In what ways could BogleHeads be badly wrong ?

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dbr
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

Here is the philoosphy as intended to be applied to investing in stock and bond mutual funds. Item by item what could be badly wrong about any of those? It isn't enough that one find something that could GO wrong; the question is what could BE wrong. BH is not a philosophy for life in general and all the things that can happen, so you can't present absurd considerations.

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
dbr
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

Trev H wrote: Wed Jan 24, 2018 4:28 pm That low cost index fund investing is the "only" way to go.

One word... oh well three words.

Wellesley Income Fund.

Trev H
1. Arguably Wellesley is a low cost fund.

2. Finding an exception does not mean the idea is wrong. To BE wrong it would have to turn out that people should generally invest in high cost funds, presumably the more expensive the better.
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
Even Larry Swedroe has said that he wouldn't be surprised to see trend following earn higher risk-adjusted returns than buy-and-hold going forward. It's certainly been true in the past.
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

willthrill81 wrote: Wed Jan 24, 2018 4:35 pm
White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
Even Larry Swedroe has said that he wouldn't be surprised to see trend following earn higher risk-adjusted returns than buy-and-hold going forward. It's certainly been true in the past.
Is this a contention that "Never time the market" could be "BADLY WRONG"?
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Re: In what ways could BogleHeads be badly wrong ?

Post by investorpeter »

My concerns about widespread adoption of the Boglehead strategy concern the overall effect on society and the economy:
1) Passive investing gives disproportionate market moving power to a smaller group of active investors -> more risk for manipulation and bubbles
2) Company management becomes complacent because stock prices become disconnected from performance -> lower overall growth and technological progress

Having said that, unless human nature changes, I do not think the Boglehead philosophy will become practiced widely enough to have these effects in my lifetime. It is human nature to seek an advantage over others.
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Re: In what ways could BogleHeads be badly wrong ?

Post by azanon »

BigMoneyNoWhammies wrote: Wed Jan 24, 2018 3:55 pm
azanon wrote: Wed Jan 24, 2018 10:11 am I have a great fondness for Boglehead philosophy, but I admit 2 come to mind (and both are related):

1. That a portfolio dominated by stocks (let's say anything 50% or higher) could ever constitutes a "balanced" portfolio. In practice, stocks are very volatile by comparison to most other asset classes, is only one of several asset classes, and only tend to do well in certain economic climates. And because of their volatility, a 50% position in stocks will likely explain 80%+ of the volatility of a portfolio.

Stocks also, I believe, have approximately the actual expected return that they should have for their expected risk, so from that standpoint they're not necessarily better than any other asset class. In any event, if we enter an unfavorable investing climate for stocks, a typical boglehead portfolio will likely feel like anything other than balanced.

2. In that it currently tends to favor home country bias in a portfolio, and logically so at least given Jack Bogle's view towards international investing. Given today's current valuations, I see at least the potential for a portfolio dominated by US stocks to be badly wrong for the next few years.
I don't have the link to it unfortunately, but JB gave an interview a few weeks ago where he addressed the "Jack Bogle prefers US stocks only" issue. Evidently, the way he framed it was thus: his view is that enough earnings from many US companies now come from business overseas (I believe approx 40% was the figure he threw out) that expressly investing in any sort of international fund wasn't necessarily needed for exposure to international markets, with the caveat that emerging markets might be an exception. I would tend to agree with his assessment, and have some EM exposure, but otherwise don't have any equities allocated specifically towards intl stocks for this reason. So many of the companies invested in via index funds are multinational entities at this point that international exposure is a given.
A few quick counterpoints:

1. If the effective international exposure is so significant with US stock, then why do domestic and foreign funds perform so differently, even outside of currency corrections?
2. International stocks also give you currency diversification.
3. International stocks currently carry far lower valuation metrics.
4. Not a point but an observation: He's in the small minority of experts that don't advocate international investing. Most (individuals and companies) do, including the company he works for.
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

dbr wrote: Wed Jan 24, 2018 4:37 pm
willthrill81 wrote: Wed Jan 24, 2018 4:35 pm
White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
Even Larry Swedroe has said that he wouldn't be surprised to see trend following earn higher risk-adjusted returns than buy-and-hold going forward. It's certainly been true in the past.
Is this a contention that "Never time the market" could be "BADLY WRONG"?
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
dbr wrote: Wed Jan 24, 2018 4:37 pm
willthrill81 wrote: Wed Jan 24, 2018 4:35 pm
White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
Even Larry Swedroe has said that he wouldn't be surprised to see trend following earn higher risk-adjusted returns than buy-and-hold going forward. It's certainly been true in the past.
Is this a contention that "Never time the market" could be "BADLY WRONG"?
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
So your answer is that trend following is not something we know about that shows an element of BH philosophy might be or is badly wrong.
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

dbr wrote: Wed Jan 24, 2018 4:45 pm
willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
dbr wrote: Wed Jan 24, 2018 4:37 pm
willthrill81 wrote: Wed Jan 24, 2018 4:35 pm
White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
Even Larry Swedroe has said that he wouldn't be surprised to see trend following earn higher risk-adjusted returns than buy-and-hold going forward. It's certainly been true in the past.
Is this a contention that "Never time the market" could be "BADLY WRONG"?
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
So your answer is that trend following is not something we know about that shows an element of BH philosophy might be or is badly wrong.
I think it depends on the individual investor. Those that can stick with buy-and-hold should stick with it. Not all investors can or want to though, and I believe that trend following can be useful for them.
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Re: In what ways could BogleHeads be badly wrong ?

Post by TomCat96 »

Dudley wrote: Wed Jan 24, 2018 9:48 am The broad BogleHead investment philosophy has (or would have) served investors well for the last few decades.
i.e. establish a stock/bond mix in line with age/risk; invest in a broad, low cost index funds; hold and rebalance over cycles. Is that going to be true going forward ?

Whats the possibility such an approach is simply the product of the market behavior over the last few decades and also influenced by experience in USA. In what ways, and in what (realistic) economic circumstances, do you think it could turn out to be badly wrong in the decade(s) to come ? e.g. :

- the risk in stocks being underestimated given US history
- rising rates and/or inflation hammering bonds
- prolonged stagflation crushing both stocks and bonds
- absence of asset class diversification outside stocks and bonds
- buy and hold may not give adequate recovery in unusually long down turn

Just interested to try get some open minded, non-dogmatic, opinions on how bogleheads may possibly be deluding themselves (ourselves) or be blind-sighted by certain economic conditions ?
I think this is an excellent question. Regarding your economic concerns, all of the issues you raised are possible. But there is wide empirical evidence that going forward a boglelike portfolio is the best way to go given the information we have. Boglehead portfolios have endured everything you have written up there. So unless you possess specialized information of a particular type of economic circumstance going forward, a broad diversified investment on stocks, staying the course, and balancing against a bond portfolio is going to give you the best bang for the buck.

That being said, I find boglehead philosophy to have shortcomings when it comes to personal situations.

To be fair, there is no way of tailoring boglehead philosophy towards individual particular circumstances. So it's really up to you to measure what you know. But I believe for the rare, talented, young individual, a boglehead portfolio investment, as profitable as it is, will underperform the potential profitability of growing yourself.

No economics course can adequately teach you how to value your personal prospects and opportunities. I can say however that I am surrounded by extremely bright and talented individuals---individuals who have no trouble making 200k+ under 30. Individuals who will no doubt change the world. In all their cases, a boglehead mindset would not have compensated them adequately. They took on considerable risk, but have made gains which far exceed 10% a year compounded.

These people poured their capital into growing their careers, skillsets, and professional images. That is not inherently a conflict with boglehead philosophy itself. But you will find many here who are adverse to risk, who are frugal, and who will summarily judge any opportunity that is not a broad diversified mix of assets as timing the market. 99% of the time they are right.

But i have found, that 1% matters. In fact it makes all the difference. The extent to which commitment to boglehead philosophy interferes with the proper mindset necessary to decisively capitalize on life opportunities, I find that to be the greatest shortcoming.
Last edited by TomCat96 on Wed Jan 24, 2018 5:06 pm, edited 1 time in total.
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Re: In what ways could BogleHeads be badly wrong ?

Post by visualguy »

rbaldini wrote: Wed Jan 24, 2018 4:20 pm Sure. But... wouldn't you agree that the vast majority of Bogleheads would predict that the average mutual fund in the future will not beat an index, after costs? And therefore, if they did (very unlikely, but not strictly impossible), then we would be "wrong"? Even "badly wrong"?
This would be a case of "somewhat wrong", but not "badly wrong" in my opinion unless the BH strategy actually fails (i.e. runs out of money) in the future for cases where it always succeeded in the past. By the way, in some areas of the world the picture on passive vs active is different than in the US even now:

http://www.telegraph.co.uk/finance/pers ... nswer.html
rbaldini wrote: Wed Jan 24, 2018 4:20 pm Sure, I have no gripe with real estate for others. I'm just saying I don't think "Don't Invest in Real Estate" is part of the Boglehead philosophy - so if real estate outperforms stocks, that doesn't reflect badly on Bogelheads, IMO. Am I wrong about that? EDIT: I guess the standard suggestion is the 3-Fund portfolio, which doesn't include real estate. So, while not explicitly forbidding real estate, it certainly doesn't encourage it as much as stocks or bonds. So, perhaps yes, we'd be wrong-ish if real estate ended up being the best bet.

Personally, I have a lot of money in real estate: I own a house. It's the biggest asset I own, for now. I don't need any more than that. Certainly no interest in being a landlord.
Again, it's not about best or better. My real estate has done better than my BH portfolio over the last 20 years, but that doesn't mean that the BH approach is badly wrong. If the BH approach delivers in the future similarly to the way it delivered in the past, then I won't complain, and I won't consider it to be "badly wrong" even if other strategies do better.
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

TomCat96 wrote: Wed Jan 24, 2018 5:02 pm

I think this is an excellent question. Regarding your economic concerns, all of the issues you raised are possible. But there is wide empirical evidence that going forward a boglelike portfolio is the best way to go given the information we have. Boglehead portfolios have endured everything you have written up there. So unless you possess specialized information of a particular type of economic circumstance going forward, a broad diversified investment on stocks, staying the course, and balancing against a bond portfolio is going to give you the best bang for the buck.

That being said, I find boglehead philosophy to have shortcomings when it comes to personal situations.

To be fair, there is no way of tailoring boglehead philosophy towards individual particular circumstances. So it's really up to you to measure what you know. But I believe for the rare, talented, young individual, a boglehead portfolio investment, as profitable as it is, will underperform the potential profitability of growing yourself.

No economics course can adequately teach you how to value your personal prospects and opportunities. I can say however that I am surrounded by extremely bright and talented individuals---individuals who have no trouble making 200k+ under 30. Individuals who will no doubt change the world. In all their cases, a boglehead mindset would not have compensated them adequately. They took on considerable risk, but have made gains which far exceed 10% a year compounded.

These people poured their capital into growing their careers, skillsets, and professional images. That is not inherently a conflict with boglehead philosophy itself. But you will find many here who are adverse to risk, who are frugal, and who will summarily judge any opportunity that is not a broad diversified mix of assets as timing the market. 99% of the time they are right.

But i have found, that 1% matters. In fact it makes all the difference. To the extent that a commitment to boglehead philosophy interferes with the proper mindset necessary to decisively capitalize on life opportunities, I find that to be the greatest shortcoming.
Those are excellent observations but don't argue that the BH philosophy could be badly wrong. BH philosophy is about how to invest in stock and bond mutual funds but does not contain an imperative that other forms of personal enterprise should be shunned. Such an imperative would be wrong but would also be irrelevant as a philosophy that applies to investing in stock and bond mutual funds has nothing to do with all the other enterprises you mention and many others as well. I guess any philosophy starts to look inadequate when applied beyond the area that it addresses.

I don't understand the comment that "not a broad diversified mix of assets" is timing the market. You have lost me there.
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Re: In what ways could BogleHeads be badly wrong ?

Post by dbr »

visualguy wrote: Wed Jan 24, 2018 5:05 pm
rbaldini wrote: Wed Jan 24, 2018 4:20 pm Sure, I have no gripe with real estate for others. I'm just saying I don't think "Don't Invest in Real Estate" is part of the Boglehead philosophy - so if real estate outperforms stocks, that doesn't reflect badly on Bogelheads, IMO. Am I wrong about that? EDIT: I guess the standard suggestion is the 3-Fund portfolio, which doesn't include real estate. So, while not explicitly forbidding real estate, it certainly doesn't encourage it as much as stocks or bonds. So, perhaps yes, we'd be wrong-ish if real estate ended up being the best bet.

Personally, I have a lot of money in real estate: I own a house. It's the biggest asset I own, for now. I don't need any more than that. Certainly no interest in being a landlord.
Again, it's not about best or better. My real estate has done better than my BH portfolio over the last 20 years, but that doesn't mean that the BH approach is badly wrong. If the BH approach delivers in the future similarly to the way it delivered in the past, then I won't complain, and I won't consider it to be "badly wrong" even if other strategies do better.
The point is that BH philosophy does not address real estate so BH can't be badly wrong about real estate. I guess the contention could be made that the scope of BH philosophy is too narrow and therefore badly wrong for ignoring important things. BH philosophy doesn't address health and fitness either and usually discussion involving personal relationships get locked. Is that a way BH philosophy might be badly wrong?
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Re: In what ways could BogleHeads be badly wrong ?

Post by visualguy »

TomCat96 wrote: Wed Jan 24, 2018 5:02 pm I think this is an excellent question. Regarding your economic concerns, all of the issues you raised are possible. But there is wide empirical evidence that going forward a boglelike portfolio is the best way to go given the information we have. Boglehead portfolios have endured everything you have written up there. So unless you possess specialized information of a particular type of economic circumstance going forward, a broad diversified investment on stocks, staying the course, and balancing against a bond portfolio is going to give you the best bang for the buck.

That being said, I find boglehead philosophy to have shortcomings when it comes to personal situations.

To be fair, there is no way of tailoring boglehead philosophy towards individual particular circumstances. So it's really up to you to measure what you know. But I believe for the rare, talented, young individual, a boglehead portfolio investment, as profitable as it is, will underperform the potential profitability of growing yourself.

No economics course can adequately teach you how to value your personal prospects and opportunities. I can say however that I am surrounded by extremely bright and talented individuals---individuals who have no trouble making 200k+ under 30. Individuals who will no doubt change the world. In all their cases, a boglehead mindset would not have compensated them adequately. They took on considerable risk, but have made gains which far exceed 10% a year compounded.

These people poured their capital into growing their careers, skillsets, and professional images. That is not inherently a conflict with boglehead philosophy itself. But you will find many here who are adverse to risk, who are frugal, and who will summarily judge any opportunity that is not a broad diversified mix of assets as timing the market. 99% of the time they are right.

But i have found, that 1% matters. In fact it makes all the difference. The extent to which commitment to boglehead philosophy interferes with the proper mindset necessary to decisively capitalize on life opportunities, I find that to be the greatest shortcoming.
Indeed, investing in yourself, your education and skills, as well as taking calculated risks makes a huge difference, and that is often what actually gets you anywhere in life. Still, once you got there, you still need to have some sort of a retirement portfolio, so the BH strategy is still relevant (unless you made so much money that it's all moot).
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Re: In what ways could BogleHeads be badly wrong ?

Post by Halicar »

dbr wrote: Wed Jan 24, 2018 4:29 pm Here is the philoosphy as intended to be applied to investing in stock and bond mutual funds. Item by item what could be badly wrong about any of those? It isn't enough that one find something that could GO wrong; the question is what could BE wrong. BH is not a philosophy for life in general and all the things that can happen, so you can't present absurd considerations.

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
#3 is the one that worries me sometimes. Political discussion is not allowed on Bogleheads, and for good reason. However, an unfortunate side effect of this is that political risk (i.e., potential for dramatic changes in the law within one's lifetime) and how to mitigate it is never discussed.
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Re: In what ways could BogleHeads be badly wrong ?

Post by Mayhew Folger »

White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 6 The entire economic world melts down and you would have been better off spending your money rather than saving/investing at all
This is the one I worry about...

There is a big opportunity cost to saving 30% of income over the years.

By all Boglehead measures, I've won the game. But until I cash out and spend it on my long-term goals, its just numbers on a page. I'll only know how that plays out at the end.

I can't complain though. I've got a wonderful wife and family and a job that I love. It has been a heck of a run so far.
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Re: In what ways could BogleHeads be badly wrong ?

Post by nisiprius »

visualguy wrote: Wed Jan 24, 2018 1:11 pm...The strategy can fail because of the reasons mentioned by the OP and others...
A strategy can't "fail" unless it has a stated objective. When you know what the objective is, then you can discuss whether the objective was met (succeeded) or not met (failed).

For example, to make things a little bit too easy, if the goal of the strategy is "to earn the average (CAGR) return of the U.S. stock market over 2018-2038, to within an error of less than 0.25% annualized," and the strategy is "invest in VTSAX for twenty years," some ways the strategy can fail badly would include:
  • Index funds are outlawed.
  • Index funds are subjected to a 2% per year tax, to compensate active investors for index fund freeriding;
  • Vanguard goes out of business, and VTSAX is merged into a fund that is not a low cost total market index fund;
  • Instead of mirroring the index with almost 100% of the fund's assets, fund manager Gerard C. O'Reilly decides to do what is allowed under fund rules, and invests 20% of the fund's assets into cryptocurrency. Cryptocurrency futures. 3X leveraged cryptocurrency futures. 3X leveraged Petro, KodakCoin, and Golem futures.*
  • Vanguard principals collude with the custodian bank, JPMorgan Chase, take investors' money, don't buy any stocks with it but produce phony statements saying they have, bribe the auditors, buy St. Kitts citizenships, run away, and live happily ever after.
If the goal is as stated above, then the only financial market event I can think of that would make the strategy "badly wrong" would be:
  • Stock market liquidity undergoes an unprecedented freeze-up in which nothing but megacaps can be traded... making it impossible to implement an index fund that includes mid-caps or small-caps.
*Yes, I'm joking. But, no, something a little bit like this actually happened to the Oppenheimer Core Bond Fund, OPIGX, and--less seriously--to the Schwab Total Bond Market Fund. That is, the funds invested a significant percentage of their assets into things that were quite different from what a lay investor reading the prospectus would have expected.
Last edited by nisiprius on Wed Jan 24, 2018 9:01 pm, edited 4 times in total.
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Re: In what ways could BogleHeads be badly wrong ?

Post by MathWizard »

The basic premise that, on average, keep costs low when investing in a diversified portfolio of stocks, really can't be wrong.
This just depends on the definition of average return.

The concept of investing in stocks in the first place assumes that capital is important, and that companies care about, or can be
made to care about the shareholders, would be the only thing that could go wrong. That is why rules/laws having to do with insider
trading, stock price manipulation, and outright fraud are important.
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Re: In what ways could BogleHeads be badly wrong ?

Post by visualguy »

nisiprius wrote: Wed Jan 24, 2018 5:35 pm A strategy can't "fail" unless it has a stated objective. When you know what the objective is, then you can discuss whether the objective was met (succeeded) or not met (failed).
That's the reason I made sure to define the objective (from my perspective), namely that BH portfolios that always succeeded in the past (as reported by firecalc) will not fail in the future. If such portfolios start failing, then I would consider the strategy to be "badly wrong".
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Re: In what ways could BogleHeads be badly wrong ?

Post by HomerJ »

snackdog wrote: Wed Jan 24, 2018 12:12 pm A black swan event such as a pandemic, nuclear war, cyber attack or asteroid collision could crater the world economy for a generation or more. Then the bogleheads might look pretty silly with all their investments up in smoke.
This is what I worry about (just a tiny tiny bit, but it has crossed my mind).

I mean, I have a good amount of money. I could use 1% of it, and a buy a lot of stuff that would be useful if we ever hit Mad Max times.

I even have a place to store it all, since my parents live out in the country and have a large basement with very little in it. The plan would be to head there in any case.

Yet, I probably won't buy any of that stuff, because my wife (and even my parents) would think I was crazy to waste thousands of dollars on ammunition, and water purifiers, and seeds, and how-to-rebuild-civilization books. But if the poop ever hits the fan, and all my money in electronic accounts disappears I'm going to be really sad I never converted any of it into actual usable physical goods.
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Re: In what ways could BogleHeads be badly wrong ?

Post by H-Town »

HomerJ wrote: Wed Jan 24, 2018 5:47 pm
snackdog wrote: Wed Jan 24, 2018 12:12 pm A black swan event such as a pandemic, nuclear war, cyber attack or asteroid collision could crater the world economy for a generation or more. Then the bogleheads might look pretty silly with all their investments up in smoke.
This is what I worry about (just a tiny tiny bit, but it has crossed my mind).

I mean, I have a good amount of money. I could use 1% of it, and a buy a lot of stuff that would be useful if we ever hit Mad Max times.

I even have a place to store it all, since my parents live out in the country and have a large basement with very little in it. The plan would be to head there in any case.

Yet, I probably won't buy any of that stuff, because my wife (and even my parents) would think I was crazy to waste thousands of dollars on ammunition, and water purifiers, and seeds, and how-to-rebuild-civilization books. But if the poop ever hits the fan, and all my money in electronic accounts disappears I'm going to be really sad I never converted any of it into actual usable physical goods.
If it comes to that, can we join you?
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Re: In what ways could BogleHeads be badly wrong ?

Post by Wildebeest »

snackdog wrote: Wed Jan 24, 2018 12:12 pm A black swan event such as a pandemic, nuclear war, cyber attack or asteroid collision could crater the world economy for a generation or more. Then the bogleheads might look pretty silly with all their investments up in smoke.
I agree with snackdog: A black swan is in the offing ( hopefully not in my life time) and would be major downer as in that all our savings may not protect us.

Bogleheads are not badly wrong. Just not prepared for all what the future may bring. It is good to have a Boglehead approach to the unknowable and for as long as it works, I feel secure.

To quote David Rumsfeld: "There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."

Mandelbrot and Taleb make a better case and make me wonder why I expect the past to presage the here and now and not tomorrow's black swan. I am not even concerned about pandemics, nuclear war or an asteroid collision. "Just" the unraveling of the social fabric and without a social fabric dollars, stock, bonds, CD's become worthless.
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Re: In what ways could BogleHeads be badly wrong ?

Post by rob65 »

That steady, sustained population decline leads to prolonged deflation?? Not actually predicting this, but we've gone so long without any sustained deflation in the US that we don't think about how dangerous a deflationary spiral could be.
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Re: In what ways could BogleHeads be badly wrong ?

Post by inbox788 »

chicagoan23 wrote: Wed Jan 24, 2018 11:38 amLike democracy, BH principles are probably the worst investment philosophy we have, except for all the other ones....
Yup! The way I see it is that BH investing is aiming for average. Sure some people will be above average, but if BH goes down, were taking half the other investors with us. Like a democracy, when half the voters or investors are impacted, there's a lot of incentive to fix things.
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Re: In what ways could BogleHeads be badly wrong ?

Post by visualguy »

Halicar wrote: Wed Jan 24, 2018 5:31 pm #3 is the one that worries me sometimes. Political discussion is not allowed on Bogleheads, and for good reason. However, an unfortunate side effect of this is that political risk (i.e., potential for dramatic changes in the law within one's lifetime) and how to mitigate it is never discussed.
It's one of those things where mitigating typically means having more money, so it can be put in the category of "bad stuff happens, and you suddenly need more money". I allocate a reserve for unexpected increases in expenses (including, but not limited to law changes). It's the reason I like having nXexpenses+reserve instead of nXexpenses. The hard thing is to estimate how much to put in that reserve.
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Re: In what ways could BogleHeads be badly wrong ?

Post by JBTX »

Where could BH be wrong?

First I don’t think low cost indexing will ever be wrong per se. Active management on average will never beat passive Investing. It is possible that an S&P 500 heavy market weight portfolio could tank badly and have middling returns for a decade or more (Japan)

I agree many, certainly not all, tend to underweight international. That could turn out to be wrong.

Having most of your money in stocks and bonds could be a terrible place to be if inflation and interest rates go up long term.

Tax rates could go up, significantly, especially for well to do retirees who have saved diligently. Many here assume they will never materially go up.

I agree with another on here that wealth stratification could lead to inevitable backlash that will not at all favor those with wealth and savings.
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Re: In what ways could BogleHeads be badly wrong ?

Post by JBTX »

Halicar wrote: Wed Jan 24, 2018 5:31 pm
dbr wrote: Wed Jan 24, 2018 4:29 pm Here is the philoosphy as intended to be applied to investing in stock and bond mutual funds. Item by item what could be badly wrong about any of those? It isn't enough that one find something that could GO wrong; the question is what could BE wrong. BH is not a philosophy for life in general and all the things that can happen, so you can't present absurd considerations.

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
#3 is the one that worries me sometimes. Political discussion is not allowed on Bogleheads, and for good reason. However, an unfortunate side effect of this is that political risk (i.e., potential for dramatic changes in the law within one's lifetime) and how to mitigate it is never discussed.
Agree. It is totally impossible to discuss anything even remotely political without it devolving into conflict. So it isn’t allowed for good reason. However the result is financial decisions are discussed devoid of the political landscape, and the two are very much intertwined.
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Re: In what ways could BogleHeads be badly wrong ?

Post by johnnybh »

I see a few areas where the Boglehead philosophy would not help:

1) Long term economic stagnation
--- This might become inevitable over time as advanced countries see their populations begin to shrink
--- Example: Japan

2) Most economically relevant companies are not longer public
--- If most of the greatest companies become privately owned (or government owned)
--- This prevents the public markets from owning a significant % of the country's value
--- Example: China

3) The SEC or other regulatory bodies become too weak to prevent insider trading and stock manipulation
--- Most of the value of the stock market is accrued to well connected private interests, not the public owners
--- Example: Saudi Arabia

4) Too much trust placed in Index Fund governance
--- What if Vanguard (or other) figures out a way to deceive their investors, or gets hacked in a serious way

5) Political regime change
--- If there was a significant change in the governance of the country, certain people could have their assets legally taken away from them
--- Possession is 9/10ths of the law, we need significant trust in Vanguard, the government, and the banks the hold the assets to honor our ownership when we come asking for it back

6) US Bias
--- The US economy is, even still, very special. But single country risk makes this a more difficult long term proposition.

-----

That said, I love the Boghehead philosophy and continue to follow it despite the risks above, it is the best option for the vast majority of people (myself included).
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Re: In what ways could BogleHeads be badly wrong ?

Post by inbox788 »

johnnybh wrote: Wed Jan 24, 2018 6:34 pm I see a few areas where the Boglehead philosophy would not help:

1) Long term economic stagnation
--- This might become inevitable over time as advanced countries see their populations begin to shrink
--- Example: Japan

2) Most economically relevant companies are not longer public
--- If most of the greatest companies become privately owned (or government owned)
--- This prevents the public markets from owning a significant % of the country's value

--- Example: China

3) The SEC or other regulatory bodies become too weak to prevent insider trading and stock manipulation
--- Most of the value of the stock market is accrued to well connected private interests, not the public owners
--- Example: Saudi Arabia

4) Too much trust placed in Index Fund governance
--- What if Vanguard (or other) figures out a way to deceive their investors, or gets hacked in a serious way

5) Political regime change
--- If there was a significant change in the governance of the country, certain people could have their assets legally taken away from them
--- Possession is 9/10ths of the law, we need significant trust in Vanguard, the government, and the banks the hold the assets to honor our ownership when we come asking for it back

6) US Bias
--- The US economy is, even still, very special. But single country risk makes this a more difficult long term proposition.

-----

That said, I love the Boghehead philosophy and continue to follow it despite the risks above, it is the best option for the vast majority of people (myself included).
Wow! Excellent list! These are real risks, but hopefully aren't too significant. The most worrisome to me is the privatization of companies. You've mentioned international companies/countries where government and private individuals control business (e.g. Russia), but if you believe the conspiracists, the US suffers the same manipulations. Public companies are taken private all the time, and that can be a loss to the public markets, since good companies in down times are taken private, while bad public companies remain to languish. Then the value creating is occurring in private hands, and when the companies come back as public companies, the value creation is mostly done. With new companies, IPOs are occurring later in the pipeline, so public investors are not participating in a big part of a new companies' growth curve. Mature companies going IPO are just ways for the private investors to cash out, not necessarily provide the public with good risk/reward opportunities. The best risk/reward is likely behind them. Think Uber...even the latest round by Softbank is risky, and the next round might be Joe Public getting little reward and most of the risk.
https://www.nytimes.com/2017/12/28/tech ... stake.html

I've looked for ways to hedge this private company risk, and one example is Berkshire Hathaway with a few dozen private companies under it's umbrella. Blackrock is another. Now they're in the index, but like some folks that overweigh REITs because they think much of real estate is in private hands, a basket of private equity related public companies might be a way to tilt against this risk. The fix is harder than for US Bias, where a 50/50 or substantial international index fund goes a long way towards mitigating the risk. For now, I'm satisfied the US public market is diversified enough to represent the US economy. Even the Japanese market adequately represents the Japanese economy. But when it comes to China and Germany, I'm not so sure. Both those stock markets suffer from more private control and public markets should be much bigger.
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Re: In what ways could BogleHeads be badly wrong ?

Post by HEDGEFUNDIE »

johnnybh wrote: Wed Jan 24, 2018 6:34 pm 2) Most economically relevant companies are not longer public
--- If most of the greatest companies become privately owned (or government owned)
--- This prevents the public markets from owning a significant % of the country's value
--- Example: China
I think this one is an underestimated risk on this board. It used to be that promising companies would go public as soon as possible, giving the general public a chance to participate in those companies’ growth.

Nowadays the sexiest tech companies (Uber, Airbnb, etc.) are happy to stay private in their growth stage. For the (many) high net worth accredited investors on this board who are able to access these private investments, the standard BH advice to put everything in the three-fund publicly traded portfolio could mean missing out on significant gains.
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Re: In what ways could BogleHeads be badly wrong ?

Post by Pinotage »

TomCat96 wrote: Wed Jan 24, 2018 5:02 pm I think this is an excellent question. Regarding your economic concerns, all of the issues you raised are possible. But there is wide empirical evidence that going forward a boglelike portfolio is the best way to go given the information we have. Boglehead portfolios have endured everything you have written up there. So unless you possess specialized information of a particular type of economic circumstance going forward, a broad diversified investment on stocks, staying the course, and balancing against a bond portfolio is going to give you the best bang for the buck.

That being said, I find boglehead philosophy to have shortcomings when it comes to personal situations.

To be fair, there is no way of tailoring boglehead philosophy towards individual particular circumstances. So it's really up to you to measure what you know. But I believe for the rare, talented, young individual, a boglehead portfolio investment, as profitable as it is, will underperform the potential profitability of growing yourself.

No economics course can adequately teach you how to value your personal prospects and opportunities. I can say however that I am surrounded by extremely bright and talented individuals---individuals who have no trouble making 200k+ under 30. Individuals who will no doubt change the world. In all their cases, a boglehead mindset would not have compensated them adequately. They took on considerable risk, but have made gains which far exceed 10% a year compounded.

These people poured their capital into growing their careers, skillsets, and professional images. That is not inherently a conflict with boglehead philosophy itself. But you will find many here who are adverse to risk, who are frugal, and who will summarily judge any opportunity that is not a broad diversified mix of assets as timing the market. 99% of the time they are right.

But i have found, that 1% matters. In fact it makes all the difference. The extent to which commitment to boglehead philosophy interferes with the proper mindset necessary to decisively capitalize on life opportunities, I find that to be the greatest shortcoming.
Very well said. It is possible to be too conservative, and as a result miss out on outstanding opportunity.
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Re: In what ways could BogleHeads be badly wrong ?

Post by swguy »

Trev H wrote: Wed Jan 24, 2018 4:28 pm That low cost index fund investing is the "only" way to go.

One word... oh well three words.

Wellesley Income Fund.

Trev H
Im not aware of anything in the BH philosophy that would argue againat Wellesley. It recommends using index funds "when possible" and encourages low costs. Wellesley is certainly a low cost balanced fund. Have i missed something?
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Re: In what ways could BogleHeads be badly wrong ?

Post by AlohaJoe »

visualguy wrote: Wed Jan 24, 2018 4:15 pm Regarding direct real estate... It helps me reduce my worry about the BH approach failing. Like I said, it's not a big worry, but why not diversify in a way that would address it if practical.
But where do you draw the line? Direct real estate wouldn't have helped you in the Great Depression.

Even if we assume "I definitely wouldn't have had direct real estate that was affected by the drought of 1931-1940 because I'm smart/lucky/handsome" .... real estate prices crashed even more than stocks. Holding direct real estate would have exacerbated the pain of that stock market crash, not made it better.
  • Prices crashed 67% by 1932.
  • A typical property bought in 1920 would have lost 46% of its value even two decades later.
  • "A investment in the stock market would have outperformed an investment in typical property by a factor of 5.2" (That is, by over 400%.)
  • "The full recovery did not happen until 1960."
  • Real estate fell more and was slower to rebound than the stock market.
If you had had direct real estate in, say, Australia or France you would have done much better, since those countries recovered much faster than America did.

It is hard to draw lessons from the past because it seems to tell us whatever we want to hear.
Last edited by AlohaJoe on Wed Jan 24, 2018 8:41 pm, edited 1 time in total.
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Re: In what ways could BogleHeads be badly wrong ?

Post by visualguy »

AlohaJoe - Real estate is local and specific. The investment is not in a "typical property". In general, "typical properties" actually don't do all that well in the US.
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Re: In what ways could BogleHeads be badly wrong ?

Post by whodidntante »

The (IMO wrong) belief that the USA is the only place worth investing in. And that even if isn't, our USA companies provide plenty of foreign exposure.

Also that active management is wrong and everyone involved in active management is misguided or just in it to cheat you, unless the active management is done by Vanguard and the mutual fund name starts with "W."
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Re: In what ways could BogleHeads be badly wrong ?

Post by aristotelian »

willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

aristotelian wrote: Wed Jan 24, 2018 8:25 pm
willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
Yes, I'd say that it is, but it's in direct opposition to "Never try to time the market."
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Re: In what ways could BogleHeads be badly wrong ?

Post by deltaneutral83 »

BigMoneyNoWhammies wrote: Wed Jan 24, 2018 4:13 pm #5. Low stock returns relative to historical norms worries me more than anything else listed here.
Yep, I already think it's happening. The worst rolling 30 for the S&P would be right before the great depression and that even got 7.6% CAGR (Sept 1929-1959) I believe. If you start 9/1/2000 as you're starting point (which is cherry picked), we will need a lot of 10%+ annual rises in the S&P to get to 7.6% by Sept 2030. I'm sure someone can figure out the annual CAGR from now until 9/1/2030 to get to 7.6% CAGR for the period. We will all be thrilled if it's 7.6%.
Last edited by deltaneutral83 on Wed Jan 24, 2018 8:44 pm, edited 1 time in total.
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Re: In what ways could BogleHeads be badly wrong ?

Post by randomizer »

I think the core BH guidelines are very solid, but the thing that worries me is that we might be headed for catastrophic systemic failure at some point due to runaway environmental destabilization; gradual collapse of our democratic institutions and systems of government/finance etc; total war; insurmountable demographic imbalance (eg. aging population); and so on. Basically, some big fat black swans.

Having said that, I still can't think of any better defense than to save as much as I can, build a low-cost three-fund portfolio, and stick to my IPS, so that's what I am doing.
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Re: In what ways could BogleHeads be badly wrong ?

Post by Rowan Oak »

willthrill81 wrote: Wed Jan 24, 2018 8:31 pm
aristotelian wrote: Wed Jan 24, 2018 8:25 pm
willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
Yes, I'd say that it is, but it's in direct opposition to "Never try to time the market."
These are good points. Temperament may be the deciding factor and one's inclination towards simple or complex. And by simple I only mean the amount of time it takes to maintain the portfolio.
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

Rowan Oak wrote: Wed Jan 24, 2018 8:44 pm
willthrill81 wrote: Wed Jan 24, 2018 8:31 pm
aristotelian wrote: Wed Jan 24, 2018 8:25 pm
willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
Yes, I'd say that it is, but it's in direct opposition to "Never try to time the market."
These are good points. Temperament may be the deciding factor and one's inclination towards simple or complex. And by simple I only mean the amount of time it takes to maintain the portfolio.
Using Portfolio Visualizer, it takes me about 30 seconds once per month to determine if I need to make a trade. Most months I do not. It's very simple.
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Re: In what ways could BogleHeads be badly wrong ?

Post by indexmonkey »

When does the “actionable” police shut this thread down?
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Re: In what ways could BogleHeads be badly wrong ?

Post by dh »

White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
# 2 Choosing stocks may become easier than it has been in the past
# 3 Picking mutual fund managers may become easier than it has been in the past
# 4 Factor investing may work out a lot better than many of us think
# 5 Future stock returns may be 3% while real estate (buying local properties) provides 10%+ returns
# 6 The entire economic world melts down and you would have been better off spending your money rather than saving/investing at all
White Coat Investor: That is a really good response to the OP's original (possibly "tongue in cheek" question). I think #1, #4, and #5 are more likely than the other three on your list.
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Re: In what ways could BogleHeads be badly wrong ?

Post by rbaldini »

aristotelian wrote: Wed Jan 24, 2018 8:25 pm I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
Well... if your rule-based system is a bad one, then staying the course would be a bad thing.

IMO trying to time the market isn't *terrible*. Why? Because the market seems to be pretty close to a random walk. That means that any time you exit the market, you're just replacing a random sample of (unknown) returns with 0% return over that time period that you exit. The effects of this are ultimately to (1) reduce long-term expected return and (2) reduce down-side risk / volatility, since you can't lose money while you're out. So it's not terribly different from putting some large chunk of your money into a 0-interest checking account: not optimal, but it does technically reduce risk. Of course, once you factor in the higher costs of buying and selling more frequently (e.g. short term cap gains), then it's worse.
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Re: In what ways could BogleHeads be badly wrong ?

Post by david1082b »

swguy wrote: Wed Jan 24, 2018 7:43 pm
Trev H wrote: Wed Jan 24, 2018 4:28 pm That low cost index fund investing is the "only" way to go.

One word... oh well three words.

Wellesley Income Fund.

Trev H
Im not aware of anything in the BH philosophy that would argue againat Wellesley. It recommends using index funds "when possible" and encourages low costs. Wellesley is certainly a low cost balanced fund. Have i missed something?
If indexing allows Bogleheads to get to their financial goals then they were not badly wrong at all or even mildly wrong, they simply didn't necessarily get the best theoretical performance (does it matter who is the best? The MSM always promote the best performing minority, but surely we can't all perform like that). Why choose Wellesley when some other active fund did even better over a certain space of time historically?
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Re: In what ways could BogleHeads be badly wrong ?

Post by willthrill81 »

rbaldini wrote: Wed Jan 24, 2018 9:14 pmIMO trying to time the market isn't *terrible*. Why? Because the market seems to be pretty close to a random walk. That means that any time you exit the market, you're just replacing a random sample of (unknown) returns with 0% return over that time period that you exit. The effects of this are ultimately to (1) reduce long-term expected return and (2) reduce down-side risk / volatility, since you can't lose money while you're out. So it's not terribly different from putting some large chunk of your money into a 0-interest checking account: not optimal, but it does technically reduce risk. Of course, once you factor in the higher costs of buying and selling more frequently (e.g. short term cap gains), then it's worse.
The notion of the 'random walk' of stock returns has been debunked many times over and is no longer widely accepted in the academic community.

Here's a simple table illustrating this.

Image

When stocks are in a downward trend (i.e. below 200 day moving average), their return is far lower than when it is above the 200 DMA.
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Re: In what ways could BogleHeads be badly wrong ?

Post by nisiprius »

randomizer wrote: Wed Jan 24, 2018 8:43 pm I think the core BH guidelines are very solid, but the thing that worries me is that we might be headed for catastrophic systemic failure at some point due to runaway environmental destabilization; gradual collapse of our democratic institutions and systems of government/finance etc; total war; insurmountable demographic imbalance (eg. aging population); and so on. Basically, some big fat black swans.

Having said that, I still can't think of any better defense than to save as much as I can, build a low-cost three-fund portfolio, and stick to my IPS, so that's what I am doing.
The nature of black swans is that there are, let's say, a thousand of them, each very low probability, but collectively not so low in total. But there's nothing much to do about them, because they are unpredictable, most of them have never happened before, nobody knows what will work, and there is no cheap way to protect yourself against any of them. If there are a thousand of them, and if it costs 1% of your portfolio to protect against each of them, it isn't going to work. Worrying about it is counterproductive because you will fall into the hands of someone willing to focus your attention on one of those thousand, and sell you something expensive and ineffective to protect yourself against only one of those thousand. Like "dread disease" insurance, or gold dealers who will claim that certain specific gold coin issues are immune from confiscation (I forget the details).
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Re: In what ways could BogleHeads be badly wrong ?

Post by Rowan Oak »

willthrill81 wrote: Wed Jan 24, 2018 8:46 pm
Rowan Oak wrote: Wed Jan 24, 2018 8:44 pm
willthrill81 wrote: Wed Jan 24, 2018 8:31 pm
aristotelian wrote: Wed Jan 24, 2018 8:25 pm
willthrill81 wrote: Wed Jan 24, 2018 4:43 pm
For the record, I think that both buy-and-hold and trend following can meet investors' goals very well. They both have their pros and cons. I think investors who can truly endure the occasional big drawdown of buy-and-hold should probably go that route. But I don't think the evidence is in favor at all of saying that rules-based, objective trend following is the bugaboo that many make it out to be.
I have asked this before and haven't gotten a good answer. If you have a rules based system for market timing, and you stick with it, even when it looks like it's not working, doesn't that count as staying the course?
Yes, I'd say that it is, but it's in direct opposition to "Never try to time the market."
These are good points. Temperament may be the deciding factor and one's inclination towards simple or complex. And by simple I only mean the amount of time it takes to maintain the portfolio.
Using Portfolio Visualizer, it takes me about 30 seconds once per month to determine if I need to make a trade. Most months I do not. It's very simple.
I was thinking more about the continuing evaluation of information as it pertains to the strategy. I should have said the amount of time it takes to maintain the strategy.

Though impressive how easy technology has made figuring out the necessary portfolio changes.
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Re: In what ways could BogleHeads be badly wrong ?

Post by rbaldini »

willthrill81 wrote: Wed Jan 24, 2018 9:21 pm
rbaldini wrote: Wed Jan 24, 2018 9:14 pmIMO trying to time the market isn't *terrible*. Why? Because the market seems to be pretty close to a random walk. That means that any time you exit the market, you're just replacing a random sample of (unknown) returns with 0% return over that time period that you exit. The effects of this are ultimately to (1) reduce long-term expected return and (2) reduce down-side risk / volatility, since you can't lose money while you're out. So it's not terribly different from putting some large chunk of your money into a 0-interest checking account: not optimal, but it does technically reduce risk. Of course, once you factor in the higher costs of buying and selling more frequently (e.g. short term cap gains), then it's worse.
The notion of the 'random walk' of stock returns has been debunked many times over and is no longer widely accepted in the academic community.

Here's a simple table illustrating this.

Image

When stocks are in a downward trend (i.e. below 200 day moving average), their return is far lower than when it is above the 200 DMA.
Can you help me unpack that table? I'm guessing that they're comparing the annual returns following days that are either above or below the 200-day moving average. I'm guessing the "p" row is the p-value for each of those being above or below the average annual return. If I'm right about that... then that is not very impressive. A p-value of 35% means that the observed result (or greater) would have been observed 35% of the time even if the null hypothesis (i.e. no difference) were true (calculated via normal or t distribution, usually). Usually people don't start perking up until you get down into the 10% or 5% level, though that's totally arbitrary. (Not sure why they wouldn't show a p-value of the difference between the two effects - looks like they only compared each to the baseline...)

I've read that the important thing is that non-randomness has to be actionable enough to be profitable. One could buy and sell more often to try to take advantage of trends... but then you're paying more in taxes and perhaps trading costs, so maybe not. Seems to me that the efficient market hypothesis posits that the only predictable trends remaining would be hard to profit on - and that would include relatively short-term (< 1 year?) momentum. Similarly, house prices show a lot of momentum, I think - but, then, flipping houses is slow and costly.

Seems to me that as an approximation, random-walk ain't bad from a practical perspective. But I'll defer to folks who work in this field.
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Re: In what ways could BogleHeads be badly wrong ?

Post by bhsince87 »

White Coat Investor wrote: Wed Jan 24, 2018 9:52 am # 1 Trend following may work better than buy and hold
# 2 Choosing stocks may become easier than it has been in the past
# 3 Picking mutual fund managers may become easier than it has been in the past
# 4 Factor investing may work out a lot better than many of us think
# 5 Future stock returns may be 3% while real estate (buying local properties) provides 10%+ returns
# 6 The entire economic world melts down and you would have been better off spending your money rather than saving/investing at all

That's about all I could think of. I worry most about # 1 and # 5 as those seem most likely to me.
Not to get too far off the rails here, but this post by one of the most astute investors and educators here makes me wonder about what actually constitutes the "Bogleheads approach".

If the Bogleheads approach is to buy and hold an S&P 500 fund, then Numbers 1 and 4 are essentially moot. The S&P 500 is inherently a trend following and a momentum factor fund. Companies are added or removed from the list based on their capitalization, and their weighting adjusted accordingly as well.

A total market fund seems even ore all-encompassing. But if it's market weighted, it too will have a momentum and trend factor.
Time is what we want most, but what we use worst. William Penn
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