance: "The no-brainer holdings if you have taxable accounts are broad-market index funds."

Bill Bernstein: "If you own VTSMX with a bit of foreign and REIT, mixed with your bonds, you're most of the way there."

Jack Bogle: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk. -- In my view, owning the market and holding it forever is the ultimate strategy for winners." --

Peter Brimlow, former senior editor of Forbes: "It's extremely difficult to beat the market."

Scott Burns, columnist, author: "The odd are really, really poor than any of us will do better than a low-cost broad index fund."

Andrew Clarke, co-author of Wealth of Experience: "If your stock portfoliio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

John Cochrane, President American Finance Association: "The market in aggregate always gets the allocation of capital right."

Jonathan Clements, author and Wall Street Journal columnist: "If you want a surefire strategy for outpacing most other U.S. stock investors, simply shovel money into an index fund that tracks a broad U.S. market index such as the Wilshire 5000 or the Russell 3000."

Jim Dahle, adviser and author of The White Coat Investor: When interviewing potential advisers, one of the first questions I would ask is: “Can you beat the market yourself or choose mutual fund managers who can?” If the answer is "yes", stand up and walk out."

Dalbar Research: "In 2014, the average investor in a stock mutual fund underperformed the S&P 500 by a margin of 8.19 percent. Fixed-income investors underperformed the Barclays Aggregate Bond Index by a margin of 4.81 percent."

Charles Ellis, author of "The Loser's Game": "Most of the managers and clients who insist on trying to beat the market, either on their own or with professional managers, will be disappointed by the results. It is a loser's game."

Edesess . Tsui . Fabbri . Peacock, authors of The Three Simple Rules of Investing: "The end results of the theories of Nobel Laureates in finance is that the most efficient portfolio is one that mirrors the whole market, a total market index fund."

Prof. Eugene Fama, Nobel Laureate: " For most people, the market portfolio is the most sensible decision."

Paul Farrell, author of The Lazy Person's Guide to Investing: "The market is totally random, irrational, and unpredictable. And it loves humbling the mighty. Try to beat it and you'll lose money."

Rick Ferri, advisor and author of many financial books: "When you are finished choosing a bond index fund, a total U.S. stock market index fund, and a broad international index fund, you will have a very simple, yet complete portfolio."

Bob French, CFA, McLean’s Director of Investment Analysis: "You can’t beat the market. It’s basically impossible to guess which company is going to be the next Apple or Google, or even which way the market will
go. So don’t try."

Steven Goldberg, Kiplinger magazine columnist: "You simply have no reason not to invest in index funds—funds that track broad market indexes rather than try to beat them."

Graham/Zweig, authors: "The single best choice for a lifelong holding is a total stock-market index fund."

Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

Mark Hebner, author of Mutual funds: "Efficient markets have no trends, so any speculation using trading systems or active investment strategies, such as stock, time, manager, or style selection, will only detract from future market returns."

Sheldon Jacobs who wrote the first book on no-load fund investing: "The best index fund for almost everyone is the Total Stock Market Index Fund.--The fund can only go wrong if the market goes down and never comes back again, which is not going to happen."

SpencerJakab, author of Heads I Win, Tails I Win: "The typical individual investor would have a nest egg at least twice as large if they simply tracked the market."

Christoper Jones, author of The Intelligent Portfolio and CFO of Financial Engines: "Standard financial economic theory dictates that the market portfolio is efficient and that it has the highest expected return of any portfolio for that level of volatility."

Darrow Kirkpatrick, author of Retiring Sooner: "Nobody can predict the future or outperform the market over the long haul."

Lawrence Kudlow, CNBC: "I like the concept of the Wilshire 5000, which essentially gives you a piece of the rock of all actively traded companies."

Prof. Burton Malkiel, author of the classic Random Walk Down Wall Street: "Buying and holding a broad-based index fund is still the only game in town."

Harry Markowitz, Nobel Laureate: "A foolish attempt to beat the market and get rich quickly will make one's broker rich and oneself much less so."

Moshe A Milevsky, author of The Probability of Fortune: "I am somewhat skeptical about anyone's ability to consistently beat the market."

Bill Miller, famed fund manager: "With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me."

Merton Miller, Nobel Laureate: "Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't."

"Morningstar (10-19-2012) named Vanguard's Total Stock Market Index Fund: "Our favorate U.S. Equity ETF."

Motley Fools: "Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index."

Charles Munger, Vice-Chairman Berkshire Hathaway: "Few in the universe exceed the market returns (on a regular basis). It's like finding a needle in a haystack."

John Norstad, Northwestern University: "Total Stock Market is efficient, in the sense that no other US stock portfolio can be more efficient than TSM (have lower risk and higher expected return)."

Professor Terrance Odean, former editor of The Review of Financial Studies: "I wish I had bought an S&P 500 index fund (or all market equity fund had one been available) 30 years ago."

Quartz news: "As always, in investing it generally pays in the long run to opt for broad-based, low-cost index funds. Anything else is likely a money-losing gimmick."

Pat Regnier, former Morningstar analyst: "We should just forget about choosing fund managers and settle for index funds to mimic the market."

Jim Rogers, author and co-founder of the Quantum Fund: "Academic studies have shown repeatedly that most people do not beat the market over any long period of time."

Allan Roth, author and financial columnist for AARP: "My advice is to own the market rather than try to outsmart it."

Ron Ross, author of The Unbeatable Market: "Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."

Paul Samuelson, Nobel Laureate: "The most efficient way to diversify a stock portfolio is with a low-fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios."

Gus Sauter, retired Vanguard Chief Investment Officer: "There is one, and only one investment that is not active -- a total market portfolio–one that provides the market beta. Everything else is active."

Bill Schultheis, author of The Coffeehouse Investor: The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market."

Charles Schwab: "Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing."

Chandan Sengupta, author of The Only Proven Road to Investment Success: "Use a low-cost, broad-based index fund to passively invest in a little bit of a large number of stocks.

Jeremy Siegel, author of Stocks for the Long Run: "For most of us, trying to beat the market leads to disastrous results."

Ben Stein, author and economist: "Scholarly work by Burton Malkiel, Eugene Fama and others has proved that it is the rare investor indeed who can outperform the overall market."\

Stein & DeMuth, authors of Yes, You Can Get A Financial Life!: "Buying and holding a few broad market index funds is perhaps the most important move ordinary investors can make to supercharge their portfolios."

"Robert Stovall, investment manager: It's just not true that you can't beat the market. Every year about one-third do it. Of course, each year it is a different group."

Larry Swedroe, author of many investment books: "Over the last 75-years, investors who simply invested passively in the total U.S. stock Market would have doubled their investment approximately every seven years."

Peter D. Teresa, M* Sr. Analyst: My recommendation: a fund that indexes the entire market, such as Vanguard Total Stock Market Index."

Richard Thaler, 2015 President of the American Economic Association: "It is not easy to beat the market, and most people don't."

Walter Updegrave, Editor of Real Deal Retirement: "If you stick to broadly diversified stock and bond index funds, you can avoid the whole fund-picking racket, and fare much better than investors who are constantly seeking out hot funds."

Garland Whizzer: "Financial graveyards are getting more and more full of those who try unsuccessfully to beat the market."

Jason Zweig, author and Wall Street Journal columnist: "I think a total stock market index fund is not only the simplest, but the very best core investment for most people.

Best wishes.
Taylor
Last edited by Taylor Larimore on Tue Jul 18, 2017 7:51 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle

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reriodan
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Re: Vanguard Total Stock Market Index

Postby reriodan » Tue Jul 18, 2017 6:07 pm

Why do I get the sneaking suspicion that jbolden1517 sells whole life insurance?

CantPassAgain
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Re: Vanguard Total Stock Market Index

Postby CantPassAgain » Tue Jul 18, 2017 6:34 pm

jbolden1517 wrote:Because I don't think those things mitigate risk very much. What they do mostly is dilute risk, which is not the same thing at all. I'm disagreeing with your content being true. For someone who wants to start investing and actually wants a "why" the distinction between mitigating risk and diluting risk is the sort of distinction they should understand.


I dunno, I'm just a regular guy who likes to go by the commonly understood definitions of English words. Mitigate seems like just as good of a word as dilute in this context. But then again, I am no investment genius.

I am always willing to learn, so out of curiosity I just did a Google search for the phrase "diluting risk." The first search result is:

"Did you mean: dilution risk." The phrase "diluting risk" does not appear at all in any of the other first page search results.

In contrast, a search using the phrase "mitigating risk" results in that exact phrase being used in every search result of the first page.

I did learn a little bit about "predation risk dilution" by searching "dilution risk" so that's a win.

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Re: Vanguard Total Stock Market Index

Postby InKirkWeTrust » Tue Jul 18, 2017 6:59 pm

CantPassAgain wrote:
CarGuy1993:

Please read the Getting Started section of the Boglehead Wiki and watch all of the videos:

https://www.bogleheads.org/wiki/Getting_started

https://www.bogleheads.org/wiki/Video:B ... philosophy

Then maybe read The Bogleheads Guide To Investing.

Once you have a proper foundation, you will know how to recognize and ignore gobledygook posts by folks with suspect agendas.


+1
Control the controllables

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Tue Jul 18, 2017 7:50 pm

CantPassAgain wrote:I dunno, I'm just a regular guy who likes to go by the commonly understood definitions of English words. Mitigate seems like just as good of a word as dilute in this context. But then again, I am no investment genius.


Dictionary:
dilute -- the action of making something weaker in force, content, or value.
mitigate -- to take measures to moderate or alleviate (something).

As far as web links the 2nd I came across covered the concept fine: http://www.investopedia.com/terms/d/dilution.asp

Though more directly is this usage which is standard portfolio theory: https://en.wikipedia.org/wiki/Capital_market_line
Not shockingly when I searched here I found a discussion which covered the theory fine: viewtopic.php?f=10&t=13450

And even wiki you all are always advising people to read covers this well: https://www.bogleheads.org/wiki/Leverage
though of course holding a positive cash position is normally called "dilution" not negative leverage.

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Re: Vanguard Total Stock Market Index

Postby abuss368 » Tue Jul 18, 2017 7:55 pm

carguy1993 wrote:I was looking at funds and technically since it is diverse in stocks would it be a reasonably safe fund to invest agressively for the next 30+ years?


Hi carguy1993 -

The Vanguard Total Stock Market Index Fund provides exposure to the U.S. stock markets at very low cost and maximum diversification. I believe this fund is now the largest stock fund by asset size on the planet.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Vanguard Total Stock Market Index

Postby CantPassAgain » Tue Jul 18, 2017 8:05 pm

jbolden1517 wrote:Dictionary:
dilute -- the action of making something weaker in force, content, or value.
mitigate -- to take measures to moderate or alleviate (something).

As far as web links the 2nd I came across covered the concept fine: http://www.investopedia.com/terms/d/dilution.asp

Though more directly is this usage which is standard portfolio theory: https://en.wikipedia.org/wiki/Capital_market_line
Not shockingly when I searched here I found a discussion which covered the theory fine: viewtopic.php?f=10&t=13450

And even wiki you all are always advising people to read covers this well: https://www.bogleheads.org/wiki/Leverage
though of course holding a positive cash position is normally called "dilution" not negative leverage.


Here is your original comment in response to my comment about adding bonds to mitigate risk:

jbolden1517 wrote:Because I don't think those things mitigate risk very much. What they do mostly is dilute risk, which is not the same thing at all.


I am well aware of what dilution means in the context of dilution of outstanding shares due to restricted stock grants, options, warrants or whatever. I just don't know what that has to do with your comment about "mitigating" risk vs "diluting" risk. You seem to have a habit of making comments and then when questioned about them your answers shift the goalpoasts to answer a question that wasn't asked.

Anyway, I'm done. If you want to troll for clients here be my guest.
Last edited by CantPassAgain on Tue Jul 18, 2017 8:16 pm, edited 1 time in total.

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Re: Vanguard Total Stock Market Index

Postby aristotelian » Tue Jul 18, 2017 8:08 pm

jbolden1517 wrote:
CantPassAgain wrote:I dunno, I'm just a regular guy who likes to go by the commonly understood definitions of English words. Mitigate seems like just as good of a word as dilute in this context. But then again, I am no investment genius.


Dictionary:
dilute -- the action of making something weaker in force, content, or value.
mitigate -- to take measures to moderate or alleviate (something).

As far as web links the 2nd I came across covered the concept fine: http://www.investopedia.com/terms/d/dilution.asp


I don't see how bonds would be considered "dilution". The example is shares of a stock being diluted when more shares of the same stock are being issued. Allocating bonds in a portfolio mitigates the risk of a stock market collapse because it is an entirely different asset class that is as uncorrelated as possible to stocks.

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Re: Vanguard Total Stock Market Index

Postby Lastrun » Tue Jul 18, 2017 8:10 pm

jbolden1517 wrote:
For someone who wants to start investing and actually wants a "why" the distinction between mitigating risk and diluting risk is the sort of distinction they should understand.



jbolden1517 wrote:
As far as web links the 2nd I came across covered the concept fine: http://www.investopedia.com/terms/d/dilution.asp



Could you please explain to me how your concept of "diluting risk" is in any way related to corporate capital structure dilution on the issuance of additional shares you cross reference in the investopia article.


Sorry, edited as already asked but not answered in two prior posts while I was posting. But I will just comment that, as someone who drafts options, warrants and restricted stock plans everyday in my practice, and has to deal with significant issues of dilution in small companies, I respectfully think it is wrong to mix that concept with risk reduction in portfolio construction.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Tue Jul 18, 2017 8:41 pm

aristotelian wrote:I don't see how bonds would be considered "dilution". The example is shares of a stock being diluted when more shares of the same stock are being issued. Allocating bonds in a portfolio mitigates the risk of a stock market collapse because it is an entirely different asset class that is as uncorrelated as possible to stocks.


Duration risk and credit risk are different asset classes. Cash is just dilution. Intermediate high quality bonds are mostly better cash with very little duration or credit risk. Hence they mainly dilute. They don't really move enough to either be correlated or uncorrelated. But even if you weren't talking about high quality intermediates were talking something like long treasuries this still wouldn't be true. Just to pick an obvious example of a popular investment, volatility futures have a correlation between -0.70 and -0.90 with stocks. Conversely bonds correlate much closer to stocks, to quote Vanguard, "Figure 2 illustrates five-year correlations between monthly U.S. stock and U.S. bond total returns over five-year intervals since 1926 (17 distinct, nonoverlapping periods). While the long-term average correlation between these two asset classes has been 0.25, the figure shows that correlations over shorter windows vary widely from this average, with a range of 0.72 for the five years ended 1975 to –0.54 for the five years ended 2005.5" ( https://www.vanguard.com/pdf/s130.pdf )

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Re: Vanguard Total Stock Market Index

Postby aristotelian » Tue Jul 18, 2017 9:14 pm

jbolden1517 wrote:
aristotelian wrote:I don't see how bonds would be considered "dilution". The example is shares of a stock being diluted when more shares of the same stock are being issued. Allocating bonds in a portfolio mitigates the risk of a stock market collapse because it is an entirely different asset class that is as uncorrelated as possible to stocks.


Duration risk and credit risk are different asset classes. Cash is just dilution. Intermediate high quality bonds are mostly better cash with very little duration or credit risk. Hence they mainly dilute. They don't really move enough to either be correlated or uncorrelated. But even if you weren't talking about high quality intermediates were talking something like long treasuries this still wouldn't be true. Just to pick an obvious example of a popular investment, volatility futures have a correlation between -0.70 and -0.90 with stocks. Conversely bonds correlate much closer to stocks, to quote Vanguard, "Figure 2 illustrates five-year correlations between monthly U.S. stock and U.S. bond total returns over five-year intervals since 1926 (17 distinct, nonoverlapping periods). While the long-term average correlation between these two asset classes has been 0.25, the figure shows that correlations over shorter windows vary widely from this average, with a range of 0.72 for the five years ended 1975 to –0.54 for the five years ended 2005.5" ( https://www.vanguard.com/pdf/s130.pdf )


I see your point on cash. Fair enough. I think you are under-rating bonds. Certainly, anyone who held BND during '08-09 was glad that they did. With interest rates low in recent years they have performed more like cash, but that is a historical anomaly. Historical bond returns are certainly better than cash. What is a better way than bonds to mitigate market fluctuation risk? You can hold different categories of stocks, but you will still get killed in a bear market. You can hold an inverse market fund, but then you are just diluting, as you said, and you may as well be in cash. If there is a secret way to get market returns without market risk, please let us know.

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Re: Vanguard Total Stock Market Index

Postby 2pedals » Tue Jul 18, 2017 9:28 pm

jbolden1517 wrote:

OK now let's talk about the problems. The biggest problem with TSM is that cap weighting is a poor way to pick stocks. Ultimately what you invest in does matter, investing returns on individual stocks are not fully random. There are predictable characteristics of a stock that make it more likely to outperform over 10+ year periods. Those are things like:
  • Does the company earn (net) a lot of money or not per share relative to the price (called P/E).
  • Are those earnings growing rapidly (earnings growth, often as a ratio called PEG).
  • Does the company make a lot of sales (gross) a lot of money or not per share relative to the price (called P/S).
  • Does the company have lots of hard assets less debt. Which are measures of quality and also P/B.
  • Does the company have a strong return on assets (i.e. is the company dependent on holding lots of debt to make a decent return and thus highly susceptible to increases in interest rates).
  • What is the market capitalization of the company? (the smaller the better, especially in combination of those other factors)
  • Does the company return a reasonable percentage of its earning to shareholders in the form of dividends (P/D).
  • and many more.


If this is so easy and predictable why can't most professionals fund managers beat the TSM consistently?

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Tue Jul 18, 2017 10:41 pm

aristotelian wrote:I see your point on cash. Fair enough. I think you are under-rating bonds. Certainly, anyone who held BND during '08-09 was glad that they did. With interest rates low in recent years they have performed more like cash, but that is a historical anomaly. Historical bond returns are certainly better than cash. What is a better way than bonds to mitigate market fluctuation risk? You can hold different categories of stocks, but you will still get killed in a bear market. You can hold an inverse market fund, but then you are just diluting, as you said, and you may as well be in cash. If there is a secret way to get market returns without market risk, please let us know.


I'm not underrating bonds at all. I'm underrating high quality intermediate bond funds (what you all are using as "bonds") as having enough of the the characteristics of bonds to really capture the diversification effects. You normally want a much longer duration to pick up a lot of duration risk. With today's low interest rates bonds are just too dangerous, but normally I'm not against bonds for diversification. That's not a problem of low interest rates, even if say money markets were paying 5%, and intermediates doing 6% you still would be looking at something that mostly looks like cash. Now long term bonds are a different story, especially treasuries because they don't have call risk. I think long term bonds are too dangerous right now, you just aren't being paid enough to take on the duration risk. But that won't always be the case. I wouldn't agree with a 20% position in 20-30 year treasuries but at least that investor is really get diversification from their bonds.

There are funds that don't correlate. NGE to pick an example I'm personally in. And this is BTW true of many of the smaller EMs. Even among USA stocks there are good defensive stocks that don't tend to get hurt nearly as much in bears like BMY, CHD... There are the alternatives that get discussed here that at least some of the Bogleheads are holding.

As you go for negative correlations things get worse. Of course gold or precious metals in general work as a diversifier which is why Schwab uses them in SIP. My point about volatility isn't idle. Volatility is still a complicated asset to be long but the overall portfolio benefits of a small long position (even though it is a negative returning asset) are huge. In years when volatility is well behaved and going lower, like this year, that position is painful. But volatility is there for you when you really need it.

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Re: Vanguard Total Stock Market Index

Postby oldzey » Tue Jul 18, 2017 10:48 pm

I noticed that the Vanguard Total Stock Market Index Fund total net assets is up to $581.0 billion as of 6/30/17.

It is my favorite fund (currently TSM index funds comprise all of the equities in my portfolio). 8-)
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Tue Jul 18, 2017 10:51 pm

2pedals wrote:If this is so easy and predictable why can't most professionals fund managers beat the TSM consistently?


Well first off you are cherrypicking a bit here. Most mutual funds invested in Asia (or Japan) crushed VPACX. But the deeper answer is because they get paid based on assets under management not returns. During good economic times people are investing. Professional fund managers for many years aimed to attract inflows during bull markets which meant holding suboptimal portfolios. You optimize what you get paid for.

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Re: Vanguard Total Stock Market Index

Postby 2pedals » Wed Jul 19, 2017 7:43 am

jbolden1517 wrote:
2pedals wrote:If this is so easy and predictable why can't most professionals fund managers beat the TSM consistently?


Well first off you are cherrypicking a bit here. Most mutual funds invested in Asia (or Japan) crushed VPACX. But the deeper answer is because they get paid based on assets under management not returns. During good economic times people are investing. Professional fund managers for many years aimed to attract inflows during bull markets which meant holding suboptimal portfolios. You optimize what you get paid for.


What would be a better way to attract investors than to consistently beat the S&P 500 and/or the TSM?
Passive investors are gaining market share of investors. Seams to me the approach Jack Bogle started at Vanguard has worked quite well.
Last edited by 2pedals on Wed Jul 19, 2017 8:08 am, edited 1 time in total.

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Re: Vanguard Total Stock Market Index

Postby aristotelian » Wed Jul 19, 2017 7:52 am

jbolden1517 wrote:
I'm not underrating bonds at all. I'm underrating high quality intermediate bond funds (what you all are using as "bonds") as having enough of the the characteristics of bonds to really capture the diversification effects. You normally want a much longer duration to pick up a lot of duration risk. With today's low interest rates bonds are just too dangerous, but normally I'm not against bonds for diversification. That's not a problem of low interest rates, even if say money markets were paying 5%, and intermediates doing 6% you still would be looking at something that mostly looks like cash. Now long term bonds are a different story, especially treasuries because they don't have call risk. I think long term bonds are too dangerous right now, you just aren't being paid enough to take on the duration risk. But that won't always be the case. I wouldn't agree with a 20% position in 20-30 year treasuries but at least that investor is really get diversification from their bonds.

There are funds that don't correlate. NGE to pick an example I'm personally in. And this is BTW true of many of the smaller EMs. Even among USA stocks there are good defensive stocks that don't tend to get hurt nearly as much in bears like BMY, CHD... There are the alternatives that get discussed here that at least some of the Bogleheads are holding.


NGE? For a beginner investor to reduce risk? You cannot possibly be serious.

Some alternatives may have merit, but at present they have high expense ratios and are not available to retail investors except through financial advisors, which would entail additional expense. Plus they are unproven. I hope you are not suggesting hedge funds. Buffet's bet laid that one to rest.

Simplest solution with proven track record is a bond allocation. Sure, they have returned like cash in recent years, but low interest rates have benefitted anyone holding TSM overall. I would think bonds (particularly intermediate to long Treasuries) are much more likely than NGE to produce positive returns during a bear market.

If I am an income investor relying on solid year-to-year income, I am going to invest in bonds with a proven track record. If I am a long term investor, I will be happy with TSM and wait for it to bounce back. I don't believe there is a way to get stock returns year after year without stock market risk.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Wed Jul 19, 2017 5:30 pm

aristotelian wrote:NGE? For a beginner investor to reduce risk? You cannot possibly be serious.


No NGE was suggested for you. I'm rejecting the little game you all keep playing of constantly changing the goal post. You want simple, SIP. You want to build your own portfolio then know what you are doing. And yes that means learning basic portfolio theory. Which you don't know based on that response, so you shouldn't be giving advice on how to construct portfolios.

aristotelian wrote: Some alternatives may have merit, but at present they have high expense ratios and are not available to retail investors except through financial advisors, which would entail additional expense. Plus they are unproven.I hope you are not suggesting hedge funds. Buffet's bet laid that one to rest.


The purpose of many hedge funds is low correlation not high returns. Stocks on 5x leverage are a very high returning asset. There is no reason to pay insane fees for return. What you pay the high fees for is to get the non-correlation so you don't go broke holding a leveraged portfolio. Or so you can maintain a higher than safe payout ratio... Volatility for example has a -8% average annual return, yet in small quantities still does wonders for reducing portfolio volatility and thus increasing portfolio return. Its the return of the portfolio not the return of the asset that matters.

aristotelian wrote: Simplest solution with proven track record is a bond allocation.


Which you don't actually advocate. You advocate an enhanced cash allocation. Not the same thing. What you call bonds don't reduce risk at all, they merely dilute it.

aristotelian wrote: Sure, they have returned like cash in recent years, but low interest rates have benefitted anyone holding TSM overall. I would think bonds (particularly intermediate to long Treasuries) are much more likely than NGE to produce positive returns during a bear market.


So 1969 and 1973-4 bears never happened?

aristotelian wrote: If I am an income investor relying on solid year-to-year income, I am going to invest in bonds with a proven track record.


You likely aren't pulling very much out of your portfolio. There are pension funds using hedge funds to reduce risk pulling 9% / yr while keeping the principle in line with inflation. How much is your 3 fund portfolio letting you pull safely?

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Wed Jul 19, 2017 5:32 pm

2pedals wrote:What would be a better way to attract investors than to consistently beat the S&P 500 and/or the TSM?


Advertising and getting in 401Ks, worked. Also to beat the SP500 and TSM by a lot during bull years or on most 3 year cycles.

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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Wed Jul 19, 2017 5:33 pm

Funny I'm not hearing the defense of VPACX. Why didn't your theory pan out in this case?

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Re: Vanguard Total Stock Market Index Fund?

Postby acanthurus » Wed Jul 19, 2017 6:47 pm

Taylor Larimore wrote:jbolden1517:

Welcome to the Bogleheads Forum. 106 posts in your first 9 days may set a record.

Perhaps you will tell us something about your background (assuming you are not a troll).
jbolden1517 wrote:As I've said repeatedly, I don't think TSM is a good fund.

Your quote is very unusual. I've never heard anyone else say that TSM is not a good fund. Morningstar gives it 4-Star and GOLD analyst ratings. It may not be the best fund, but it is my favorite and the favorite of many experts:

Baer & Ginsler study: "The returns of actively managed funds were 20 to 25% more volatile than the broad market."

Christine Benz, Morningstar Director of Personal Finance: "The no-brainer holdings if you have taxable accounts are broad-market index funds."

Bill Bernstein: "If you own VTSMX with a bit of foreign and REIT, mixed with your bonds, you're most of the way there."

Jack Bogle: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk. -- In my view, owning the market and holding it forever is the ultimate strategy for winners." --

Peter Brimlow, former senior editor of Forbes: "It's extremely difficult to beat the market."

Scott Burns, columnist, author: "The odd are really, really poor than any of us will do better than a low-cost broad index fund."

Andrew Clarke, co-author of Wealth of Experience: "If your stock portfoliio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

John Cochrane, President American Finance Association: "The market in aggregate always gets the allocation of capital right."

Jonathan Clements, author and Wall Street Journal columnist: "If you want a surefire strategy for outpacing most other U.S. stock investors, simply shovel money into an index fund that tracks a broad U.S. market index such as the Wilshire 5000 or the Russell 3000."

Jim Dahle, adviser and author of The White Coat Investor: When interviewing potential advisers, one of the first questions I would ask is: “Can you beat the market yourself or choose mutual fund managers who can?” If the answer is "yes", stand up and walk out."

Dalbar Research: "In 2014, the average investor in a stock mutual fund underperformed the S&P 500 by a margin of 8.19 percent. Fixed-income investors underperformed the Barclays Aggregate Bond Index by a margin of 4.81 percent."

Charles Ellis, author of "The Loser's Game": "Most of the managers and clients who insist on trying to beat the market, either on their own or with professional managers, will be disappointed by the results. It is a loser's game."

Edesess . Tsui . Fabbri . Peacock, authors of The Three Simple Rules of Investing: "The end results of the theories of Nobel Laureates in finance is that the most efficient portfolio is one that mirrors the whole market, a total market index fund."

Prof. Eugene Fama, Nobel Laureate: " For most people, the market portfolio is the most sensible decision."

Paul Farrell, author of The Lazy Person's Guide to Investing: "The market is totally random, irrational, and unpredictable. And it loves humbling the mighty. Try to beat it and you'll lose money."

Rick Ferri, advisor and author of many financial books: "When you are finished choosing a bond index fund, a total U.S. stock market index fund, and a broad international index fund, you will have a very simple, yet complete portfolio."

Bob French, CFA, McLean’s Director of Investment Analysis: "You can’t beat the market. It’s basically impossible to guess which company is going to be the next Apple or Google, or even which way the market will
go. So don’t try."

Steven Goldberg, Kiplinger magazine columnist: "You simply have no reason not to invest in index funds—funds that track broad market indexes rather than try to beat them."

Graham/Zweig, authors: "The single best choice for a lifelong holding is a total stock-market index fund."

Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

Mark Hebner, author of Mutual funds: "Efficient markets have no trends, so any speculation using trading systems or active investment strategies, such as stock, time, manager, or style selection, will only detract from future market returns."

Sheldon Jacobs who wrote the first book on no-load fund investing: "The best index fund for almost everyone is the Total Stock Market Index Fund.--The fund can only go wrong if the market goes down and never comes back again, which is not going to happen."

SpencerJakab, author of Heads I Win, Tails I Win: "The typical individual investor would have a nest egg at least twice as large if they simply tracked the market."

Christoper Jones, author of The Intelligent Portfolio and CFO of Financial Engines: "Standard financial economic theory dictates that the market portfolio is efficient and that it has the highest expected return of any portfolio for that level of volatility."

Darrow Kirkpatrick, author of Retiring Sooner: "Nobody can predict the future or outperform the market over the long haul."

Lawrence Kudlow, CNBC: "I like the concept of the Wilshire 5000, which essentially gives you a piece of the rock of all actively traded companies."

Prof. Burton Malkiel, author of the classic Random Walk Down Wall Street: "Buying and holding a broad-based index fund is still the only game in town."

Harry Markowitz, Nobel Laureate: "A foolish attempt to beat the market and get rich quickly will make one's broker rich and oneself much less so."

Moshe A Milevsky, author of The Probability of Fortune: "I am somewhat skeptical about anyone's ability to consistently beat the market."

Bill Miller, famed fund manager: "With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me."

Merton Miller, Nobel Laureate: "Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't."

"Morningstar (10-19-2012) named Vanguard's Total Stock Market Index Fund: "Our favorate U.S. Equity ETF."

Motley Fools: "Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index."

Charles Munger, Vice-Chairman Berkshire Hathaway: "Few in the universe exceed the market returns (on a regular basis). It's like finding a needle in a haystack."

John Norstad, Northwestern University: "Total Stock Market is efficient, in the sense that no other US stock portfolio can be more efficient than TSM (have lower risk and higher expected return)."

Professor Terrance Odean, former editor of The Review of Financial Studies: "I wish I had bought an S&P 500 index fund (or all market equity fund had one been available) 30 years ago."

Quartz news: "As always, in investing it generally pays in the long run to opt for broad-based, low-cost index funds. Anything else is likely a money-losing gimmick."

Pat Regnier, former Morningstar analyst: "We should just forget about choosing fund managers and settle for index funds to mimic the market."

Jim Rogers, author and co-founder of the Quantum Fund: "Academic studies have shown repeatedly that most people do not beat the market over any long period of time."

Allan Roth, author and financial columnist for AARP: "My advice is to own the market rather than try to outsmart it."

Ron Ross, author of The Unbeatable Market: "Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."

Paul Samuelson, Nobel Laureate: "The most efficient way to diversify a stock portfolio is with a low-fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios."

Gus Sauter, retired Vanguard Chief Investment Officer: "There is one, and only one investment that is not active -- a total market portfolio–one that provides the market beta. Everything else is active."

Bill Schultheis, author of The Coffeehouse Investor: The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market."

Charles Schwab: "Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing."

Chandan Sengupta, author of The Only Proven Road to Investment Success: "Use a low-cost, broad-based index fund to passively invest in a little bit of a large number of stocks.

Jeremy Siegel, author of Stocks for the Long Run: "For most of us, trying to beat the market leads to disastrous results."

Ben Stein, author and economist: "Scholarly work by Burton Malkiel, Eugene Fama and others has proved that it is the rare investor indeed who can outperform the overall market."\

Stein & DeMuth, authors of Yes, You Can Get A Financial Life!: "Buying and holding a few broad market index funds is perhaps the most important move ordinary investors can make to supercharge their portfolios."

"Robert Stovall, investment manager: It's just not true that you can't beat the market. Every year about one-third do it. Of course, each year it is a different group."

Larry Swedroe, author of many investment books: "Over the last 75-years, investors who simply invested passively in the total U.S. stock Market would have doubled their investment approximately every seven years."

Peter D. Teresa, M* Sr. Analyst: My recommendation: a fund that indexes the entire market, such as Vanguard Total Stock Market Index."

Richard Thaler, 2015 President of the American Economic Association: "It is not easy to beat the market, and most people don't."

Walter Updegrave, Editor of Real Deal Retirement: "If you stick to broadly diversified stock and bond index funds, you can avoid the whole fund-picking racket, and fare much better than investors who are constantly seeking out hot funds."

Garland Whizzer: "Financial graveyards are getting more and more full of those who try unsuccessfully to beat the market."

Jason Zweig, author and Wall Street Journal columnist: "I think a total stock market index fund is not only the simplest, but the very best core investment for most people.

Best wishes.
Taylor


Does committing a logical fallacy ad infinitum make it any less fallacious?

https://en.wikiquote.org/wiki/Argument_from_authority

TropikThunder
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Re: Vanguard Total Stock Market Index Fund?

Postby TropikThunder » Wed Jul 19, 2017 6:55 pm

acanthurus wrote:Does committing a logical fallacy ad nauseum make it any less fallacious?

https://en.wikiquote.org/wiki/Argument_from_authority

If ~50 acknowledged financial experts say one thing, and a poster on a forum disagrees, which party has the burden of proof?
Fallacious arguments from authority are frequently the result of citing a non-authority as an authority. An example of the fallacy of appealing to an authority in an unrelated field would be citing Albert Einstein as an authority for a determination on religion when his primary expertise was in physics.
..................................................................
The valid form of argument is one in which a recognized and knowledgeable authority on the relevant subject is appealed to by citing a statement by that authority. This is a form of inductive reasoning in that the conclusion is not logically certain, but likely.

https://en.wikipedia.org/wiki/Argument_from_authority

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TD2626
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Re: Vanguard Total Stock Market Index

Postby TD2626 » Wed Jul 19, 2017 7:20 pm

I think that the forum consensus is that TSM is likely one of the best funds ever created. In my opinion, this is justified.

The theory behind having a large portion of one's portfolio in indexed investments is very sound. Indexing is a brilliant idea and is very efficient in every sense of the word.

Maybe if one doesn't want everything in index funds, you could find a handful of ultra-low-cost active funds to add to the portfolio in a buy and hold fashion (as part of a small allocation to active) - but the added complexity and potential for behavioral errors may not be worth it for most.

acanthurus
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Re: Vanguard Total Stock Market Index Fund?

Postby acanthurus » Wed Jul 19, 2017 7:25 pm

TropikThunder wrote:If ~50 acknowledged financial experts say one thing, and a poster on a forum disagrees, which party has the burden of proof?
https://en.wikipedia.org/wiki/Argument_from_authority

I'm not sure I'd consider even half the people on the list experts, and certainly not entirely without bias or conflict of interest. An actual argument could be infinitely more persuasive than a laundry list of quotes.

Even then, jbolden seems to be doing a laudable job responding to people here, even if some comments responding to him don't particularly add to the discussion. I'm not sure I agree with jbolden, but I'd rather see people address his arguments logically than reply with a copy-paste quote list I've seen a dozen times before on this forum.

Getting rid of the dogmatism and poor argumentation on Bogleheads will only make it better. We give too much of a free pass to those that agree with us.

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Taylor Larimore
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The Bogleheads Philosophy

Postby Taylor Larimore » Wed Jul 19, 2017 8:21 pm

Getting rid of the dogmatism and poor argumentation on Bogleheads will only make it better. We give too much of a free pass to those that agree with us.

acanthurus:

The Bogleheads forum is built on the wisdom of Jack Bogle who knows more about investing than you or I or anyone on this forum. This is the Bogleheads Philosophy --and it works.

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

The truth must be repeated again and again because lies are constantly being told around it. -- Rick Ferri, CFA, co-author of The Bogleheads Guide to Retirement Planning and numerous other books

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

2pedals
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Re: Vanguard Total Stock Market Index

Postby 2pedals » Wed Jul 19, 2017 8:55 pm

jbolden1517 wrote:For example right now I'm holding 2 different 18-40% yielding synthetic bonds that have a small probability of tail risk that could make at least one of them go as low as -180%. How would you compare that to 3 fund? I think a fair answer is there is nothing in 3 fund like that at all.


You've got that right, nothing like that at all in the 3 portfolio. I want nothing to do with a 18-40% return with a so called small probability of tail risk that could go -180%.

Desert
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Re: Vanguard Total Stock Market Index

Postby Desert » Wed Jul 19, 2017 10:39 pm

aristotelian wrote:
reriodan wrote:We need someone smart like nisiprius to come in here and own this guy. Should I go get a goat or are there other ways to summon him? :P


jbolden is either a genius or a lunatic. I am going to sit back and watch this thread play out.


I doubt he/she is either. There are some good points being raised here.

aj76er
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Re: Vanguard Total Stock Market Index

Postby aj76er » Thu Jul 20, 2017 4:43 pm

jbolden1517 wrote:
aristotelian wrote:NGE? For a beginner investor to reduce risk? You cannot possibly be serious.


No NGE was suggested for you. I'm rejecting the little game you all keep playing of constantly changing the goal post. You want simple, SIP. You want to build your own portfolio then know what you are doing. And yes that means learning basic portfolio theory. Which you don't know based on that response, so you shouldn't be giving advice on how to construct portfolios.

aristotelian wrote: Some alternatives may have merit, but at present they have high expense ratios and are not available to retail investors except through financial advisors, which would entail additional expense. Plus they are unproven.I hope you are not suggesting hedge funds. Buffet's bet laid that one to rest.


The purpose of many hedge funds is low correlation not high returns. Stocks on 5x leverage are a very high returning asset. There is no reason to pay insane fees for return. What you pay the high fees for is to get the non-correlation so you don't go broke holding a leveraged portfolio. Or so you can maintain a higher than safe payout ratio... Volatility for example has a -8% average annual return, yet in small quantities still does wonders for reducing portfolio volatility and thus increasing portfolio return. Its the return of the portfolio not the return of the asset that matters.

aristotelian wrote: Simplest solution with proven track record is a bond allocation.


Which you don't actually advocate. You advocate an enhanced cash allocation. Not the same thing. What you call bonds don't reduce risk at all, they merely dilute it.

aristotelian wrote: Sure, they have returned like cash in recent years, but low interest rates have benefitted anyone holding TSM overall. I would think bonds (particularly intermediate to long Treasuries) are much more likely than NGE to produce positive returns during a bear market.


So 1969 and 1973-4 bears never happened?

aristotelian wrote: If I am an income investor relying on solid year-to-year income, I am going to invest in bonds with a proven track record.


You likely aren't pulling very much out of your portfolio. There are pension funds using hedge funds to reduce risk pulling 9% / yr while keeping the principle in line with inflation. How much is your 3 fund portfolio letting you pull safely?


I would classify the boglehead 3 fund as a global growth Portfolio; whereas you are describing more of a risk-parity Portfolio. Two very different things.

I think the general consensus on this forum is that if the volatility bothers you, then just save 20%-50% more than you need through a combination of working longer, focusing on career growth, saving more, and spending less. The average person can control those aspects much better than attempting to hedge volatility thru alternative asset classes, leveraging, and derivatives.

So yes, in a 3 fund Portfolio, cash and bonds are pretty much dampeners and not mitigators. During withdrawal, the fixed income portion allows a three fund holder to wait for equities to revert to the mean (without needing to withdraw from equities). For an accumulator, it allows for buying equities cheap. And for both it provides sound sleep :).
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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CaliJim
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Re: Vanguard Total Stock Market Index

Postby CaliJim » Thu Jul 20, 2017 5:23 pm

I agree that boglehead portfolios are best, and that boglehead portfolio best embody the belief in the efficient market hypothesis.

It is certain that market inefficiencies exist, and that some people have the ability to exploit these inefficiencies. However, I am equally certain that identifying who these people are (and what their winning method is) cannot be done in advance.
-calijim- | | For more info, click this

jbolden1517
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Re: Vanguard Total Stock Market Index

Postby jbolden1517 » Thu Jul 20, 2017 5:32 pm

aj76er wrote: would classify the boglehead 3 fund as a global growth Portfolio; whereas you are describing more of a risk-parity Portfolio. Two very different things.

I think the general consensus on this forum is that if the volatility bothers you, then just save 20%-50% more than you need through a combination of working longer, focusing on career growth, saving more, and spending less. The average person can control those aspects much better than attempting to hedge volatility thru alternative asset classes, leveraging, and derivatives.

So yes, in a 3 fund Portfolio, cash and bonds are pretty much dampeners and not mitigators. During withdrawal, the fixed income portion allows a three fund holder to wait for equities to revert to the mean (without needing to withdraw from equities). For an accumulator, it allows for buying equities cheap. And for both it provides sound sleep :).


Thank you! Agree with everything you wrote. Pretty much a risky portfolio that requires an excessive balance and low spending to work safely. Which is one of the reasons I keep preaching the advantages of diversification. Because you can match the returns with less risk and thus not have to have quite as much (the difference is in the margins). Not horrible but very similar in effect from a more sophisticated portfolio with a high ER.

ThrustVectoring
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Re: Vanguard Total Stock Market Index

Postby ThrustVectoring » Thu Jul 20, 2017 5:57 pm

jbolden1517 wrote:Stocks on 5x leverage are a very high returning asset.


This is false. The long-run return of levering up 5x on stocks is "you lose all your money". Leverage both increases returns and exposes your capital base to getting crushed, preventing future returns. IIRC, if you do the math on stocks, the balancing point between these two is at something like 1.2x leverage. "Kelley Criteria" is the right google search term to learn more.

The only place such leverage ratios make sense is if you have a non-callable loan and a predictable income stream. In which case, it's more like selling a term annuity than levering up - instead of putting your stream of savings into stocks as they come in, you do it all at once at the start and use that stream to pay off the loan you took to do so. In which case, it's more like treating your future savings as a fixed income asset and "rebalancing" its net present value into equities.


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