What experts say about "Stay-the-Course"

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Taylor Larimore
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What experts say about "Stay-the-Course"

Post by Taylor Larimore » Tue Apr 21, 2015 5:47 pm

Bogleheads:

"Stay-the-course" is very important for investment success. This is what experts say:
Frank Armstrong, advisor and author of The Informed Investor: "Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy."

Barber Odean Study: "Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent. Our central message is that trading is hazardous to your health."

William Bernstein, author of Four Pillars of Investing: If you become upset when one of your asset classes does poorly, even when the rest of your portfolio is doing well, then you should not be managing your own money."

Jack Bogle: "Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."--"We say stay the course. But before you stay the course, make sure you're on the right course."

Bogleheads Guide to Investing: "Wall Street can't stand buy-and-hold strategies because brokers need trading activity to make money."

Jack Brennan, former Vanguard CEO: "If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor."

Warren Buffett: "Inactivity strikes us as intelligent behavior."

"Andrew Clarke, author of Wealth of Experience: "Setting a goal, developing an appropriate asset allocation, and selecting a handful of funds are not hugely complex tasks. The hard part comes next: Battling your emotions so that you can stick with your plan through thick and thin."

Jonathan Clements, author and Wall Street Journal columnist: "Take my word on it. Buy-and-hold is still your best long-run strategy."

Phil DeMuth, adviser and co-author of seven investment books: "The investor says to his adviser: 'Every year you tell me to do nothing. What do I need you for?' The adviser replied: 'Every year you need me to keep your from doing anything.' "

Paul Farrell, author of Lazy Persons Guide to Investing: "In a study of 66,400 Merrill Lynch investors, professors Odean and Barber discovered that buy-and-hold investors beat the more active investors by a fairly sizable margin: 18.5% to 11.4% over a six-year period."

Rick Ferri, advisor and financial author: "Write down your strategy -- and stay-the-course."

Steve Forbes: "Everyone is a long-term investor until the market goes down."

Alan Greenspan, former Chairman of the Federal Reserve: "The best strategy for equity investor has always been buy and hold, and forget it."

Mark Hebner, author of "Index Funds": "Prices change to reflect news which is both random and unpredictable. Stock picking and market timing don't work. Stay the course in a risk-appropriate index portfolio and invest and relax."

Morgan Housel, financial columnist: "Do nothing" are the two most powerful -- and underused -- words in investing. The urge to act has transferred an inconceivable amount of wealth from investors to brokers."

Michael LeBoeuf, author of The Millionaire in You: "Simple buy-and-hold index investing is one of the best, most efficient ways to grow your money to the ultimate goal of financial freedom."

Jessie Livermore, famous stock trader: "The big money is not in the buying or the selling, but in the sitting."

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

Paul Merriman: "There will always be somebody with a story or strategy that's newer or seems much better."

Morningstar video: Bad Timing Costs Investors 2.5% Per Year

Mike Piper, editor of The Oblivious Investor: "One of the most important lessons in investing is that there is no “perfect” portfolio, but there are many “perfectly fine” portfolios. Once you are confident that you have a “perfectly fine” portfolio, just stick with the plan and let the portfolio do what it is meant to do."

Bill Schultheis, author of The Coffeehouse Investor: "42% of millionaires of this country make less than one transaction per year in their investments."

Fred Schwed Jr. author of "Where are the Customers' Yachts? "It turns out that I should have just bought them (securities) and thereafter I should have just sat on them like a fat, stupid peasant."

Chandan Sengupta, author of The Only Proven Road to Investment Success: "If you are not going to stick to your chosen investment method through thick and thin, there is almost no chance of your succeeding as an investor."

Dan Solin, financial author and adviser: "Once you understand that monitoring the markets is harmful to your long-term returns, a whole new world of opportunities will await you."

Larry Swedroe, advisor and financial author: "There are lots of people out there who have something to gain by your taking action instead of your adhering to your well-thought-out plan."

Eric Tyson, author of Mutual Funds for Dummies: "Don't trade in and out of funds. Stay invested. Not only does buy-and-hold investing offer better returns, but it's also less work."

Jason Zweig, financial author and Wall Street Journal columnist: "The ultimate benefits of owning stocks accrue only to those who can buy and hold."
More "What Experts Say"

Why Bogleheads stay-the-course

Best wishes.
Taylor
Last edited by Taylor Larimore on Sun Sep 01, 2019 9:36 pm, edited 14 times in total.
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: What experts say about "Stay-the-Course"

Post by galeno » Tue Apr 21, 2015 8:58 pm

This year we went to a 2-ETF portfolio. New Year's resolution: only look at portfolio value every quarter. So far so good.

If I don't break this year's resolution. Next year's will be to only look at the port's value once a year on rebalance day.

I'm trying to take the "simple" and "no peek" rules to the extreme. Wish me luck.
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%.

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Re: What experts say about "Stay-the-Course"

Post by Blue » Tue Apr 21, 2015 9:02 pm

Great list Taylor. Should be a sticky for all of us to read when the next bear market shows itself.

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Re: What experts say about "Stay-the-Course"

Post by oldzey » Wed Apr 22, 2015 5:59 pm

I've added many of these "What experts say about" quotes to my IPS.

Thanks Taylor!
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Doing what experts say

Post by Taylor Larimore » Wed Apr 22, 2015 7:46 pm

oldzey wrote:I've added many of these "What experts say about" quotes to my IPS.

Thanks Taylor!
oldzey:

I am pleased you like the quotes.

We can become a successful investor the same way I became a successful sailor -- listen to experts and then do what they say.

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

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Re: What experts say about "Stay-the-Course"

Post by abuss368 » Mon Apr 27, 2015 9:55 pm

Thanks Taylor!
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: What experts say about "Stay-the-Course"

Post by Rx 4 investing » Mon Apr 27, 2015 10:38 pm

Great post Taylor!

I am 57, and started a small experiment 3 years ago to see if I might find some solutions to simplifying our investing lives as we draw closer to retirement. Generally we prefer to make investing changes either annually or semi-annually.

I tried the brokerage's 'Managed Account' for a small IRA that they held. They had us in about 15 different funds, mostly actively managed. Changes in the fund line up were occurring more frequently than we would have liked. Between the account fee and the fees on the actively managed funds, the portfolio under-performed the market all three years we were in the program.

During a December '14 visit to consider changes for '15, I pulled the plug on the managed account and directed them to simplify. I now have a simple 50:50 portfolio, i.e. 50% in VT, and 50% in BND.

I plan to "stay the course", with no more than semi-annual re-balancing. And another benefit, the investment returns are improving. I am feeling much better about the account from the simplification, and the associated expenses are a lot lower.

Thanks for all you do!
“Everyone is a disciplined, long-term investor until the market goes down.” – Steve Forbes

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Re: What experts say about "Stay-the-Course"

Post by galeno » Mon Apr 27, 2015 11:20 pm

50% VT + 50% BND = 100% PP (portfolio perfection). Kudos.
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%.

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Re: What experts say about "Stay-the-Course"

Post by abuss368 » Tue Apr 28, 2015 9:56 pm

galeno wrote:50% VT + 50% BND = 100% PP (portfolio perfection). Kudos.
Two fund approach? Jack Bogle recommends a two fund approach consisting of Total U.S. Stock and Bond.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: What experts say about "Stay-the-Course"

Post by Jerry55 » Tue Apr 28, 2015 10:05 pm

I check every day. Up or Down, I take notice, then I move on.

#LongTermInvestor :-)
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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Re: What experts say about "Stay-the-Course"

Post by galeno » Wed Apr 29, 2015 7:52 am

"Two fund approach? Jack Bogle recommends a two fund approach consisting of Total U.S. Stock and Bond."

For USA-NRAs the reverse is true. Smart tilting would have us avoiding USA equities and holding only non-USA equities.

1. USA equities are more expensive (15% withholding tax on dividends vs 6% for non-USA equities).

2. USA equities have a lower expected return (VTI = 9.5% vs VXUS = 10.5%).
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%.

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Re: What experts say about "Stay-the-Course"

Post by BeachPerson » Thu Sep 06, 2018 3:52 pm

Any chance we can get an early copy so we can do a pre publication review???
David | | From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"

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Re: What experts say about "Stay-the-Course"

Post by kaeltor » Thu Sep 06, 2018 5:34 pm

Does this apply to real estate as well?

Say I bought a home and market crashes a year later -- buy and hold?

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Re: What experts say about "Stay-the-Course"

Post by Dandy » Fri Sep 07, 2018 8:04 am

Jack Bogle: "Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
Certainly good general advice. But Mr. Bogle didn't always stay the course with his own personal investments. Around the year 2000 he drastically cut back on his equity investments. He has also said in extreme valuations people should consider similar actions. So, "no matter what happens" is not completely accurate. What constitutes extreme valuation is certainly open to debate. And a matter that Mr. Bogle/we should clarify-- his basis for extreme valuation determination.

Mr. Bogle has been a model investment champion of the little man. He has done more for individual investors than anyone I can think of. Why we ignore this exception to stay the course mantra and the rather bad advice, if taken literally, of don't peek, is puzzling.

Everyone should monitor their investments on some decent frequency to identify errors/fraud or need to rebalance.
There are times, especially for those in retirement, when extreme valuations occur, when a serious look at whether or not their current allocation should be modified aka a course correction or "tactical allocation" (another Mr. Bogle term). Loss of human capital is usually a big deal.

My concern is more for the non investment savvy forum readers who might need a bit more detail than a good general catch phrase to make good decisions. Having worked in the financial industry my whole life it impressed upon me that our words or omissions can have major positive or negative impact on people's future.

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Re: What experts say about "Stay-the-Course"

Post by dratkinson » Fri Sep 07, 2018 2:39 pm

Dandy wrote:
Fri Sep 07, 2018 8:04 am
Jack Bogle: "Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
Certainly good general advice. But Mr. Bogle didn't always stay the course with his own personal investments. Around the year 2000 he drastically cut back on his equity investments. He has also said in extreme valuations people should consider similar actions. So, "no matter what happens" is not completely accurate. What constitutes extreme valuation is certainly open to debate. And a matter that Mr. Bogle/we should clarify-- his basis for extreme valuation determination.

Mr. Bogle has been a model investment champion of the little man. He has done more for individual investors than anyone I can think of. Why we ignore this exception to stay the course mantra and the rather bad advice, if taken literally, of don't peek, is puzzling.

Everyone should monitor their investments on some decent frequency to identify errors/fraud or need to rebalance.
There are times, especially for those in retirement, when extreme valuations occur, when a serious look at whether or not their current allocation should be modified aka a course correction or "tactical allocation" (another Mr. Bogle term). Loss of human capital is usually a big deal.

My concern is more for the non investment savvy forum readers who might need a bit more detail than a good general catch phrase to make good decisions. Having worked in the financial industry my whole life it impressed upon me that our words or omissions can have major positive or negative impact on people's future.

Strategic investing game plan. I believe we all have the same (flexible) game plan. (1) Start with an appropriate AA for our financial situation. (2) Have it become more conservative as we age. (3) Rebalance when valuations are skewed too much either way. (4) Go into retirement with enough cash-like reserves (+ pension, SS, annuity,...) so we are not forced to sell equities during a down market.

And of course, if our financial situation changes (marriage, children,…), then those cause allowed changes to our strategic investing game plan.

There is enough flexibility built into our game plan that we can make many changes and still be considered to be "staying the course."


Extreme valuation. (1) Extreme valuation and (2) desired asset allocation, are different things. During times of "extreme valuation", I would expect our current AA to be skewed toward equities. So rebalancing to cut back on equities, to return to our desired/strategic AA, would be an example of "staying-the-course."


Tactical allocation. By definition, this would not be a strategic change... so does not a deviate from "staying the course."

I was nearing retirement and realized I had "enough" and wanted to scratch the itch to reach for more yield in my extended EF tier. So I researched/bought a single-state muni fund and posted it.

I consider my extended EF tier to be part of my AA. Why? Because I follow the advice that when we have "enough", then we don't need a dedicated EF, because all of our investments become our EF.

As my desired AA remained the same, before and after this change, that makes this a tactical change, not a strategic change.


I have read (here) that many, as they near retirement, like to keep at least 5-years of living expenses in safe bond or stable value funds (or annuities), so they can weather the "sequence of return risk" in retirement.

As the SoRR seems to be unique for retirees, so changing to handle it as one approaches retirement is a tactical, not a strategic, change. So does not deviate from “stay the course.”


We all want more yield and a larger cash reserve. But it may be only after we have "enough" that we can make the tactical changes necessary to put this part of our game plan into action.


Bottom line. If Mr Bogle didn't say he was making a strategic change to his AA, then I don't believe that's what he was talking about when he mentioned "extreme valuation" and "tactical allocation." Why? Because our investing game plan has enough flexibility built into it... that we can make many changes and still be considered to be "staying the course."

I believe that as long as our strategic AA remains age-appropriate* for our financial situation*, then we are staying the course.

* Notice, "age-appropriate" and "financial situation" are variables. :)
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

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Re: What experts say about "Stay-the-Course"

Post by Dandy » Fri Sep 07, 2018 3:42 pm

https://www.youtube.com/watch?v=k6ra5PO ... 5p&index=2

In a youtube discussion with Mark Witte in 2014 discussing allocation and market collapse Mr. Bogle recounts what he did and said at a Morningstar conference in the year 2000. I'll bet some of our honored Bogleheads were there.

Stocks were at 40 times earnings and bond yields were at 7%
He was ill and was also thinking of his estate

He went from 70-80% equities (he couldn't recall exactly) to 25-30%.

That was not staying the course "no matter what" no matter how you slice it. Many retirees (me included) whether in good health or not also worry about preserving money for our heirs. Should they wait until stocks are 40x earnings? or just if bonds are also at 7%. Or just if both exist and you are in poor health? Or did Mr. Bogle panic and regret his action. He is only human.

I assume he made a rational decision. Then he feels there are rare times when you should not stay the course but actually make significant changes to your allocation. (e.g. reduce it by 40 or 55% !!) I think we could benefit by exploring when those extreme conditions might occur. What measures of extreme valuations make sense? Does the corresponding bond yields play a factor in when to make such a move? Should retirees make the move sooner than those early in the accumulation phase?
The stay the course and all market timing is bad "rules" cuts off discussion of this issue.

So staying the course is good and market timing is bad except in very rare cases when----?

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Re: What experts say about "Stay-the-Course"

Post by gmaynardkrebs » Fri Sep 07, 2018 4:23 pm

Dandy wrote:
Fri Sep 07, 2018 3:42 pm
...
The stay the course and all market timing is bad "rules" cuts off discussion of this issue.
So staying the course is good and market timing is bad except in very rare cases when----?
I agree with you, but I don't see the familiar rejoinders as cutting off the discussion for those who wish to look beyond that. I would welcome discussion you propose, and I think the recent thread on international investing had good points on the "activist" side. In other words, I just ignore the boilerplate rejoinders, not because they are wrong necessarily (who knows?), but because they rarely add anything new to the discussion at this point.

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Re: What experts say about "Stay-the-Course"

Post by oldcomputerguy » Fri Sep 07, 2018 4:33 pm

kaeltor wrote:
Thu Sep 06, 2018 5:34 pm
Does this apply to real estate as well?

Say I bought a home and market crashes a year later -- buy and hold?
I did. I've held this one for 21 years so far. (Of course I've enjoyed living here, I suppose that could have something to do with it...)
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: What experts say about "Stay-the-Course"

Post by DesertGator » Fri Sep 07, 2018 7:19 pm

kaeltor wrote:
Thu Sep 06, 2018 5:34 pm
Does this apply to real estate as well?

Say I bought a home and market crashes a year later -- buy and hold?
no, by all means, sell and move somewhere else.

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Re: What experts say about "Stay-the-Course"

Post by RAchip » Fri Sep 07, 2018 8:47 pm

I can accept that “trading” doeant work but you could have gotten very very rich by just buying faang.

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Re: What experts say about "Stay-the-Course"

Post by rgs92 » Fri Sep 07, 2018 9:16 pm

Thanks Taylor. Yep, anything else but staying the course is gambling.

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Re: What experts say about "Stay-the-Course"

Post by gmaynardkrebs » Fri Sep 07, 2018 9:35 pm

It would be helpful to know the dates of the Taylor quotes. How many were made before the current 30+ year bull market began? That long bull market has generously rewarded those who followed that strategy. However, the question is always about the future. Moreover, there is strong reason to believe that equity risks grow greater over longer time periods, making the strategy questionable for risk averse investors, which most of us are. Paul Samuelson wrote a number of papers on the subject. If they have not already done so, those who "stay the course" should at least consider the evidence that buy and hold is not the only sensible approach to personal investing, and perhaps not optimal for them..

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