Post for Livesoft

[northernboy]

Livesoft,

Despite achieving financial independence (still working – like my job for the most part) I’ve always believed in continuous personal financial improvement. To that end I seek out the wisdom/experience of others to help me do better. I’ve been on Bogleheads for a few years now and have come to appreciate your advice/snarky wisdom (cracks me up on occasion). I would like to pose some questions to you for the benefit of those on this forum:

- What is your present target asset allocation (stocks ,bonds, cash, other) and how has it changed over time if it has? Do you have any trigger points that would cause you to materially change this allocation and if so, what are those?
- Assuming you are married how involved is your spouse in financial affairs? Mine is completely hands-off and not really interested.
- What investment options (ETFs I presume) do you consider for your portfolio? In other words, do you have a defined set of ETFs that you opportunistically leverage to meet your objectives? How many investment vehicles do you typically leverage in your portfolio at any time?
- How active is the management of your portfolio? How often do you trade? What is your buy/sell critiera? How do you define financial opportunity?
- When you were working how did you realize and accept that you had enough to pull the plug? Was this easy or difficult for you to do?
- Any other general guidance you can provide based on your own personal experience would be appreciated.

Thanks and keep up the good commentary!
-Northernboy

[livesoft]

Hmmm, lots of questions and most have all been answered at some point or another in my previous posts. I'll try to summarize over the next few days. I'll start with this link to my asset allocation:
viewtopic.php?t=150267 I have increased fixed income percentage in 2007 when I semi-retired.

[livesoft]

Trigger points: Discussed ad nauseum:
viewtopic.php?t=194427

I will generally increase equities by 3% to 15% of portfolio on a bona fide livesoft RBD. I will generally rebalance back to standard asset allocation shortly thereafter (see purple line in the above thread). In the absence of an RBD, I will buy new things with dividends and distributions. I will sell things in order to maintain my asset allocation. I will not wait in cash to buy something, but will buy as soon as I can. Sometimes I am out of the country or away from the internet and will not have a chance to reinvest dividends until I get back.

In addition to equity trigger points, I do something with bond ETFs when they move about 0.5% in a day.

[livesoft]

My spouse: Apparently likes what I do with our portfolio and will do what I ask. For instance, I asked her to move money from her SDBA back into VFIAX in order to get the recent dividends back to $0.00. She has talked to her CEO and HR folks to campaign for a better 401(k) at my behest and has been successful.

In the past my spouse was in 2 investment clubs at the same time, so she knows about investing. She also used to fill out our tax returns, but no longer. She has expressed dismay that we pay so little in taxes due to my tax planning, but I tell her that lets her donate more to the charities of her choice instead of to Uncle Sam.

I am confident that she would be able to handle any finances after I die.

[livesoft]

Actual investments I have listed many times before.
Large-cap US: VTI, VV, VLCAX, VFIAX
Small-cap US: VBR, IJS
Large-cap foreign: VEA, VEU, but in 2015 we owned VTIAX in order to create this thread: viewtopic.php?t=179414
Small-cap foreign: VSS, VFSVX, DGS
Fixed income: (AGG, BND,VBMFX, VBLTX, FBIDX), BIV, VCSH
TIAA: Traditional annuity and Real Estate Account

Number of trades:
I have placed 2 trades in taxable accounts this year to raise money to pay college expenses.

I reinvest dividends manually, so I have a few reinvestment trades every month from bond funds and a few more from equity funds every quarter. In addition to these trades, I have maybe 3 to 10 others based on RBDs. My spouse contributes to her 401(k) with her paycheck, so that means a buy every couple of weeks.

Rebalancing requires some trades, too. The reality is that RBDs cover rebalancing into equities, so for me rebalancing is selling equities and buying fixed income assets. That adds maybe 2 or 3 more transactions per year.

Thus, I don't think I make many transactions that everybody else is not making. But I do have a few extra ones. So far, I don't pay commissions nor taxes on my trades.

Buy/sell trigger points were described in the links I put in this thread.

[livesoft]

Working and pulling the plug:
I wanted to reach financial independence from an early age. I may be the original Mr Money Mustache I told my friends that I wanted to retire early. I had a plan.

But I had a great career doing something that I loved to do. I would have worked for free (but don't tell my employers). I went half-time at age 50 and then I stopped working while still age 57. Nevertheless, I still do a little bit of work for a few weeks every year which funds my individual 401(k). So pulling the plug was relatively easy because there are many other things that I like to do plus I still have lots of professional contacts each year.

I knew I was financially independent by running software like FIRECalc and Otar's spreadsheet and reading books. While my spouse still works, her income is not needed, but her income does make things quite nice for us. But our total income has us in the 15% marginal income tax bracket, so we are not private jet wealthy.

[livesoft]

General guidance: I would suggest that you become a student of behavioral finance and read all the books by folks like Gilovich & Belsky, Kahneman, Ariely, Zweig, Thaler, Swedroe, and others. I contend that most people have problems when it comes to investing unemotionally. Indeed, I think the transactions that I like to make are generally taking advantage of the psychology and psychoses of other investors.

When I see phrases like "Peace of Mind" or "Sleep Well at Night", I look to see what Behavioral Finance trap or Mental Accounting lies behind the statement. I probably have some problems myself, but I like to think that I invest based on statistics and Bayes' Theorem.

Other than that: Don't pay commissions. Don't pay taxes if you can help it. Keep the expense ratio of your portfolio below 0.15%. Then it's Buy, Hold, and Rebalance for the win.

[Mrxyz]

A summary of livesoft's investment philosophy!
Surely this qualifies as a sticky!

[livesoft]

No, it doesn't.

To see something sticky-worthy, see Robert T's post.

[flyingaway]

General guidance: I would suggest that you become a student of behavioral finance and read all the books by folks like Gilovich & Belsky, Kahneman, Ariely, Zweig, Thaler, Swedroe, and others. I contend that most people have problems when it comes to investing unemotionally. Indeed, I think the transactions that I like to make are generally taking advantage of the psychology and psychoses of other investors.

When I see phrases like "Peace of Mind" or "Sleep Well at Night", I look to see what Behavioral Finance trap or Mental Accounting lies behind the statement. I probably have some problems myself, but I like to think that I invest based on statistics and Bayes' Theorem.

Other than that: Don't pay commissions. Don't pay taxes if you can help it. Keep the expense ratio of your portfolio below 0.15%. Then it's Buy, Hold, and Rebalance for the win.

Why one has to read all these books? I bet they have a lot of overlaps.

[Mrxyz]

No, it doesn't.

To see something sticky-worthy, see Robert T's post.

Wow, thanks for the link........of course it will take me many months (?years) to read that sticky post and it's many links! But I still like/enjoy your posts and explanations... along with many others....
Very interesting that a 10 year old sticky post is still relevant in today's world.

[triceratop]

No, it doesn't.

To see something sticky-worthy, see Robert T's post.

Wow, thanks for the link........of course it will take me many months (?years) to read that sticky post and it's many links! But I still like/enjoy your posts and explanations... along with many others....
Very interesting that a 10 year old sticky post is still relevant in today's world.

Robert continuously updates his Collective Thoughts (as you can see at the bottom of the post). But in addition it's interesting you mention that his 10-year old sticky post is still relevant; Robert T has been one of the more transparent Bogleheads posters in terms of attribution analysis of the sources of returns over long periods, since he has maintained a constant factor exposure for at least 15 years.

edit: Just to followup, the "Location" information for poster Robert T is a set of coordinates for his factor exposures: 1 for Mkt, 0.2 for SmB, 0.4 for HmL, and 0.5 for Term (I think). It's clever

[iceport]

Number of trades:
I have placed 2 trades in taxable accounts this year to raise money to pay college expenses.

I reinvest dividends manually, so I have a few reinvestment trades every month from bond funds and a few more from equity funds every quarter. In addition to these trades, I have maybe 3 to 10 others based on RBDs. My spouse contributes to her 401(k) with her paycheck, so that means a buy every couple of weeks.

Rebalancing requires some trades, too. The reality is that RBDs cover rebalancing into equities, so for me rebalancing is selling equities and buying fixed income assets. That adds maybe 2 or 3 more transactions per year.

Thus, I don't think I make many transactions that everybody else is not making. But I do have a few extra ones. So far, I don't pay commissions nor taxes on my trades.

Buy/sell trigger points were described in the links I put in this thread.

If the OP will indulge my inquiry, livesoft, does this put you on track for a 100+% turnover rate this year?

(Though I've never quantified it, my turnover rate is probably an order of magnitude less than 100%.)

[livesoft]

I am happy to report my turnover number. I keep what I think are excellent records, so the number is easy to find.

So for 2017, if my portfolio value at the beginning was $X, so far I have 70.0% of $X in buys and 69.6% of sells. I have not had to do any tax-loss harvesting in 2017 at all.

For 2016, with that 20% correction, I had a turnover of about 174%.

[Mrxyz]

No, it doesn't.

To see something sticky-worthy, see Robert T's post.

Wow, thanks for the link........of course it will take me many months (?years) to read that sticky post and it's many links! But I still like/enjoy your posts and explanations... along with many others....
Very interesting that a 10 year old sticky post is still relevant in today's world.

Robert continuously updates his Collective Thoughts (as you can see at the bottom of the post). But in addition it's interesting you mention that his 10-year old sticky post is still relevant; Robert T has been one of the more transparent Bogleheads posters in terms of attribution analysis of the sources of returns over long periods, since he has maintained a constant factor exposure for at least 15 years.

Thanks for the explanation and brief history!
I am a boglehead for last 5 years and is one of my most visited website..... saved me a lot of money etc etc.
But there is so much more to read and learn...............

However,
It would be nice to have a summary or some background information about the star bogleheads members along with their 'stickyable' posts!
At the risk of missing many if not most...........Taylor,livesoft, Nisi, retiredjg.........just to name a few.

[iceport]

I am happy to report my turnover number. I keep what I think are excellent records, so the number is easy to find.

So for 2017, if my portfolio value at the beginning was $X, so far I have 70.0% of $X in buys and 69.6% of sells. I have not had to do any tax-loss harvesting in 2017 at all.

For 2016, with that 20% correction, I had a turnover of about 174%.

Wow. That's absolutely amazing.

Thanks for the reply.

[BW1985]

Why do you choose to manually reinvest dividends rather than automatic? Just curious.

[livesoft]

Why do you choose to manually reinvest dividends rather than automatic? Just curious.

1. In taxable, I usually spend the dividends nowadays.
2. In tax-advantaged, I use dividends for rebalancing purposes.
3. Not all of our dividends are manually invested. In some accounts, the dividends are automatically reinvested. For instance, the mutual funds FBIDX, VBMFX, VBTLX, VFSVX, and VFIAX have dividends automatically reinvested. The mutual funds are in separate accounts each all by themselves (inherited IRAs, rollover IRA, 401(k), Roth IRAs).

[livesoft]

Wow. That's absolutely amazing.

It is kind of amazing --- especially when I stated that I make only a few more transactions than a lot of other people. But I will say that I tend not to make small dollar-amount trades anymore because such small amounts won't have a significant change to my portfolio.

So here's another statistic. The YTD performance of the DFA small-cap value fund DFSVX is 4.1%. If I calculate the performance of my small-cap value ETFs and mutual funds that I traded this year (I'm leaving out VBR shares bought in 2009), the performance is 12.1%. But turnover was 638%.

[staythecourse]

General guidance: I would suggest that you become a student of behavioral finance and read all the books by folks like Gilovich & Belsky, Kahneman, Ariely, Zweig, Thaler, Swedroe, and others. I contend that most people have problems when it comes to investing unemotionally. Indeed, I think the transactions that I like to make are generally taking advantage of the psychology and psychoses of other investors.

When I see phrases like "Peace of Mind" or "Sleep Well at Night", I look to see what Behavioral Finance trap or Mental Accounting lies behind the statement. I probably have some problems myself, but I like to think that I invest based on statistics and Bayes' Theorem.

Other than that: Don't pay commissions. Don't pay taxes if you can help it. Keep the expense ratio of your portfolio below 0.15%. Then it's Buy, Hold, and Rebalance for the win.

Why one has to read all these books? I bet they have a lot of overlaps.

Or more importantly does it even make a difference to read the books. I believe it was Mr. Thaler who said one of his cowriters of his book on the topic called him up and said he was nervous with some random shuddering of the market and said he had to get out. Mr. Thaler basically told him to read the book they just wrote together, but didn't make a difference and he still bailed out.

I think WAY too many books are written on this sexy investing topic without much meat on HOW to prevent the behavioral mistakes. As another poster on this board eloquently said, "A problem without a solution is just a distraction".

Good luck.

[livesoft]

Or more importantly does it even make a difference to read the books.

I agree with the above statement. For many people, it will make no difference to read the books.

[iceport]

General guidance: I would suggest that you become a student of behavioral finance and read all the books by folks like Gilovich & Belsky, Kahneman, Ariely, Zweig, Thaler, Swedroe, and others.

<snip>

Other than that: Don't pay commissions. Don't pay taxes if you can help it. Keep the expense ratio of your portfolio below 0.15%. Then it's Buy, Hold, and Rebalance for the win.

So for 2017, if my portfolio value at the beginning was $X, so far I have 70.0% of $X in buys and 69.6% of sells. I have not had to do any tax-loss harvesting in 2017 at all.

For 2016, with that 20% correction, I had a turnover of about 174%.

So here's another statistic. The YTD performance of the DFA small-cap value fund DFSVX is 4.1%. If I calculate the performance of my small-cap value ETFs and mutual funds that I traded this year (I'm leaving out VBR shares bought in 2009), the performance is 12.1%. But turnover was 638%.

Seems like these are mixed messages.

[livesoft]

Yes, but I did write "Other than that ...." I have also noticed that folks do not rebalance when I would and do.

[Sandtrap]

No, it doesn't.

To see something sticky-worthy, see Robert T's post.

Outstanding!
Thanks for the link.
j

[MotoTrojan]

Wow. That's absolutely amazing.

It is kind of amazing --- especially when I stated that I make only a few more transactions than a lot of other people. But I will say that I tend not to make small dollar-amount trades anymore because such small amounts won't have a significant change to my portfolio.

So here's another statistic. The YTD performance of the DFA small-cap value fund DFSVX is 4.1%. If I calculate the performance of my small-cap value ETFs and mutual funds that I traded this year (I'm leaving out VBR shares bought in 2009), the performance is 12.1%. But turnover was 638%.

Wow that is an impressive feat with the small-cap fund! I am 100% equity, with 20% US SCV (VIOV), so not as well setup for such a maneuver.

What book or two on behavioral finance would you start with?

[livesoft]

I would start with Why Smart People Make Big Money Mistakes and How to Correct Them by Gilovich and Belsky.

[livesoft]

Wow that is an impressive feat with the small-cap fund! I am 100% equity, with 20% US SCV (VIOV), so not as well setup for such a maneuver.

I don't think it was so impressive. Your VIOV has a 3-month performance of 12.7%. So you just needed to buy shares 3 months ago.

For some performance, check out DGS.

[triceratop]

(I also switched from VBR to IJS on 08/17 and then bought more iJS on 08/21. Market timing made me a nice sum this year too.)

[iceport]

General guidance: I would suggest that you become a student of behavioral finance and read all the books by folks like Gilovich & Belsky, Kahneman, Ariely, Zweig, Thaler, Swedroe, and others.

<snip>

Other than that: Don't pay commissions. Don't pay taxes if you can help it. Keep the expense ratio of your portfolio below 0.15%. Then it's Buy, Hold, and Rebalance for the win.

So for 2017, if my portfolio value at the beginning was $X, so far I have 70.0% of $X in buys and 69.6% of sells. I have not had to do any tax-loss harvesting in 2017 at all.

For 2016, with that 20% correction, I had a turnover of about 174%.

So here's another statistic. The YTD performance of the DFA small-cap value fund DFSVX is 4.1%. If I calculate the performance of my small-cap value ETFs and mutual funds that I traded this year (I'm leaving out VBR shares bought in 2009), the performance is 12.1%. But turnover was 638%.

Seems like these are mixed messages.

Yes, but I did write "Other than that ...."

Yes, but that was a reference to your discussion of avoiding behavioral issues, not to the use of (super)active management and market timing, which does seem to contradict the "Buy, Hold, and Rebalance for the win" advice.

I have also noticed that folks do not rebalance when I would and do.

It seems difficult to imaging arriving at a 638% turnover rate with "rebalancing" as the term is commonly used. If your "rebalancing" involves actively buying and selling based on market timing, large market moves, or other parameters to alternate between extreme ends of your rebalancing bands — or to eliminate then reestablish holdings altogether — is that something you recommend to the OP?

Or is "Buy, Hold, and Rebalance" in the traditional sense what you are recommending?

[livesoft]

I am not recommending anything in the traditional sense. I don't recommend Buy, Hold, and Rebalance in the traditional sense. And I don't recommend Market Timing in the traditional sense.

[MotoTrojan]

Wow that is an impressive feat with the small-cap fund! I am 100% equity, with 20% US SCV (VIOV), so not as well setup for such a maneuver.

I don't think it was so impressive. Your VIOV has a 3-month performance of 12.7%. So you just needed to buy shares 3 months ago.

For some performance, check out DGS.

I bought some shares 3 months ago, but I also bought some at the top . I buy whenever I can. So far it has been a fun ride!

I think turning a ~4% YTD into a personal one that is 3x that, via turnover, is more impressive than getting lucky and going all in 3 months ago.

[iceport]

I am not recommending anything in the traditional sense. I don't recommend Buy, Hold, and Rebalance in the traditional sense. And I don't recommend Market Timing in the traditional sense.

Very good. Hopefully that is helpful to others.

[livesoft]

I think turning a ~4% YTD into a personal one that is 3x that, via turnover, is more impressive than getting lucky and going all in 3 months ago.

I don't know. Think of the possibilities: Trade (churn) 6 or 7 times with no gains or small losses, but end up with a buy 3 months ago and hold until today. One ends up with a 13% YTD return, don't they?

Also don't forget that I excluded the VBR that I bought in 2009 from the calculation of return. That VBR is up 8% through yesterday.

[northernboy]

Thanks Livesoft for your time responding to my post and commitment to this forum

Regards,
-Northernboy

[randomizer]

Despite achieving financial independence (still working – like my job for the most part) I’ve always believed in continuous personal financial improvement. To that end I seek out the wisdom/experience of others to help me do better. I’ve been on Bogleheads for a few years now and have come to appreciate your advice/snarky wisdom (cracks me up on occasion).

I second this (or third, fourth, fifth it?). I learned a bunch of stuff about tax loss harvesting and investing in general from Livesoft, and seeing his name as the last poster on any given thread generally warrants an immediate click. May he live long and prosper.