The More I learn, the fewer changes I make

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
IndexBeliever
Posts: 67
Joined: Mon Jun 09, 2014 10:39 am

The More I learn, the fewer changes I make

Post by IndexBeliever » Fri Mar 06, 2015 3:58 pm

I find it interesting that finance is completely different than most of life. For example, if you want to get ahead in business, the more research you do, polls, surveys, people you meet and time you put into it, the more successful business you may have. It seems like in personal investing, the more I learn the less changes I should make. One would think if you keep reading/learning that you will make several changes to your portfolio and do very well. Most of what I've read lately proves the opposite. Set your money in a lazy 3 fund portfolio, target date fund or the like and forget it. Don't time interest rate changes or stock market swings.

I know it's not question, just wanted to put it out there. I read this forum daily and have learned so much. Thanks to all. :beer
Last edited by IndexBeliever on Fri Mar 06, 2015 8:47 pm, edited 1 time in total.

User avatar
Taylor Larimore
Advisory Board
Posts: 28948
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: The More I learn, the Less changes I make

Post by Taylor Larimore » Fri Mar 06, 2015 4:28 pm

IndexBeliever wrote:I find it interesting that finance is completely different than most of life. For example, if you want to get ahead in business, the more research you do, polls, surveys, people you meet and time you put into it, the more successful business you may have. It seems like in personal investing, the more I learn the less changes I should make. One would think if you keep reading/learning that you will make several changes to your portfolio and do very well. Most of what I've read lately proves the opposite. Set your money in a lazy 3 fund portfolio, target date fund or the like and forget it. Don't time interest rate changes or stock market swings.

I know it's not question, just wanted to put it out there. I read this forum daily and have learned so much. Thanks to all.
Index Believer:

Your post reminds me of what Mr. Bogle wrote in his "Forward" to The Bogleheads' Guide to Investing:
"They (the authors) note that relying on the typical common sense approaches that apply to most of life's challenges is 'destined to leave you poorer." For example, they warn against following life principles like these:

*If you don't know how to do something...hire an expert.
*You get what you pay for.
*If there's a crisis, take action!
*The best predictor of future performance is past performance.

In short, the principles that work in most aspects of our daily lives simply leads to failure in investing.
You learned your lesson well!

Congratulations and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
nisiprius
Advisory Board
Posts: 39738
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: The More I learn, the Less changes I make

Post by nisiprius » Fri Mar 06, 2015 4:31 pm

IndexBeliever wrote:...It seems like in personal investing, the more I learn the less changes I make...
Me, too.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Van
Posts: 624
Joined: Wed Oct 27, 2010 9:24 am

Re: The More I learn, the Less changes I make

Post by Van » Fri Mar 06, 2015 4:38 pm

Agree completely, but it should be FEWER changes.

User avatar
SimpleGift
Posts: 3396
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: The More I learn, the Less changes I make

Post by SimpleGift » Fri Mar 06, 2015 4:42 pm

IndexBeliever wrote:Set your money in a lazy 3 fund portfolio, target date fund or the like and forget it.
Even those of us lucky enough to be exposed to and persuaded by the passive indexing philosophy decades ago didn't always adopt the simple 3-4 fund portfolio approach. Many of us were influenced by the "more diversification, the better" theories of the time (Roger Gibson's classic text from the late 1990s, Asset Allocation: Balancing Financial Risk, comes to mind) — and believing in the rewards of multiple asset classes, we invested in as many of them as we could.

If I had it to do over again, I believe the simpler 3-4 fund portfolio would have provided nearly all of the same rewards over time, with just a tad more volatility — and I would have had fewer (now highly-appreciated) funds to manage in my later years. Simpler is better in portfolio construction, I'm now convinced.
Last edited by SimpleGift on Fri Mar 06, 2015 5:16 pm, edited 1 time in total.

Woodshark
Posts: 455
Joined: Fri Jan 07, 2011 4:09 pm

Re: The More I learn, the Less changes I make

Post by Woodshark » Fri Mar 06, 2015 5:15 pm

Same here. I spent way too much time and lost way too much $$ chasing the latest hot mutual funds, investing in individual stocks, hiring a financial planner who churned the accounts plus me occasionally trying to time the market.

Thankfully after a few foolish years I came to understand the majesty of simplicity.

It's like traveling the world looking for the perfect life partner then finally you give up, go home and find them living next door. They had been there all along, but you just felt it had to be complicated to be right.

User avatar
galeno
Posts: 1576
Joined: Fri Dec 21, 2007 12:06 pm

Re: The More I learn, the Less changes I make

Post by galeno » Fri Mar 06, 2015 5:25 pm

Same here. It took us 30 years to boil our portfolio down to the 2 fund portfolio. We're so lazy now we let the FTSE all-world equity index choose our entire equity allocation. No 3 fund port for us.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

ShiftF5
Posts: 749
Joined: Wed Jan 11, 2012 8:59 pm

Re: The More I learn, the Less changes I make

Post by ShiftF5 » Fri Mar 06, 2015 8:10 pm

I agree wholeheartedly.

It's a paradox, but that's the way it seems to work.

That's probably why someone more prone to active trading has trouble buying into indexing, because it is just so opposite from what we've always believed to be simple cause and effect. Do more -- get more. No, not this time.

Topic Author
IndexBeliever
Posts: 67
Joined: Mon Jun 09, 2014 10:39 am

Re: The More I learn, the Less changes I make

Post by IndexBeliever » Fri Mar 06, 2015 8:53 pm

Van wrote:Agree completely, but it should be FEWER changes.
Thanks! English was my worst subject in school!

Topic Author
IndexBeliever
Posts: 67
Joined: Mon Jun 09, 2014 10:39 am

Re: The More I learn, the Less changes I make

Post by IndexBeliever » Fri Mar 06, 2015 8:55 pm

Taylor Larimore wrote:
IndexBeliever wrote:I find it interesting that finance is completely different than most of life. For example, if you want to get ahead in business, the more research you do, polls, surveys, people you meet and time you put into it, the more successful business you may have. It seems like in personal investing, the more I learn the less changes I should make. One would think if you keep reading/learning that you will make several changes to your portfolio and do very well. Most of what I've read lately proves the opposite. Set your money in a lazy 3 fund portfolio, target date fund or the like and forget it. Don't time interest rate changes or stock market swings.

I know it's not question, just wanted to put it out there. I read this forum daily and have learned so much. Thanks to all.
Index Believer:

Your post reminds me of what Mr. Bogle wrote in his "Forward" to The Bogleheads' Guide to Investing:
"They (the authors) note that relying on the typical common sense approaches that apply to most of life's challenges is 'destined to leave you poorer." For example, they warn against following life principles like these:

*If you don't know how to do something...hire an expert.
*You get what you pay for.
*If there's a crisis, take action!
*The best predictor of future performance is past performance.

In short, the principles that work in most aspects of our daily lives simply leads to failure in investing.
You learned your lesson well!

Congratulations and best wishes.
Taylor
Thanks Taylor! I will be forever indebted to this forum. Thanks for your service!

User avatar
grabiner
Advisory Board
Posts: 25633
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: The More I learn, the fewer changes I make

Post by grabiner » Fri Mar 06, 2015 9:58 pm

You will still make changes, but only when your situation changes.

The last four significant changes I have made:

Moved half my real estate to Vanguard Global Real Estate once the fund became available.

Sold stock to make the down payment for my home, and adjusted my asset allocation when I made the purchase.

Started increasing my bond allocation by 2% per year as retirement eventually approaches.

(edited to fix typo)
Last edited by grabiner on Sat Mar 07, 2015 9:36 am, edited 1 time in total.
Wiki David Grabiner

BabylonOrBust
Posts: 41
Joined: Sun Dec 28, 2014 2:27 pm

Re: The More I learn, the fewer changes I make

Post by BabylonOrBust » Fri Mar 06, 2015 10:06 pm

I remember during the maelstrom of 2009, I casually asked my girlfriend if she had seen how badly the market had been faring. "Yeah," she said, and went back to whatever it was she had been doing. I then asked if she had sold anything in her IRA. "Huh? No, that's a retirement account. It's for like when I'm 60." I then said, "You're the greatest investor I've ever known." And then she unknowingly proved my point by continuing to do whatever it was she had been doing, barely having heard me at all.

kolea
Posts: 1322
Joined: Fri Jul 11, 2014 5:30 pm
Location: Maui and Columbia River Gorge

Re: The More I learn, the fewer changes I make

Post by kolea » Fri Mar 06, 2015 11:06 pm

My whole life the message has been to get well educated, work hard, use your brain, and success will be yours. So here is an investment philosophy that turns all of that on its head. This philosophy rewards those who are, basically, non-analytical and are simply able to follow easy instructions. It is really hard for me to accept the idea that I am not being rewarded for using the attributes that I have cultivated all my life. Passive investing is probably the only economic system that has achieved utopian, socialistic disregard for who or what you are in terms of end results. Anyone can be successful at it. At least that is the promise.
Kolea (pron. ko-lay-uh). Golden plover.

User avatar
steve roy
Posts: 1732
Joined: Thu May 13, 2010 5:16 pm

Re: The More I learn, the fewer changes I make

Post by steve roy » Sat Mar 07, 2015 12:18 am

The great advantage of a three-fund portfolio is you minimize chances to louse it up.

You can't chase real estate. You can't chase energy stocks, you can't chase health care mutual funds or emerging markets or small caps or growth stocks. You won't go off on a tangent chasing whatever CNBC says you need to be in because what you've got in those three big fat funds (Total U.S., Total International, Total bond) is the market with all its hot and cold sectors baked into the mix.

Some other stock-bond allocation might do better, but many will do worse. And you're pretty much assured of doing "okay," particularly if you can discipline yourself to set up the program then leave it the foo alone.

Leaving things alone is the key.

staythecourse
Posts: 6993
Joined: Mon Jan 03, 2011 9:40 am

Re: The More I learn, the fewer changes I make

Post by staythecourse » Sat Mar 07, 2015 12:46 am

Just curious how a thread about making less changes has ANYTHING to do with a simpler 3 fund portfolio? Not saying it is right or wrong, but don't see the association?

Either way I do agree with the OP. When I discuss finance with others who don't know much and think I am some investing genius I tell them all the same thing. I learned probably 80% of what is important in the first 1-2 quick books I have read (Mr. Bogle's "Little Book on Common Sense" and Mr. Roth's "How a second grader...") Every other book I have read and thought about was just so I can argue on this site with other nerds. :D

My simple rules:
1. Save as much as can as early as you can
2. Asset allocation is king
3. Active management is a loser's game
4. Be cognizant fees, taxes, and inflation eat into long term returns
5. Stay the course to prevent yourself from messing everything up

Can't say I have learned much that has helped beyond that.

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

pkcrafter
Posts: 13738
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: The More I learn, the fewer changes I make

Post by pkcrafter » Sat Mar 07, 2015 9:14 am

Indexbeliever, congratulation on coming to the correct conclusion. I have said it almost the same way--the more you learn, the more you realize the less you need to know. Of course, you don't know this until you put time into learning.

Your first reply is from the master. Taylor has always promoted simplicity.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

User avatar
Toons
Posts: 13426
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: The More I learn, the fewer changes I make

Post by Toons » Sat Mar 07, 2015 9:17 am

"I learn the less changes I should make"
"Don't do something, just stand there."-Bogle :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

jj
Posts: 243
Joined: Sun Mar 04, 2007 9:44 am
Location: Texas

Re: The More I learn, the fewer changes I make

Post by jj » Sat Mar 07, 2015 9:32 am

grabiner wrote:
Started reducing my bond allocation by 2% per year as retirement eventually approaches.
Really? You're reducing your bond allocation...
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

User avatar
grabiner
Advisory Board
Posts: 25633
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: The More I learn, the fewer changes I make

Post by grabiner » Sat Mar 07, 2015 9:37 am

jj wrote:
grabiner wrote:
Started reducing my bond allocation by 2% per year as retirement eventually approaches.
Really? You're reducing your bond allocation...
Typo fixed above.
Wiki David Grabiner

Quickfoot
Posts: 1166
Joined: Fri Jan 11, 2013 1:03 pm

Re: The More I learn, the fewer changes I make

Post by Quickfoot » Sat Mar 07, 2015 9:43 am

My whole life the message has been to get well educated, work hard, use your brain, and success will be yours. So here is an investment philosophy that turns all of that on its head.
I don't think so, successfully passively investing requires work and education just not on the topics people expect. It requires obtaining the knowledge the passive investing is a good strategy and obtaining the knowledge and skills to successfully not make unwise changes in one's portfolio. Most the time that involves reading multiple books, sometimes participating in online groups such as this one, and in general educating oneself.

Among other things a person often needs to be educated on asset allocation, glide path, re-balancing, asset placement, tax loss harvesting, behavioral investing, and withdraw strategies. Can a person be successful without learning about these things? Sometimes, in particular if they invest in a asset allocation fund like a TR or LS fund and literally forget about their money. That said a person will be more successful if they take the time to educate themselves.

Behavioral investing is one of the most important topics a person can study, it doesn't matter when you started saving, what your savings rate is, asset allocation is, or rate of return is if you consistently do the instinctive but absolute worst thing at the wrong time consistently for your entire accumulation phase.

Dandy
Posts: 6059
Joined: Sun Apr 25, 2010 7:42 pm

Re: The More I learn, the fewer changes I make

Post by Dandy » Sun Mar 08, 2015 5:01 pm

After some investing learning there is diminishing returns. Almost every other field the more you study the better chance of success. With personal investing once you learn some basics the rest might tempt you to make frequent changes. Active managers and research teams are bright and when one of them recommends a stock they usually have excellent reasoning -- but it doesn't seem to translate into results. It must be maddening for them.

ShiftF5
Posts: 749
Joined: Wed Jan 11, 2012 8:59 pm

Re: The More I learn, the fewer changes I make

Post by ShiftF5 » Sun Mar 08, 2015 7:19 pm

TwoByFour wrote:My whole life the message has been to get well educated, work hard, use your brain, and success will be yours. So here is an investment philosophy that turns all of that on its head. This philosophy rewards those who are, basically, non-analytical and are simply able to follow easy instructions. It is really hard for me to accept the idea that I am not being rewarded for using the attributes that I have cultivated all my life. Passive investing is probably the only economic system that has achieved utopian, socialistic disregard for who or what you are in terms of end results. Anyone can be successful at it. At least that is the promise.
I think #1 you must use your brain to become educated enough / highly skilled to get a job or gig that produces Enough Income to pay your bills AND have $$ left over to invest.

Without investing some $$ to get the ball rolling (hopefully at a young age), the growth and compounding simply can't happen.

I think that is the hardest part.

As you inferred, Stay The Course, does not require any heavy lifting per se.

Jpg
Posts: 28
Joined: Tue Jan 20, 2015 3:43 pm

Re: The More I learn, the fewer changes I make

Post by Jpg » Sun Mar 08, 2015 8:24 pm

I have learned more about investing (for a lifetime ) reading this forum every day for the last month, than ten years of reading the WSJ every day. Thank you to every member of this group.

User avatar
Taylor Larimore
Advisory Board
Posts: 28948
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Learning how to invest.

Post by Taylor Larimore » Sun Mar 08, 2015 8:42 pm

Jpg wrote:I have learned more about investing (for a lifetime ) reading this forum every day for the last month, than ten years of reading the WSJ every day. Thank you to every member of this group.
jpg:

Thank you for sharing your experience.

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

User avatar
nedsaid
Posts: 12971
Joined: Fri Nov 23, 2012 12:33 pm

Re: The More I learn, the fewer changes I make

Post by nedsaid » Sun Mar 08, 2015 8:49 pm

I have found that with my portfolio things go better when left alone. The fewer buy/sell decisions we make, the better we do. One big reason is the very human love of being in the best performing and the most popular investments. We want to buy what has recently been performing well and want to sell the laggards, when in many cases we should be doing the opposite. Looking for value, which seems so obvious when shoppers, seems to be a very difficult concept for investors to grasp.

There is also a very annoying truth, that is certain investments in your portfolio will stubbornly refuse to perform right up to the moment you sell them. When you sell, those underperforming investments will suddenly start to move up in price and will outperform what you just bought to replace them! This doesn't always happen but happens much more often than not. It is the problem of impatience and incorrect buy/sell decisions.

Another reason this happens is that different segments of the market outperform the rest of the market at different times. Sometimes value does better than growth. Sometimes growth does better than value. You also see this with small cap versus large cap. There are cycles in the market. Someone who is a value investor might get frustrated with value's underperformance may switch to growth just at the time that value starts to reassert itself. This is why you don't want to switch back and forth between investing styles. You might find yourself buying high and selling low as you switch from style to style.

Here is the appeal of market weight indexing. No worries about investing style or buying and selling individual mutual funds or individual stocks. You just hold the market as a whole at very low costs. No buy/sell decisions. Very simple and hard to beat.
A fool and his money are good for business.

Fallible
Posts: 7071
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: The More I learn, the fewer changes I make

Post by Fallible » Sun Mar 08, 2015 8:57 pm

IndexBeliever wrote:I find it interesting that finance is completely different than most of life. For example, if you want to get ahead in business, the more research you do, polls, surveys, people you meet and time you put into it, the more successful business you may have. It seems like in personal investing, the more I learn the less changes I should make. ...
A Warren Buffett quote I think explains how investing is different: "The most important quality for an investor is temperament, not intellect." It's also why he and John Bogle have said investing is simple but not easy and why Bogle has said, "Buy right and hold tight. Once you set your asset allocation, stick to it no matter how greedy or scared you become." Grabiner, who posted here earlier, is right to say some changes will be necessary, such as those he mentioned. Otherwise, investing is very much about keeping it simple, then having the the temperament to "stick to it."
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

Post Reply