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

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

Post by staythecourse » Wed Jan 07, 2015 10:16 am

I would put "stay the course" closer to a commandment then not. Once you decide on an asset allocation you should NOT be changing it unless something changes in YOUR (the investors) willingness, ability, or need to take risk. That means the only reasons NOT to stay the course is if something changes in YOUR circumstances and not the investing world.

As we have seen even recently with that fascinating, but not surprising study by Fidelity the folks who did not touch, i.e. alter their accounts ended up doing better then those who did. Odean and Barber from ?St. Barbara found the same thing a while ago showing those who traded more did worse.

It is very difficult for folks to accept that investing is as simple as set and forget (except rebalancing).

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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

Post by steve r » Wed Jan 07, 2015 10:35 am

staythecourse wrote:I would put "stay the course" closer to a commandment then not. ....

As we have seen even recently with that fascinating, but not surprising study by Fidelity the folks who did not touch, i.e. alter their accounts ended up doing better then those who did.

It is very difficult for folks to accept that investing is as simple as set and forget (except rebalancing).

Good luck.


+1
My personal experience matches that very well. This is why having a plan is so critical.

The account/funds I contribute to are more bond orientated than my current main holdings which increases my bonds with age. My international/domestic / REIT / fund selection ratios were well thought out.

Not thinking about day to day financial dribble is a real plus once you get used to the initial boredom that kicks in after spending many months developing, reading about, and thinking about a plan I can stick with for decades.
Maximize Diversification - Minimize Costs - Avoid Lotteries

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

Post by dkturner » Wed Jan 07, 2015 10:52 am

staythecourse wrote:I would put "stay the course" closer to a commandment then not. Once you decide on an asset allocation you should NOT be changing it unless something changes in YOUR (the investors) willingness, ability, or need to take risk. That means the only reasons NOT to stay the course is if something changes in YOUR circumstances and not the investing world.

As we have seen even recently with that fascinating, but not surprising study by Fidelity the folks who did not touch, i.e. alter their accounts ended up doing better then those who did. Odean and Barber from ?St. Barbara found the same thing a while ago showing those who traded more did worse.

It is very difficult for folks to accept that investing is as simple as set and forget (except rebalancing).

Good luck.


If we are to accept your perfectly reasonable interpretation of "stay the course" what are we supposed to make of Bogleheads luminary Rick Ferri? In case you missed the recent post on his website, and the thread discussing it on this website, he's telling us that he expects a major meltdown in foreign markets in 2015. When/if that occurs he said he'll increase foreign exposure from 30% to 50% - and plans on maintaining it for the balance of the decade. Is Rick's announcement an indication that he thinks "stay the course" is only a suggestion, or are there times when market conditions put the concept on hold because of a once in a decade opportunity to possibly make a major enhancement to value of our portfolios?

Is Rick really a Boglehead?

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

Post by BigJohn » Wed Jan 07, 2015 11:03 am

FWIW, I disagree with staythecourse that only changes in your personal circumstances can/should result in a change in your IPS. Taking an example from the past, if my IPS was created when TIPS did not exist, does it make any sense to ignore that development and not consider adding them? No one can predict the future and I'm certainly not advocating frequent changes but adjustments to real world developments over a 10 year period with lots of due diligence and deliberation do not constitute "market timing" in my book.

As for the suggestion that Rick isn't a Boglehead based on his plans to change his strategy, that's just nonsense.

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

Post by steve r » Wed Jan 07, 2015 11:10 am

dkturner wrote:If we are to accept your perfectly reasonable interpretation of "stay the course" what are we supposed to make of Bogleheads luminary Rick Ferri? In case you missed the recent post on his website, and the thread discussing it on this website, he's telling us that he expects a major meltdown in foreign markets in 2015. When/if that occurs he said he'll increase foreign exposure from 30% to 50% - and plans on maintaining it for the balance of the decade. Is Rick's announcement an indication that he thinks "stay the course" is only a suggestion, or are there times when market conditions put the concept on hold because of a once in a decade opportunity to possibly make a major enhancement to value of our portfolios?

Is Rick really a Boglehead?


In that same article you cite
"I make investment changes at a glacial speed. The last change was about five years ago when I ..." I would say he very much stays the course. Yes, Rick is very much a BH. He also states that he "may" make some changes.

On his changes .... increasing global bonds makes sense due to the ease and low cost at which this can now be done ... this is a new structural type shift that will come up even while staying the course. This is similar to BIGJOHN adding TIPS when available (prior post).

Rick also states: "Now I’m planning a move toward a neutral global mix. I believe the opportunities outside the U.S. ..." does not strike me as market timing or anything other than having his portfolio reflect market capitalization rates which some BHs feel is the only weight of international/U.S. worth considering. Opinions on this will very.

When changing a portfolio asset allocation, it is advised to plan such a change many months ahead of time. This is exactly what he is doing (IMHO).
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dkturner
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Re: Is "stay the course" a commandment or a suggestion?

Post by dkturner » Wed Jan 07, 2015 1:39 pm

steve r wrote:
Rick also states: "Now I’m planning a move toward a neutral global mix. I believe the opportunities outsid the U.S. ..." does not strike me as market timing or anything other than having his portfolio reflect market capitalization rates which some BHs feel is the only weight of international/U.S. worth considering. Opinions on this will very.



Excellent summary of Rick's us vs. them asset allocation plan. But wait. What does Rick mean when he says: "This isn't to say I'm bearish on the US. This shift just puts my portfolio closer to a global market allocation, which is where I want it to be during the second half of this decade." :?: "where I want it to be during the second half of this decade" sounds to me like he senses a multi year opportunity and he wants to take advantage of it on behalf of his clients. The last time foreign stocks outperformed domestic stocks (2002-2009) it was a relatively long 8 year period. Do you really believe he'll be able to sell a permanent 50/50 us vs them portfolio to the average guy on the street? Most of these people aren't academics. They have trouble adjusting to substantial foreign stock ownership - unless, of course, foreign stocks are outperforming domestic stocks. I think Rick is embracing classic Jack Bogle investment management philosophy (as practiced by the man) and I commend him for it.

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

Post by Leeraar » Thu Jan 08, 2015 1:10 pm

Warning to Rick: "Nobody expects the Spanish Inquisition." (Monty Python)

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

Post by dognose » Thu Jan 08, 2015 2:10 pm

It's definitely a commandment. If you break it, you're off to Bogleheads Prison, where you'll spend hard time among various unsavory characters, including market timers, individual stock pickers, and those who have been found guilty of holding actively managed funds.

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

Post by Fallible » Thu Jan 08, 2015 3:22 pm

dognose wrote:It's definitely a commandment. If you break it, you're off to Bogleheads Prison, where you'll spend hard time among various unsavory characters, including market timers, individual stock pickers, and those who have been found guilty of holding actively managed funds.

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

Post by chaz » Thu Jan 08, 2015 3:26 pm

Fallible wrote:
dognose wrote:It's definitely a commandment. If you break it, you're off to Bogleheads Prison, where you'll spend hard time among various unsavory characters, including market timers, individual stock pickers, and those who have been found guilty of holding actively managed funds.

:D

+1!
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epilnk
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Re: Is "stay the course" a commandment or a suggestion?

Post by epilnk » Thu Jan 08, 2015 3:42 pm

steve r wrote:Rick also states: "Now I’m planning a move toward a neutral global mix. I believe the opportunities outside the U.S. ..." does not strike me as market timing or anything other than having his portfolio reflect market capitalization rates which some BHs feel is the only weight of international/U.S. worth considering. Opinions on this will very.

When changing a portfolio asset allocation, it is advised to plan such a change many months ahead of time. This is exactly what he is doing (IMHO).


Yes, it sounds like he's charted a course here. In this case, making a specific change in response to specific market conditions would count as 'staying the course'; so would leaving his portfolio alone should those conditions not materialize.

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