Actually feeling pretty good about my active decisions

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freyj6
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Actually feeling pretty good about my active decisions

Post by freyj6 » Thu Sep 07, 2017 1:50 pm

Mostly due to the influence of this forum, I'm mainly a passive index investor. I don't believe I can pick stocks or time bull/bear markets.

However, I have made a few active ETF bets and thus far have been really pleased. For example:

-I held about 15% of my portfolio in VDC through the 2015-2016 correction, where it returned about 18%, then sold it mid July 2016 when everyone was flocking to dividends. It's been basically flat since. It's also worth noting that I was a few basis points away from exchanging it for even more VWO in January 2016.

-I had about 30% of my portfolio in VBR and VOE, road it up after the election, then sold all of my VBR holdings in January 2017 and it's been flat since.

-Since early January, my largest holdings have been VWO (up about 25%, 40% since Jan 2016), MTUM (up about 22%) and VSS (up about 21%).

Is some (or most) of this luck? Probably.

I'm certainly not posting this to brag about my amazing active management skills.

I actually just wanted to get this out here as an interesting anecdotal data point. I've participated in the community here for several years and read all the cautionary books and tales, but thus far I'm not totally convinced that making adjustments like this every year or so will sink my financial future.

*edit*

http://stockcharts.com/freecharts/perf. ... SS,VWO,VDC

Visual link for those not familiar with ETF symbols/don't follow the market closely/like visuals.
Last edited by freyj6 on Thu Sep 07, 2017 4:08 pm, edited 1 time in total.

software
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Re: Actually feeling pretty good about my active decisions

Post by software » Thu Sep 07, 2017 2:29 pm

Depending on what data you are basing those decision on, what you are describing is either random guessing or a form of Tactical Asset Allocation. I'm glad that you have thus far been pleased with your results.

mhalley
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Re: Actually feeling pretty good about my active decisions

Post by mhalley » Thu Sep 07, 2017 3:02 pm

Most people won't know what you are talking about as they have not memorized multiple etc symbols.

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munemaker
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Re: Actually feeling pretty good about my active decisions

Post by munemaker » Thu Sep 07, 2017 3:15 pm

mhalley wrote:
Thu Sep 07, 2017 3:02 pm
Most people won't know what you are talking about as they have not memorized multiple etc symbols.
Google is your friend:
VBR - Vanguard Small Cap Value
VDC - Vanguard Consumer Staples
VWO - Vanguard Emerging Market Index
VOE - Vanguard Mid Cap Value
VSS - All World ex US Small Cap
MSUM - iShares MSCI Edge USA Momentum

gkaplan
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Re: Actually feeling pretty good about my active decisions

Post by gkaplan » Thu Sep 07, 2017 5:06 pm

munemaker wrote:
Thu Sep 07, 2017 3:15 pm
mhalley wrote:
Thu Sep 07, 2017 3:02 pm
Most people won't know what you are talking about as they have not memorized multiple etc symbols.
Google is your friend:
VBR - Vanguard Small Cap Value
VDC - Vanguard Consumer Staples
VWO - Vanguard Emerging Market Index
VOE - Vanguard Mid Cap Value
VSS - All World ex US Small Cap
MSUM - iShares MSCI Edge USA Momentum
I think you're missing the point. Many posters won't bother reading the OP's post if all they have to go on are the symbols of funds.
Gordon

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nedsaid
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Re: Actually feeling pretty good about my active decisions

Post by nedsaid » Thu Sep 07, 2017 5:13 pm

Well, I guess you can be a legend in your own mind. Hey, I was the man until the 2008-2009 financial crisis and bear market. I had active earnings and price momentum funds that were doing great, Value was doing great, and International was doing great. My IRA with active funds was outperforming my workplace savings plan which was mostly indexed. I was a legend in my own mind until things hit the fan. My investment results since then have been okay but not as good as they were before the financial crisis. What I am trying to say is that making such bets sometimes works and sometimes doesn't. So far, so good for you. I am happy for your success. Can't speak for anyone else, every time that I am convinced of my utter brilliance, the market humbles me.
A fool and his money are good for business.

KlangFool
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Re: Actually feeling pretty good about my active decisions

Post by KlangFool » Thu Sep 07, 2017 5:22 pm

OP,

Does it really matter? Do you make enough to retire a few years earlier? If not, why are you doing this? You are gambling with 45% of your portfolio in order to make about 10% to 15% more. Does it really matter?

I gamble with less than 5% of my portfolio. If there is no possibility of making 10X to 30X return, I won't bother. Why should you?

KlangFool

delamer
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Re: Actually feeling pretty good about my active decisions

Post by delamer » Thu Sep 07, 2017 5:24 pm

You claim your philosophy is that you don't believe you can time the market, but you moved 45% of your assets in the last year. I noticed that you didn't mention what you chose to invest in once you sold your positions.

The thing that matters is how your portfolio does over the long-run. Changes over the last year --or even 5 years -- don't mean anything.

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blueblock
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Re: Actually feeling pretty good about my active decisions

Post by blueblock » Thu Sep 07, 2017 6:15 pm

freyj6 wrote:
Thu Sep 07, 2017 1:50 pm
I'm certainly not posting this to brag about my amazing active management skills...
LOL, yes you are. It's called humble bragging.

That's okay. It feels good to get ahead. Congrats, and enjoy your gains, but please do check back in with us when you make an active trade that loses you money, because it will happen if you keep it up. :beer

BHUser27
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Re: Actually feeling pretty good about my active decisions

Post by BHUser27 » Thu Sep 07, 2017 7:09 pm

OP -
What was the method to your madness?
What will you buy/sell next and why?

Fallible
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Re: Actually feeling pretty good about my active decisions

Post by Fallible » Thu Sep 07, 2017 7:30 pm

freyj6 wrote:
Thu Sep 07, 2017 1:50 pm
Mostly due to the influence of this forum, I'm mainly a passive index investor. I don't believe I can pick stocks or time bull/bear markets.

However, I have made a few active ETF bets and thus far have been really pleased. ...
Glad you did well, but being "really pleased" and "feeling pretty good" about a few active trades sound an awful lot like the all-too-common behavioral pitfall known as overconfidence. It's written about in our wiki and just about every book by the investing greats, and it's what all investors need to understand, always watch out for, and learn to control.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

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bottlecap
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Re: Actually feeling pretty good about my active decisions

Post by bottlecap » Thu Sep 07, 2017 7:33 pm

You got it half right. It IS anecdotal. :wink:

JT

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Watty
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Re: Actually feeling pretty good about my active decisions

Post by Watty » Thu Sep 07, 2017 8:46 pm

freyj6 wrote:
Thu Sep 07, 2017 1:50 pm
Is some (or most) of this luck? Probably.
By most measures the stock market is near an all time high which probably has a lot to do with it.

If you picked more aggressive than average stocks then it would make sense that you could be doing better than the market. If the market dips by 20% then I would expect the more aggressive stocks to be more volatile and drop more than than average too.

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saltycaper
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Re: Actually feeling pretty good about my active decisions

Post by saltycaper » Thu Sep 07, 2017 10:26 pm

freyj6 wrote:
Thu Sep 07, 2017 1:50 pm


...thus far I'm not totally convinced that making adjustments like this every year or so will sink my financial future.
If you're doing it every year, that's too frequent, IMO. You'll either turn out to be a statistical outlier by luck or talent, or, more likely, you will stumble, especially if you continue to make all-or-nothing bets. Keep in mind that thus far your main success appears to have been selling outperformers in a rising market. That's not a terribly difficult thing to do.
Quod vitae sectabor iter?

Nate79
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Re: Actually feeling pretty good about my active decisions

Post by Nate79 » Thu Sep 07, 2017 11:45 pm

I feels good to be lucky. Luck runs out after a while though. Don't kid yourself that this was anything but luck.

inbox788
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Re: Actually feeling pretty good about my active decisions

Post by inbox788 » Fri Sep 08, 2017 12:30 am

freyj6 wrote:
Thu Sep 07, 2017 1:50 pm
-I held about 15% of my portfolio in VDC through the 2015-2016 correction, where it returned about 18%, then sold it mid July 2016 when everyone was flocking to dividends. It's been basically flat since. It's also worth noting that I was a few basis points away from exchanging it for even more VWO in January 2016.

-I had about 30% of my portfolio in VBR and VOE, road it up after the election, then sold all of my VBR holdings in January 2017 and it's been flat since.

-Since early January, my largest holdings have been VWO (up about 25%, 40% since Jan 2016), MTUM (up about 22%) and VSS (up about 21%).

Is some (or most) of this luck? Probably.
Don't forget that trading is a zero sum game. You may have won, but someone on the other side of the trade lost. Whoever sold you VDC lost out on the 18% gain you made. And whoever bought it from you hasn't made any money yet. So yes, you've been lucky and your trading counterparts have been unlucky.
nedsaid wrote:
Thu Sep 07, 2017 5:13 pm
What I am trying to say is that making such bets sometimes works and sometimes doesn't.
And when you add them up, they wind up cancelling out. If it's always working out for OP, others are taking the brunt of the half that doesn't. Expect what goes around to come around, so don't press your luck.

freyj6
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Re: Actually feeling pretty good about my active decisions

Post by freyj6 » Fri Sep 08, 2017 1:01 pm

I agree with a lot of what's been said.

Rather than reply to each individual post, I'll address the main points:

1. I've been 100% stock up until last summer, when I first went to 85%, then 70% in January. That 15/30% allocation went to short-term and total bond. Obviously returns would have been higher had I put that money into something that is currently doing well, but I've been progressively reducing risk. And as I mentioned, the stock allocations I sold in exchange for bonds has been flat. I'm currently around 66% stock and I plan to go to about 60/40 by the end of this year, so in a sense this has really been a de-risking process for me. If the US market explodes up another 50%, I'll have made a mistake.

2. I really didn't post this to brag. Yes, I have enough self-awareness to realize that part of me is self-satisfied that things have worked so well, but that's not why I posted this. I posted this because 1) I wanted to post some anecdotal food for thought, and 2) I felt it was worth going out on a limb so that the results are on the record for future scrutiny. If what I've done/do turns out to be a big mistake, everyone will get to see.

3. I do realize that a good portion of this is luck, and I don't think I'm some market wizard. I also realize that these decisions weren't part of a statistical, pre-planned rebalancing process. They weren't emotional and I thought about them and/or stretched out the buys/sells over several weeks, but yes no they weren't totally rules-based.

My reasoning has mostly been to be contrarian. With the explosive results of utilities, REITS and consumer staples last summer, I saw dozens of articles and posts about dividends suggesting to buy those ETFs and lots of people talking about dividend strategies and how bonds were dead. Same with VBR after the election; I saw it hockey stick up and then everyone was screaming "buy, buy, buy", so I sold it.

Over the past year or so, I'd been slightly increasing my allocation to international and EM cause everyone seemed to have given up on them. MTUM I've held for a while because I believe that momentum is a strong factor. Before making any changes, I'd held 30% value (voe/vbr), 25% MTUM, 15% VDC, 15% VWO and 15% VSS. I did slightly increase those last two holdings earlier this year, but the changes I mentioned have been the substantial ones.

--------------------------------

So yeah, I just wanted to put this out there as some food for thought.

They say that wisdom is one's ability to handle cognitive dissonance. This forum has been incredibly valuable to me cause it runs counter to some of my natural tendencies (to optimize everything) and helps balance me out and constantly give me opposite, cautious opinions. This post was meant to be a tiny tidbit of anecdotal evidence on the other side -- take it with a grain of salt and take it in stride :)

MathWizard
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Re: Actually feeling pretty good about my active decisions

Post by MathWizard » Fri Sep 08, 2017 1:58 pm

I'm happy for you. You need to choose your own way to financial success.

I would not advocate this to anyone else, as it is risky, but maybe you
are one of the few who has the time and ability to be able to do this.
We need some active investors risking their own money to make
these value decisions for the rest of us indexers to come along for the ride.

Engineer250
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Re: Actually feeling pretty good about my active decisions

Post by Engineer250 » Fri Sep 08, 2017 10:00 pm

freyj6 wrote:
Fri Sep 08, 2017 1:01 pm

2. I really didn't post this to brag. Yes, I have enough self-awareness to realize that part of me is self-satisfied that things have worked so well, but that's not why I posted this. I posted this because 1) I wanted to post some anecdotal food for thought, and 2) I felt it was worth going out on a limb so that the results are on the record for future scrutiny. If what I've done/do turns out to be a big mistake, everyone will get to see.
What's the food for thought? How do you believe this information could be useful to anyone else? Yes you are bragging. That's okay, plenty of posts on these forms are humble brags. But a lot of those folks have something that can be translated past their own experience (save more, save consistently, etc.) So what's your message?
Where the tides of fortune take us, no man can know.

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Doom&Gloom
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Re: Actually feeling pretty good about my active decisions

Post by Doom&Gloom » Fri Sep 08, 2017 10:11 pm

Superstitious learning.

Please give us annual updates.

livesoft
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Re: Actually feeling pretty good about my active decisions

Post by livesoft » Fri Sep 08, 2017 10:13 pm

@freyj6, I don't see a problem with what you are doing, but share the love please. Post your current portfolio to this thread and also any changes you make to it (within an hour of the change) along with your reasoning so that we can follow along at home or even try to copy you. Have some fun with this and don't let the naysayers slow you down.
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