Is "stay the course" a commandment or a suggestion?

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dkturner
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Is "stay the course" a commandment or a suggestion?

Post by dkturner » Mon Jan 05, 2015 1:49 pm

Just curious about how the brothers interpret Jack Bogle's oft quoted phrase, "stay the course" :?:

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Re: Is "stay the course" a commandment or a suggestion?

Post by Tamales » Mon Jan 05, 2015 2:05 pm

Stay the course or Stray the course?

I guess you could think of it like a speed limit on roads. Some people will always obey the speed limit, some will "adjust for conditions." If you stray the course because you think conditions justify it, e.g. you are near retirement or you learned something new that calls into question your original plan or there was some major change in your life, just don't be reckless and don't do it frequently.

I would guess most of us--especially the older folks among us--have changed course at some point in our lives.

I would also guess that many of us have changed course because of what we've learned on this forum.

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Re: Is "stay the course" a commandment or a suggestion?

Post by k66 » Mon Jan 05, 2015 2:14 pm

For myself, "Stay the course" means stay on the path you are on (as laid out in your plan) until such a time that change is required. This would be a major change like a birth, death, marriage, divorce, employment status, etc. It does not mean wandering just because the market winds are blowing a little differently today than they were last week.
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Re: Is "stay the course" a commandment or a suggestion?

Post by Tom_T » Mon Jan 05, 2015 2:15 pm

My perception of Mr. Bogle's advice is that the average investor is far better off with their investments on autopilot. The human tendency is to make knee-jerk reactions to current events and to have a short-term view; those are generally bad qualities for investors.

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Re: Is "stay the course" a commandment or a suggestion?

Post by Toons » Mon Jan 05, 2015 2:17 pm

The 11th Commandment :thumbsup
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Re: Is "stay the course" a commandment or a suggestion?

Post by longinvest » Mon Jan 05, 2015 2:18 pm

I would say that it means:
Bogleheads investment philosophy wrote: Create an asset allocation that includes bonds to reduce the volatility caused by the stock part of your portfolio, then rebalance when needed. This balanced approach will help you to stay the course. Once you set up a Boglehead portfolio, the only real course correction needed is to rebalance once per year to bring the stock/bond allocations back to pre-set levels. (Investors generally want to increase bond holdings slightly every year, such as by setting the percentage of bonds "to your age in bonds".) Although making only that one change every year takes discipline, it is also an enormous relief to be able to tune out the endless chatter of when and what to buy and sell.
Source: wiki:Bogleheads investment philosophy:Stay the course
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Re: Is "stay the course" a commandment or a suggestion?

Post by englishgirl » Mon Jan 05, 2015 2:27 pm

the brothers??? :shock:
Sarah

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Re: Is "stay the course" a commandment or a suggestion?

Post by oldzey » Mon Jan 05, 2015 2:29 pm

Toons wrote:The 11th Commandment :thumbsup
+1 Amen!
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Re: Is "stay the course" a commandment or a suggestion?

Post by kolea » Mon Jan 05, 2015 2:38 pm

Of course Emerson had this to say: "A foolish consistency is the hobgoblin of small minds".

Not sure if he was talking about investing our something else. :)
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Re: Is "stay the course" a commandment or a suggestion?

Post by MathWizard » Mon Jan 05, 2015 2:48 pm

I view it as advice.

If you cannot say with a fair degree of certainty that you will stay the course, then you have the
wrong AA.

Perhaps you might think of it instead as "take the long view", or "plan ahead".
When I first started driving, I peered at the road immediately in front of the car afraid of going out of my lane, and
consequently changing course making too much of a course correction, then having to correct again. I must have
looked like a drunk on the road. Trusting to fix my gaze on a far off goal a mile down the road allowed me to take
a rock-solid path in the middle of the lane. Obviously, course corrections are required when circumstance change.
In finances, retirement, huge windfalls, layoffs, require adjustments, but rarely is a quick jerk of the wheel necessary
or even helpful.

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Re: Is "stay the course" a commandment or a suggestion?

Post by retiredjg » Mon Jan 05, 2015 2:56 pm

englishgirl wrote:the brothers???
I was wondering the same thing. :?

I love the idea of staying the course, but you have to keep the lighthouse story in mind. Sometimes staying the course requires a detour.

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Re: Is "stay the course" a commandment or a suggestion?

Post by Munir » Mon Jan 05, 2015 3:08 pm

englishgirl wrote:the brothers??? :shock:
+1.

Can we also skip all the "shipmates" expressions?

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Re: Is "stay the course" a commandment or a suggestion?

Post by Aptenodytes » Mon Jan 05, 2015 3:09 pm

1) No matter how high the pedestal we put him on, Bogel is not a god, and doesn't get to issue commandments any more than anyone else. So of course what he says is a suggestion.

2) Longinvest posts the most doctrinaire reading of the meaning, but my guess is that fewer than 5% of the people on this forum actually subscribe to it in our heart of hearts. It requires that we never change our AAs ever. There's a selection bias here, though. Adherents of this view would have nothing to learn on this forum and are far less likely to spend time here than people who are open to making some selective changes now and then and find this a convivial place to discuss such options. Perhaps in the entire universe of Bogelheads the view is more common; those that really believe it aren't wasting time on this forum.

3) The less doctrinaire reading would be something like this: "Stay the course" is an admonition to place a very high priority on avoiding the well-known traps that undisciplined investors make -- don't change your investments based on recent returns; don't adjust your plan because of what you hear on the news; don't try to anticipate what the market is going to do. Sound reasons may emerge for changing your plan, however. Your life circumstances may change in ways you didn't initially foresee. New financial instruments may become available at low cost; new evidence may come to light about alternative strategies. If you adjust, however, do so in a calm, deliberate, and above-all evidence-based manner. Take time to thoroughly understand the contemplated change from all relevant angles. Anticipate how such a change will subject your portfolio to new risks and be very clear that you are willing to accept them. Be as objective as you possibly can in weighing the evidence, pro and con. And make a firm plan to stick to your new plan for a long time before reconsidering it -- if you are fearful of making a commitment to stick with the new plan for 10 years, don't make the change.

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Re: Is "stay the course" a commandment or a suggestion?

Post by Christine_NM » Mon Jan 05, 2015 3:11 pm

englishgirl wrote:the brothers??? :shock:
OP, you have more to worry about than staying the course... :D

So stay the course and attend to that which may need some fixing.
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Re: Is "stay the course" a commandment or a suggestion?

Post by dkturner » Mon Jan 05, 2015 3:27 pm

longinvest wrote:I would say that it means:
Bogleheads investment philosophy wrote: Create an asset allocation that includes bonds to reduce the volatility caused by the stock part of your portfolio, then rebalance when needed. This balanced approach will help you to stay the course. Once you set up a Boglehead portfolio, the only real course correction needed is to rebalance once per year to bring the stock/bond allocations back to pre-set levels. (Investors generally want to increase bond holdings slightly every year, such as by setting the percentage of bonds "to your age in bonds".) Although making only that one change every year takes discipline, it is also an enormous relief to be able to tune out the endless chatter of when and what to buy and sell.
Source: wiki:Bogleheads investment philosophy:Stay the course
But Jack Bogle doesn't do it that way. By his own admission he made a large reduction in his equity allocation in 1999 because he thought equities were selling at too high a price. And, earlier this decade he decreased his allocation to government bonds because their yield was too low compared to investment grade corporate bonds. He's also on record commenting that the Vanguard Total Bond Index Fund doesn't reflect the way investors actually allocate their fixed income investments. And he doesn't rebalance, annually or otherwise.

Somehow or other Jack Bogle doesn't strike me as a "do as I say, not as I do" type of guy.

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Re: Is "stay the course" a commandment or a suggestion?

Post by FreeAtLast » Mon Jan 05, 2015 3:33 pm

Aptenodytes: Excellent post!
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Re: Is "stay the course" a commandment or a suggestion?

Post by Leeraar » Mon Jan 05, 2015 3:34 pm

dkturner wrote:Just curious about how the brothers interpret Jack Bogle's oft quoted phrase, "stay the course" :?:
I always thought it is a slogan to remind you to stick with your plan.

L.
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Re: Is "stay the course" a commandment or a suggestion?

Post by fposte » Mon Jan 05, 2015 3:36 pm

I don't think either is quite right, but I especially disagree with "commandments," which suggests a deification. Nobody suggesting "stay the course" has smiting power, as far as I know; they're just saying that's likely to get you to where you want to go. If you don't, it's not like society collapses or you don't go to heaven.

I think the short aphorisms like "Stay the course" are most useful as reminders when you're uncertain; it's the investor's version of "Don't panic." I don't think that notion forbids you cool-headedly recasting your course in a planned reexamination of your IPS.

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Re: Is "stay the course" a commandment or a suggestion?

Post by tetractys » Mon Jan 05, 2015 3:39 pm

Munir wrote:
englishgirl wrote:the brothers??? :shock:
+1.

Can we also skip all the "shipmates" expressions?
There is a certain clubbiness to this form. However it can't really be attributed to the more reasonable members, although some of them seeking clientele here do engage their hooks judiciously.

Stay the course; but avoid icebergs and other navigational hazards. -- Tet

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Re: Is "stay the course" a commandment or a suggestion?

Post by epilnk » Mon Jan 05, 2015 3:55 pm

I think it means stay with whatever course you set in advance, in order to keep you from making decisions in the moment in response to temporary conditions or upheavals. But that means choosing a course that you are willing to stay with, so if you've done that, you should follow through.

You don't need to pick one thing and stick with it forever - I reevaluate mine every year after I file taxes. Your course can even specify changes in response to market conditions if you like. If your IPS says to sell all equities and move to bonds at the first sign of a correction, or to overweight sectors using a TAA strategy, or to automatically adjust your stock/bond ratio in case of a major life event, or to move everything to treasuries if the yield curve inverts, or to switch to backup plan B in case of X - whatever you decide, that's fine; it's your course to stay. The important thing is that you've thought this out in advance and you're not panicking and making bad decisions in the moment. That's why you stay the course.

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Re: Is "stay the course" a commandment or a suggestion?

Post by BigJohn » Mon Jan 05, 2015 4:26 pm

Aptenodytes wrote:The less doctrinaire reading would be something like this: "Stay the course" is an admonition to place a very high priority on avoiding the well-known traps that undisciplined investors make -- don't change your investments based on recent returns; don't adjust your plan because of what you hear on the news; don't try to anticipate what the market is going to do. Sound reasons may emerge for changing your plan, however. Your life circumstances may change in ways you didn't initially foresee. New financial instruments may become available at low cost; new evidence may come to light about alternative strategies. If you adjust, however, do so in a calm, deliberate, and above-all evidence-based manner. Take time to thoroughly understand the contemplated change from all relevant angles. Anticipate how such a change will subject your portfolio to new risks and be very clear that you are willing to accept them. Be as objective as you possibly can in weighing the evidence, pro and con. And make a firm plan to stick to your new plan for a long time before reconsidering it -- if you are fearful of making a commitment to stick with the new plan for 10 years, don't make the change.
I think it means this..... very well written Aptenodytes

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Re: Is "stay the course" a commandment or a suggestion?

Post by Fallible » Mon Jan 05, 2015 4:58 pm

englishgirl wrote:the brothers??? :shock:
+1 and joining you in :shock:
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Re: Is "stay the course" a commandment or a suggestion?

Post by nedsaid » Mon Jan 05, 2015 5:04 pm

Fallible wrote:
englishgirl wrote:the brothers??? :shock:
+1 and joining you in :shock:
Did I miss something? Is there a secret handshake or something?
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Re: Is "stay the course" a commandment or a suggestion?

Post by dkturner » Mon Jan 05, 2015 5:09 pm

Fallible wrote:
englishgirl wrote:the brothers??? :shock:
+1 and joining you in :shock:
I was just curious about how many female posters frequent this forum. :wink:

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Re: Is "stay the course" a commandment or a suggestion?

Post by nedsaid » Mon Jan 05, 2015 5:11 pm

I think what Mr. Bogle means is to stick with your plan. Don't sell your stocks at or near the bottom. Don't chase investment styles and ultimately performance. Don't make wild changes in your asset allocation. I think he does allow for adjustments according to life circumstances and/or market conditions. What I mean by market conditions would be extremes in asset class valuation or extremes in investor sentiment. Most of the time, the best thing to do in times of market turbulence is nothing.

We have talked about tactical asset allocation a lot. I don't do this without a lot of thought beforehand and then I look for a good opportunity to execute the change. A good rebalancing program will take care of a lot of this.
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Re: Is "stay the course" a commandment or a suggestion?

Post by BTDT » Mon Jan 05, 2015 5:14 pm

Goal? Recommendation? Suggestion? but definitely not a commandment e.g. from Merriam-Webster Dictionary;
com·mand·ment
noun \kə-ˈman(d)-mənt\

: an important rule given by God that tells people how to behave
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Re: Is "stay the course" a commandment or a suggestion?

Post by Fallible » Mon Jan 05, 2015 5:18 pm

Staying the course to me is generally staying the course you set with your AA based on your financial and personal risk tolerance and with help from a properly written IPS. The key is setting the right course in the first place, in particular determining as best you can how much emotional risk you can tolerate in a market downturn/crash/crisis.

Larry Swedroe and Rick Ferri are among our pro Bogleheads who have written blogs and books on when a change in course is justified/needed, basically in response to a major change in life or a major miscalculation in the initial AA.
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Re: Is "stay the course" a commandment or a suggestion?

Post by livesoft » Mon Jan 05, 2015 5:22 pm

Stay the course means to me to continue to follow my IPS which of course has a few rules for market timing. Thus, for me "stay the course" means be sure to do market timing.
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Re: Is "stay the course" a commandment or a suggestion?

Post by itstoomuch » Mon Jan 05, 2015 5:37 pm

Depends on where you are in the retirement savings
If you are just starting, stay the course is very good.
If you are just ending, it could be very bad.

So where are you?
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Re: Is "stay the course" a commandment or a suggestion?

Post by Fallible » Mon Jan 05, 2015 5:42 pm

livesoft wrote:Stay the course means to me to continue to follow my IPS which of course has a few rules for market timing. Thus, for me "stay the course" means be sure to do market timing.
But if there are "rules," is it still market timing? :)
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Re: Is "stay the course" a commandment or a suggestion?

Post by livesoft » Mon Jan 05, 2015 5:54 pm

Fallible wrote:
livesoft wrote:Stay the course means to me to continue to follow my IPS which of course has a few rules for market timing. Thus, for me "stay the course" means be sure to do market timing.
But if there are "rules," is it still market timing? :)
You are right, I meant to write "opportunistic rebalancing."
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Re: Is "stay the course" a commandment or a suggestion?

Post by Sagenick48 » Mon Jan 05, 2015 6:30 pm

There are no answers, only suggestions, that we view through the lens of an imperfect lens, you'se pays you'rse money and you'se takes you'rse chances. You'se do it enough times at lowest cost and you wins.
The market goes up, the market goes down.

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Re: Is "stay the course" a commandment or a suggestion?

Post by Buddtholomew » Mon Jan 05, 2015 6:33 pm

I take the phrase literally. How else would one re-balance their portfolio after a 50% decline in equities? There are always reasons to make adjustments, no matter how well thought-out they appear at the time. Your mind works in mysterious ways under financial duress. Trusting your gut is not an investment philosophy I am willing to explore further. I already know how that chapter ended.
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Re: Is "stay the course" a commandment or a suggestion?

Post by rjm_cali » Mon Jan 05, 2015 6:38 pm

I'd suggest Aptenodyte's post just about has it.

Stay your course is what it seems to me, most people on here do. At the core of that are the base factors covered by Aptenodyte's post to which we all add our own ideas of route planning. I will market time by buying in a dip of a size that makes me think it "worthwhile" such as back in October but only with a view to then not selling for quite some time - just another form of DCA while I have cash I wish to move into the market. Eventually I will be all in so from then it will be rebalancing but only based on my AA.

Am I following the straight and narrow course ? Probably not but compared to what I was doing (or more accurately - not doing) before I've got a much clearer idea where I'm heading and I'm with the right coach party.

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Re: Is "stay the course" a commandment or a suggestion?

Post by dbr » Mon Jan 05, 2015 6:53 pm

Aptenodytes wrote: 3) The less doctrinaire reading would be something like this: "Stay the course" is an admonition to place a very high priority on avoiding the well-known traps that undisciplined investors make -- don't change your investments based on recent returns; don't adjust your plan because of what you hear on the news; don't try to anticipate what the market is going to do. Sound reasons may emerge for changing your plan, however. Your life circumstances may change in ways you didn't initially foresee. New financial instruments may become available at low cost; new evidence may come to light about alternative strategies. If you adjust, however, do so in a calm, deliberate, and above-all evidence-based manner. Take time to thoroughly understand the contemplated change from all relevant angles. Anticipate how such a change will subject your portfolio to new risks and be very clear that you are willing to accept them. Be as objective as you possibly can in weighing the evidence, pro and con. And make a firm plan to stick to your new plan for a long time before reconsidering it -- if you are fearful of making a commitment to stick with the new plan for 10 years, don't make the change.
Like virtually all the phrases that one might apply to investing "stay the course" is a reference to a larger discussion which one needs to understand and that may have variations and nuances. The above is perhaps an abstract for that discussion. The full published document lurks in many places but perhaps can be had mostly by reading any of the various good books on investing one might suggest here.

Thus "stay the course" is certainly not a commandment but also certainly far more than a suggestion.

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Re: Is "stay the course" a commandment or a suggestion?

Post by steve roy » Mon Jan 05, 2015 6:57 pm

Stay the Course = "Remain on the path to investing salvation ... with prudent adjustments along the way."

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Re: Is "stay the course" a commandment or a suggestion?

Post by columbia » Mon Jan 05, 2015 10:10 pm

My interpretation of this is to always hold enough bonds to limit the distractions on your long term investment goals and/or short term withdrawal needs.

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Re: Is "stay the course" a commandment or a suggestion?

Post by S&L1940 » Mon Jan 05, 2015 11:16 pm

steve roy wrote:Stay the Course = "Remain on the path to investing salvation ... with prudent adjustments along the way."
I will go with that; "stay the course" is the strategy with your own flavor of asset growth, diversity and risk
Course adjustments are the tactics to allow for lifestyle and economic conditions while keeping the course destination as my goal.
There, I think that is enough ambiguity
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Re: Is "stay the course" a commandment or a suggestion?

Post by pingo » Tue Jan 06, 2015 8:39 am

longinvest wrote:I would say that it means:
Bogleheads investment philosophy wrote: Create an asset allocation that includes bonds to reduce the volatility caused by the stock part of your portfolio, then rebalance when needed. This balanced approach will help you to stay the course. Once you set up a Boglehead portfolio, the only real course correction needed is to rebalance once per year to bring the stock/bond allocations back to pre-set levels. (Investors generally want to increase bond holdings slightly every year, such as by setting the percentage of bonds "to your age in bonds".) Although making only that one change every year takes discipline, it is also an enormous relief to be able to tune out the endless chatter of when and what to buy and sell.
Source: wiki:Bogleheads investment philosophy:Stay the course
dkturner wrote:But Jack Bogle doesn't do it that way. By his own admission he made a large reduction in his equity allocation in 1999 because he thought equities were selling at too high a price. And, earlier this decade he decreased his allocation to government bonds because their yield was too low compared to investment grade corporate bonds. He's also on record commenting that the Vanguard Total Bond Index Fund doesn't reflect the way investors actually allocate their fixed income investments. And he doesn't rebalance, annually or otherwise.

Somehow or other Jack Bogle doesn't strike me as a "do as I say, not as I do" type of guy.
Just bouncing off longinvest and dkturner

Long before he was canonized as a saint, young John C. Bogle was an investor. Boglehead-ish principles didn't exist and he didn't exactly create them, anyway. "Bogleheads" means "fans of Bogle", those of us that identify with a lot (not all) of what John Bogle expresses and who appreciate his example and character, extolling his virtues for what he has accomplished for the average investor: low cost index funds that all have their heritage in the now-titan S&P 500 Fund he started. There is also a lot Bogle has said and written than can help us non-experts identify sage ways to guide our own style of navigating markets, some of which is memorialized on this site. Some of what he says is for us; some of it about himself; all of it worth noting.

John Clifton Bogle's early schooling and experiences led him to invest as an investor does: looking forward. Stocks? They have earnings and prices and dividends from which one decides whether the risk is worth the expected return, which doesn't always materialize. Bonds? They are for their income-producing dividends, have a future expected returns based on current dividends, risks based on their duration, and they tend to be less volatile than stocks. One diversifies the other; an investor benefits from holding both.

St. Jack continues to invest in a forward looking manner to this day. He's neither a prophet nor a prognosticator (or "pornosticator" as Larry Swedroe likes to say). He weighs his decisions on reasonable expectations for the asset classes he is willing to embrace. When bond spreads and reasonable return expectations matched his willingness to accept the incrementally higher risk of corporate bonds, he decided to pull more into his portfolio. The additional fluctuation of corporate bonds is of little concern because he does not head for the hills when assets occasionally buckle. He has accepted that it's part and parcel with the return he expects. It's the same with stocks. And I believe it is what he means by "staying the course".

In other words, when Mr. Bogle has decided to accept a certain level of risk, he expects the risk to accompany the return and he does not alter course when that risk shows up. (One notable exception that in a way proves the rule is when he invested in international stocks, of which he has always been leery. When storms raged, he realized quickly that he is not willing to accept the risks of foreign markets regardless of valuations or potential portfolio diversification.)

Research has followed that is in harmony with his early thesis that an index fund would serve investors without the need for costly active management. But he's not a rebalancer. Why should he be? Rebalancing is a way for people like us to gage and maintain a level of risk, but we do not invest like him! He doesn't invest for the "rebalancing bonus" idea that was once made popular in the works of Ferri, Bernstein, Swedroe, Bogleheads.org, etc. He doesn't subscribe to holding only short-term bonds/treasuries for their risklessness as advocated by Berstein, or only intermediate-term treasuries for their negative-correlation with equities as advocated by Swedroe, or parceling out bonds between Total Bond, High Yield, TIPS (and eventually International Bonds) as preferred by Ferri. (All reasonable approaches, mind you.) He'd rather let his investments run their course than worry about rebalancing. When he's on CNBC saying "stay the course!" and "don't just do something, stand there!", he's trying to get the word out to the poor nincompoops and financial porn addicts that can't leave their investments alone, knowing that inactivity wins out over hyperactivity.

In fact, "stay the course" is most specifically about making a few good choices and avoiding major mistakes, which notably are to avoid what most investors did during the 2008 stock market crash: cutting and running mid-course and losing out on the benefit of recovery; listening to market noise. "Stay the course" is more about not letting market fear/euphoria/sensationalism direct investment decisions; keeping the long view. For some reason, investors look to the recent past as a guide to the future and then confuse it with being "forward-looking". I have have met more than a few "long-term investors" that cannot see that they are nothing but short-term market timers.

When forward looking valuations are extreme, Bogle abandons neither stock nor bond, generally speaking. He adjusts them based on his willingness, need and tolerance for the forward-looking returns/risks they represent, always knowing he could be wrong. It's all a part of being the investor that he is.
Last edited by pingo on Tue Nov 17, 2015 7:55 pm, edited 3 times in total.

dkturner
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Re: Is "stay the course" a commandment or a suggestion?

Post by dkturner » Tue Jan 06, 2015 10:11 am

pingo wrote:
longinvest wrote:I would say that it means:
Bogleheads investment philosophy wrote: Create an asset allocation that includes bonds to reduce the volatility caused by the stock part of your portfolio, then rebalance when needed. This balanced approach will help you to stay the course. Once you set up a Boglehead portfolio, the only real course correction needed is to rebalance once per year to bring the stock/bond allocations back to pre-set levels. (Investors generally want to increase bond holdings slightly every year, such as by setting the percentage of bonds "to your age in bonds".) Although making only that one change every year takes discipline, it is also an enormous relief to be able to tune out the endless chatter of when and what to buy and sell.
Source: wiki:Bogleheads investment philosophy:Stay the course
dkturner wrote:But Jack Bogle doesn't do it that way. By his own admission he made a large reduction in his equity allocation in 1999 because he thought equities were selling at too high a price. And, earlier this decade he decreased his allocation to government bonds because their yield was too low compared to investment grade corporate bonds. He's also on record commenting that the Vanguard Total Bond Index Fund doesn't
reflect the way investors actually allocate their fixed income investments. And he doesn't rebalance, annually or otherwise.

Somehow or other Jack Bogle doesn't strike me as a "do as I say, not as I do" type of guy.
Just bouncing off longinvest and dkturner

Long before he was canonized as a saint, young John C. Bogle was an investor. Boglehead-ish principles didn't exist and he didn't exactly create them, anyway. "Bogleheads" means "fans of Bogle", those of us that identify with a lot (not all) of what John Bogle expresses and who appreciate his example and character, extolling his virtues for what he has accomplished for the average investor: low cost index funds that all have their heritage in the now-titan S&P 500 Fund he started. There is also lot Bogle has said and written than can help us non-experts identify sage ways to guide our own style of navigating markets, some of which is memorialized on this site. Some of what he says is for us; some of it about himself; all of it worth noting.

John Clifton Bogle's early schooling and experiences led him to invest as an investor does: looking forward. Stocks? They have earnings and prices and dividends from which one decides whether the risk is worth the expected return, which doesn't always materialize. Bonds? They are for their income-producing dividends, have a future expected returns based on current dividends, risks based on their duration, and they tend to be less volatile than stocks. One diversifies the other; an investor benefits from holding both.

St. Jack continues to invest in a forward looking manner to this day. He's neither a prophet nor a prognosticator (or "pornosticator" as Larry Swedroe likes to say). He weighs his decisions on reasonable expectations for the asset classes he is willing to embrace. When bond spreads and reasonable return expectations matched his willingness to accept the incrementally higher risk of corporate bonds, he decided to pull more into his portfolio. The additional fluctuation of corporate bonds is of little concern because he does not head for the hills when assets occasionally buckle. He has accepted that it's part and parcel with the return he expects. It's the same with stocks. And I believe it is what he means by "staying the course".

In other words, when Mr. Bogle has decided to accept a certain level of risk, he expects the risk to accompany the return and he does not alter course when that risk shows up. (One notable exception that in a way proves the rule is when he invested in international stocks, of which he has always been leery. When storms raged, he realized quickly that he is not willing to accept the risks of foreign markets regardless of valuations or potential portfolio diversification.)

Research that has followed that is in harmony his early thesis that an index fund would serve investors without the need for costly active management. But he's not a rebalancer. Why should he be? Rebalancing is a way for people like us to gage and maintain a level of risk, but we do not invest like him! He doesn't invest for the "rebalancing bonus" idea that was once made popular in the works of Ferri, Bernstein, Swedroe, Bogleheads.org, etc. He doesn't subscribe to holding only short-term bonds/treasuries for their risklessness as advocated by Berstein, or only intermediate-term treasuries for their negative-correlation with equities as advocated by Swedroe, or parceling out bonds between Total Bond, High Yield, TIPS (and eventually International Bonds) as preferred by Ferri. (All reasonable approaches, mind you.) He'd rather let his investments run their course. When he's on CNBC saying "stay the course!" and "don't just do something, stand there!", he's trying to get the word out to the poor nincompoops and financial porn addicts that can't leave their investments alone, knowing that inactivity wins out over hyperactivity.

In fact, "stay the course" is most specifically about making a few good choices and avoiding major mistakes, which notably are to avoid what most investors did during the 2008 stock market crash: cutting and running mid-course and losing out on the benefit of recovery; listening to market noise. "Stay the course" is more about not letting market fear/euphoria/sensationalism direct investment decisions; keeping the long view. For some reason, investors look to the recent past as a guide to the future and then confuse it with being "forward-looking". I have have met more than a few "long-term investors" that cannot see that they are nothing but short-term market timers.

When forward looking valuations are extreme, Bogle abandons neither stock nor bond, generally speaking. He adjusts them based on his willingness, need and tolerance for the forward-looking returns/risks they represent, always knowing he could be wrong. It's all a part of being an investor.
Best description of the real Jack Bogle I have seen! A complex individual who does things his own way, because that's what works for him.Your comments reinforce my suspicion that Jack's oft quoted maxims are primarily designed for investors (including a lot of really smart people) who lack self discipline and frequently engage in destructive behavior at the worst possible times. Successful investing is largely counterintuitive, which probably explains why there are so few successful investors.

roamin survivor
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Re: Is "stay the course" a commandment or a suggestion?

Post by roamin survivor » Tue Jan 06, 2015 10:43 am

Suggestion. Kind of like a financial equivalent to having "DON'T PANIC" in large, friendly letters.

Preferably on the cover of a common sense investing book that has outsold The Bogleheads' Guide to Investing because it is slightly cheaper.

sls239
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Re: Is "stay the course" a commandment or a suggestion?

Post by sls239 » Tue Jan 06, 2015 10:54 am

It is a default mode.

pingo
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Re: Is "stay the course" a commandment or a suggestion?

Post by pingo » Tue Jan 06, 2015 9:24 pm

roamin survivor wrote:Suggestion. Kind of like a financial equivalent to having "DON'T PANIC" in large, friendly letters.

Preferably on the cover of a common sense investing book that has outsold The Bogleheads' Guide to Investing because it is slightly cheaper.
Nice!

I'd love to see that little green guy in the shape of a ball with two arms and a big smile on the cover of Common Sense on Mutual Funds, The Little Book of Common Sense Investing, or The Boglehead's Guide to the galaxy, er, investing. It's also cool to realize that science fantasy has more or less become science fact: I can hold a digital copy of all three "guides" on a chip no bigger than my thumbnail.

:D

pingo
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Re: Is "stay the course" a commandment or a suggestion?

Post by pingo » Tue Jan 06, 2015 9:34 pm

Oh! Check this out. Robert T quotes Common Sense on Mutual Funds regarding "staying the course" and "mid-course correction": http://www.bogleheads.org/forum/viewtop ... d#p1869331
Last edited by pingo on Tue Jan 06, 2015 9:50 pm, edited 1 time in total.

SP-diceman
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Re: Is "stay the course" a commandment or a suggestion?

Post by SP-diceman » Tue Jan 06, 2015 9:37 pm

It's the only choice we have.
It's a reminder we're human.

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joe8d
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Re: Is "stay the course" a commandment or a suggestion?

Post by joe8d » Tue Jan 06, 2015 9:55 pm

Just means not making any knee jerk reactions to market conditions.
All the Best, | Joe

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obgyn65
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Re: Is "stay the course" a commandment or a suggestion?

Post by obgyn65 » Wed Jan 07, 2015 5:08 am

"Stay the course" is just a suggestion to me.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell

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midareff
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Re: Is "stay the course" a commandment or a suggestion?

Post by midareff » Wed Jan 07, 2015 9:03 am

I take it as a strong recommendation. Market ups and downs don't bother me, I stay the course. I have a written IP and I do modify it from time to time over the last dozen years, so that isn't staying the course, unless following the revised IP is staying the course. I do look at everything in detail at least once a year as to relative value, year's performance and rebalance as/when appropriate. I also followed a glide path to roughly 48/48/4, near retirement and now 45/51/4 .. I suppose if that's what the IP says it is staying the course.

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Re: Is "stay the course" a commandment or a suggestion?

Post by Dandy » Wed Jan 07, 2015 9:09 am

I think that in general Jack means that you should stick to your plan. But, since he, on occasion, doesn't that makes it less than a commandment for him and his followers. Most recently he said that if the equity market was significantly overvalued that a person might change his allocation from 65% to 50%. He said that in mid 2014 and felt the market was not significantly overvalued at that time. He has also indicated his issues with Total Bond Fund allocating too much to government bonds and suggested adding more corporate bonds.

So I feel he suggests stay the course unless there are extreme changes which should occur infrequently. To illustrate that approach he didn't feel people should make minor adjustments to their equity allocations when markets seemed overvalued - only a relatively large change when the markets were extremely overvalued. The changes to the course aren't made due to fear or greed but due to some objective analysis.

I believe stay the course is a pretty firm recommendation but not a commandment. When you think about it most of us are trying to set a course to follow for decades and to say that you can determine the exact allocation and sub allocations that will make sense over that time frame is pretty optimistic. The risk is that people will determine that if it is less than a commandment they will drift into fear/greed/media based frequent changes that will likely be counter productive.

Diversification and low cost seem much more commandment like.

core4portfolio
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Re: Is "stay the course" a commandment or a suggestion?

Post by core4portfolio » Wed Jan 07, 2015 9:47 am

When I was in Atlanta last year, I have a nice learning while driving to city.
At any point of time, only one lane is moving faster but not all the lanes.

So if you are in 3 or 5 or last, no matters you will get your chance to move faster
I tested this by staying in just one lane every day instead of jumping the lane which goes faster.

Close enough, all of them reached the destination point with just very few mins difference.
So much of tension in changing lanes here and there to gain few seconds is not worth

So just stay in one lane you choose and so as "stay the course" based on your IPS
Swapping here and there will not work even in investment.... :)
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

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