To be or not to be complex, that is the question

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Rick Ferri
Posts: 8607
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

To be or not to be complex, that is the question

Post by Rick Ferri » Wed May 30, 2018 6:42 am

Bogleheads spend a lot of time talking about the benefits and drawbacks of simple portfolio strategies and “complex” strategies. Simple portfolios include Life-Strategy funds, 2-fund, 3-fund, Core-4 and other set and forget type strategies. Complex portfolios include factor tilts, commodity exposures, currencies and various other slice and dice strategies that need a lot of maintenance.

I wrote the following post in another conversation; however, after thinking about this a bit, I decided to start a new conversation about simple vs complex.

My goal IS NOT to endlessly debate whether complex beats simple in theory or vice versa. Rather, my intention is to discuss the practicality of the two strategies in real life. Is there any actual advantage to being complex? I’ll admit my thinking has shifted over the years. I was a complex advocate for many years, but now I believe that was more about stroking my own ego than anything else.

++++

On paper, a more complex strategy should outperform a simple one, but I don't believe it does in real life for most people. The outcome of simplicity is actually greater in real life than the outcome for complexity, even if in theory complexity outperforms.

We know complexity will cost more and that it takes up more of our time. But that's not all. Complexity changes. What will be new that we'll have to include in a portfolio 5 or 10 years from now?

There's also tracking error in any portfolio that's not a market portfolio, but we can't know how negative tracking error will affect us if it goes on for a long time. I noticed the advocates for complex on this board never seem to be satisfied with what they have. They are seeking (or chasing) a perfect portfolio that can only be known in retrospect.

These issues lead to cognitive errors. How many times will we change a complex strategy? Probably several. How will these changes affect our long-term return? Probably not much. What's the next thing I'll have to add? Complexity will require adding the next "evidence-based" asset class, factor or strategy.

All of the above have lead to an advancement in my investment views. The more I know, the more I realized how little I know, and how little anyone knows. Yet we must invest. So, how do we do it?

Simpler is better. Less is more.

Rick Ferri
Last edited by Rick Ferri on Wed May 30, 2018 6:54 am, edited 1 time in total.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

User avatar
dodecahedron
Posts: 3799
Joined: Tue Nov 12, 2013 12:28 pm

Re: To be or not to be complex, that is the question

Post by dodecahedron » Wed May 30, 2018 6:49 am

The candor and tone of Rick's post resonates well with the evolution in my own thinking. Living here near remnants of Shaker settlements, I often think to myself " 'Tis a gift to be simple, 'tis a gift to be free."

Edited to add: just looked up the official lyrics, apparently slightly but meaningfully different than I had been remembering:

" 'Tis the gift to be simple, 'tis the gift to be free."

Simplicity is not just A gift, it is THE gift.
Last edited by dodecahedron on Wed May 30, 2018 7:26 am, edited 2 times in total.

columbia
Posts: 1100
Joined: Tue Aug 27, 2013 5:30 am

Re: To be or not to be complex, that is the question

Post by columbia » Wed May 30, 2018 6:59 am

Absolutely

I have “reduced” my portfolio to 3 balanced funds + TIAA Traditional. I’ll get the returns that the market bears and fretting over a spreadsheet (and probably making a bad move, as a result) is a thing of the past.

Johnsson
Posts: 149
Joined: Mon Jul 17, 2017 2:28 pm

Re: To be or not to be complex, that is the question

Post by Johnsson » Wed May 30, 2018 7:17 am

Yes, it's a lifestyle. With the ever growing speed and complexity of electronics/communication I believe we often lose sight of what's truly important. Simplicity is often pushed aside by acquiring more `stuff'. Whether nic nacs or investments, stuff has to be managed once it's purchased. We all need to decide for ourselves if the overall cost to purchase/manage is really worth the hassle to our own lives. For some ( I think many BHs) investing is a hobby that helps work the gray matter after retirement. Others find comfort in the simplicity.

In any event, we all need to plan for the nic nacs and investments left when we pass, as others may not place the same importance to what we've collected. We certainly don't want them to be handled improperly once we're gone! I think simplicity helps avoid 'final' losses (i.e. loss of value due to mishandling) after we pass.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: To be or not to be complex, that is the question

Post by dbr » Wed May 30, 2018 7:30 am

I am a strong believer in our maxim that the worst enemy of a good plan is a better plan.

I find complex investment analysis intellectually interesting but have no desire to make any practical application. My answer about SCV tilting, for example, is that I don't because I don't need to and I don't want to. A simple three fund portfolio has been good enough for me. I am not going to answer "which bond fund?" either.

I would extend the same comment to retirement studies. The stuff is intellectually interesting but I have no interest in engineering withdrawals and all that stuff down to the nit. I guess that is why I have such disdain for buckets, LMP, and other schemes, even VPW, which does have some rationale.

Grt2bOutdoors
Posts: 19481
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: To be or not to be complex, that is the question

Post by Grt2bOutdoors » Wed May 30, 2018 7:38 am

Less is more, more time to enjoy the present. Too bad I haven't followed this, but I'm coming around to it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
dodecahedron
Posts: 3799
Joined: Tue Nov 12, 2013 12:28 pm

Re: To be or not to be complex, that is the question

Post by dodecahedron » Wed May 30, 2018 7:39 am

Johnsson wrote:
Wed May 30, 2018 7:17 am
Simplicity is often pushed aside by acquiring more `stuff'. Whether nic nacs or investments, stuff has to be managed once it's purchased. We all need to decide for ourselves if the overall cost to purchase/manage is really worth the hassle to our own lives. For some ( I think many BHs) investing is a hobby that helps work the gray matter after retirement. Others find comfort in the simplicity.

In any event, we all need to plan for the nic nacs and investments left when we pass, as others may not place the same importance to what we've collected. We certainly don't want them to be handled improperly once we're gone! I think simplicity helps avoid 'final' losses (i.e. loss of value due to mishandling) after we pass.
Amen on stuff! My beloved dear departed husband had many virtues so I can hardly hold this against him, but he did love the acquisition of *stuff.* And even moreso did his beloved mother--he had a massive amount of her stuff to deal with when she died (over ten years before he did). I think cleaning out the accumulation did give him pause.

My view is to try to find other households that will appreciate/be able to use much of the accumulated stuff in my home while I am still living. I volunteer with a homeless family shelter program where some families have all their worldly goods in a suitcase, plastic bags, or maybe a car. It gives me an appreciation for all that I have that I do not actually use or need. (I do not give directly to the families I directly serve as volunteer with but to agencies that help these families and others like them.) It is a process. I wish I had done more earlier. Also wish so much had never been acquired to begin with. Have greatly slowed down acquisition of new stuff.

Bonus of sifting through all the stuff is finding amazing treasured memories of stuff I'd forgotten I had or in some cases did not even know I had (e.g., an out-of-print book written by a dear departed relative on a very meaningful subject that I had been searching for fruitlessly for years on the Internet turned out to be on one of my very own bookshelves in my own home!)

Edited to add: the only reason we have that treasured book (written in 1950s) is because my above-mentioned MIL had saved it and it was one of a number of things my dear departed husband had chosen to rescue when he cleared out her home after her death.

Simplicity involves some care and curation and reflecting on priorities. I suppose that is true in investing as well. Certain old vintage high interest rate TIAA Trad holdings might be the investing analog to my example of the treasured book I discovered while simplifying.

snarlyjack
Posts: 780
Joined: Fri Aug 28, 2015 12:44 pm
Location: Montana

Re: To be or not to be complex, that is the question

Post by snarlyjack » Wed May 30, 2018 7:46 am

Nice meeting you Rick.
(I've read a lot of your posts...Thank You).

Paul Merriman is starting to come to the same conclusion.

Here is some math that you might enjoy.

enjoy...

http://www.fourpillarfreedom.com/the-ma ... irst-100k/

bondsr4me
Posts: 935
Joined: Fri Oct 18, 2013 7:08 am

Re: To be or not to be complex, that is the question

Post by bondsr4me » Wed May 30, 2018 7:53 am

Rick:

good piece...thanks for sharing it with us.

I do believe simple is better than complex.
The time, knowledge, assets, information requirements to establish and maintain a "complex" portfolio are/can be a tremendous burden.

"less" time spent on managing investments can mean "more" time enjoying life.
Time is one asset than can never be replaced; we use it until it's gone.
No "refresh" on it.

Thanks for your posts; appreciate reading them.

Have a great day BH'ers.

Don

book lover
Posts: 144
Joined: Thu Aug 23, 2012 4:01 pm

Re: To be or not to be complex, that is the question

Post by book lover » Wed May 30, 2018 7:55 am

Always liked Leonardo Da Vinci's quote:" Simplicity is the ultimate sophistication" and Henry David Thoreau's: "Simplify, simplify, simplify" and finally William of Ockham's belief that the simplest solution is the one that usually makes the most sense.

av8r316
Posts: 31
Joined: Sat Apr 29, 2017 7:27 pm

Re: To be or not to be complex, that is the question

Post by av8r316 » Wed May 30, 2018 8:03 am

This is basically Occam's Razor, a principle to which I assume many BH subscribe.

Add: I see I was beat to it by book lover
Last edited by av8r316 on Wed May 30, 2018 8:29 am, edited 1 time in total.

livesoft
Posts: 62855
Joined: Thu Mar 01, 2007 8:00 pm

Re: To be or not to be complex, that is the question

Post by livesoft » Wed May 30, 2018 8:19 am

Many people have hobbies. Those hobbies can cost them money and sometimes make them money. People pursue hobbies for the emotional, expressive,and status benefits (borrowing vocabulary from Meir Statman). Investing can be a hobby for some people with all the perceived benefits.

People also get tired of their hobbies and move on to another hobby.

If one doesn't want investing to be their hobby, then avoiding complexity is a good thing. If one wants their hobby to be investing, then avoiding underperformance is a good thing in spite of any complexity that one incorporates into their hobby. Of course, there are also simple hobbies, so complexity in a hobby is not a requirement either.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

Re: To be or not to be complex, that is the question

Post by TheTimeLord » Wed May 30, 2018 8:23 am

The older I get the more appealing simplicity is because I want to spend time living my life not managing my portfolio.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Dandy
Posts: 5463
Joined: Sun Apr 25, 2010 7:42 pm

Re: To be or not to be complex, that is the question

Post by Dandy » Wed May 30, 2018 8:37 am

I have no problem with people who choose simplicity. I think it is sometimes overstated as to how difficult it is to manage a portfolio that is a bit more "complex". To me the equity side of the allocation is easy -- basically Total US and Total International seems to fill the bill.

On the fixed income side having only Total bond fund is reasonable. But, it doesn't include TIPS which as a retiree some allocation to TIPS seems wise to at least consider. Having taxable account it seems as if an allocation to muni bonds seems like a reasonable choice. If the main purpose of your fixed income allocation is stability/safety so you can take the risk on the equity side - maybe some allocation to products that are principal "safe" such as CDs, Money Market Funds/Deposit Accounts, Stable Value funds, etc might be useful. Especially, since they will usually participate in rising interest rates which it what we are experiencing. I'm not a fan of International bonds but you can't deny that there are certainly strong arguments to support their inclusion.

Do you need to allocate funds to all the fixed income choices - no. But in retirement where their is usually a large allocation to fixed income more than just the Total bond fund might be a wise decision even if it adds "complexity". To me complexity can be overstated especially if you get very fussy about rebalancing sub allocations. It makes little difference if you have 1% more allocated to a CD ladder than to the TIPS fund. But it might make a difference if you don't have some inflation protected coverage especially in retirement.

There are a number of different fixed income choices each with pros and cons. Some avoid taxes, others do well in rising interest rate environments some do well in declining interest rates, some have high yields, others have government guarantees, some guard against inflation. Why automatically limit yourself to a single bond fund to cover your fixed income needs? Yes, if your busy, not particularly investment savvy or it is getting to be too much to keep track of - go consolidate.

I allocate about 1/3 to no loss of principal, about 1/3 to short term bond funds and about 1/3 to intermediate bond funds. Those are the categories I keep an eye on as well as the top level equity/fixed income allocation. All in Vanguard or 2 banks.

B. Wellington
Posts: 136
Joined: Fri Mar 30, 2012 10:10 am

Re: To be or not to be complex, that is the question

Post by B. Wellington » Wed May 30, 2018 8:51 am

Rick Ferri wrote:
Wed May 30, 2018 6:42 am
Bogleheads spend a lot of time talking about the benefits and drawbacks of simple portfolio strategies and “complex” strategies. Simple portfolios include Life-Strategy funds, 2-fund, 3-fund, Core-4 and other set and forget type strategies. Complex portfolios include factor tilts, commodity exposures, currencies and various other slice and dice strategies that need a lot of maintenance.

I wrote the following post in another conversation; however, after thinking about this a bit, I decided to start a new conversation about simple vs complex.

My goal IS NOT to endlessly debate whether complex beats simple in theory or vice versa. Rather, my intention is to discuss the practicality of the two strategies in real life. Is there any actual advantage to being complex? I’ll admit my thinking has shifted over the years. I was a complex advocate for many years, but now I believe that was more about stroking my own ego than anything else.

++++

On paper, a more complex strategy should outperform a simple one, but I don't believe it does in real life for most people. The outcome of simplicity is actually greater in real life than the outcome for complexity, even if in theory complexity outperforms.

We know complexity will cost more and that it takes up more of our time. But that's not all. Complexity changes. What will be new that we'll have to include in a portfolio 5 or 10 years from now?

There's also tracking error in any portfolio that's not a market portfolio, but we can't know how negative tracking error will affect us if it goes on for a long time. I noticed the advocates for complex on this board never seem to be satisfied with what they have. They are seeking (or chasing) a perfect portfolio that can only be known in retrospect.

These issues lead to cognitive errors. How many times will we change a complex strategy? Probably several. How will these changes affect our long-term return? Probably not much. What's the next thing I'll have to add? Complexity will require adding the next "evidence-based" asset class, factor or strategy.

All of the above have lead to an advancement in my investment views. The more I know, the more I realized how little I know, and how little anyone knows. Yet we must invest. So, how do we do it?

Simpler is better. Less is more.

Rick Ferri
Great post Rick, thank you.

My real life experience of adding more complexity to a portfolio has added little value. I find that simple balanced investing works for us and will benefit heirs. Is it optimal? Probably not. Is it the most tax efficient? No. However, it has worked for us with solid gains over the years that were "good enough."

bloom2708
Posts: 4997
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: To be or not to be complex, that is the question

Post by bloom2708 » Wed May 30, 2018 9:07 am

Well said Rick. Thank you for your comments.

Many times when I reply to threads from new members the common theme is "simplify". Even people currently with a 3 fund portfolio seem to have a deep down need to "add something". To "diversify" by adding something else.

If someone has the Total US Stock market index, they desire to add tech sector funds on top for "more" return. If they have a Target date fund, they need to add a S&P 500 fund on top for more return.

All we can do is keep beating the drum. Simplify, simplify, simplify. The 3 fund portfolio may not end up being 3 funds. You may have a few flavors of bond funds. Or some CDs like Dandy mentions.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: To be or not to be complex, that is the question

Post by dbr » Wed May 30, 2018 9:10 am

Surely someone is going to defend SCV tilts, which, by the way, don't have to be very complex.

GAAP
Posts: 686
Joined: Fri Apr 08, 2016 12:41 pm

Re: To be or not to be complex, that is the question

Post by GAAP » Wed May 30, 2018 9:37 am

Timing is everything -- today's Knowledge@Wharton podcast is entitled "Want to Be in Control of Your Wealth? Un-clutter Your Investments": http://knowledge.wharton.upenn.edu/arti ... vestments/
Often people find that the wealthier they are, the less control they have over their money. Investment advisor Liz Miller believes this is a by-product of success: As people make more money, they randomly invest in different instruments and end up with a cluttered portfolio.
She has apparently written a book on the topic.

I do find it somewhat amusing to see how many discussions here revolve around the definition of simple...

User avatar
jeffyscott
Posts: 7366
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: To be or not to be complex, that is the question

Post by jeffyscott » Wed May 30, 2018 9:47 am

Rick Ferri wrote:
Wed May 30, 2018 6:42 am
Simple portfolios include Life-Strategy funds, 2-fund, 3-fund, Core-4 and other set and forget type strategies. Complex portfolios include factor tilts, commodity exposures, currencies and various other slice and dice strategies that need a lot of maintenance.
Being one who believes a low cost fund manager can be an acceptable option and that manager can be allowed some flexibility (if you hire a manager, why not let 'em manage), allows me to incorporate some complexity in the portfolio in a simple manner.

For example, I have have intentionally chosen to use Dodge and Cox balanced and global funds to give them more flexibility. Other examples are T. Rowe Capital Appreciation and some managed bond funds with pretty flexible mandates (not Vanguard funds, obviously).

For people who don't have interest in this as a hobby (my spouse), I have suggesting things like: ½ Wellington and ½ Life Strategy Income for a target of ~40% stock, with just a pinch of manager spice in there.
press on, regardless - John C. Bogle

User avatar
David Jay
Posts: 5770
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: To be or not to be complex, that is the question

Post by David Jay » Wed May 30, 2018 9:51 am

Rick Ferri wrote:
Wed May 30, 2018 6:42 am
On paper, a more complex strategy should outperform a simple one, but I don't believe it does in real life for most people. The outcome of simplicity is actually greater in real life than the outcome for complexity, even if in theory complexity outperforms.
A favorite quote: "In theory, theory and practice are the same; in practice, they're not."
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Random Walker
Posts: 3302
Joined: Fri Feb 23, 2007 8:21 pm

Re: To be or not to be complex, that is the question

Post by Random Walker » Wed May 30, 2018 10:12 am

Thanks Rick for bringing up this subject. It is a huge one. I myself have a natural inclination towards simplicity, but have evolved in the other direction. For our purposes, complex portfolios are not really complex; it’s really no more difficult to rebalance an 8 fund portfolio than a 3 fund portfolio.
I don’t think the changes we are referring to are fleeting changes that will be changed again when something new comes along. CAPM explains about 70% of equity returns. Fama-French factors increase explanatory power to greater than 90%. Adding momentum and profitability increases explanatory behavior beyond 95%. So once someone has diversified equities across geographies and factors, there is not much additional change to make on the equity side. And I don’t see anything changing with bonds.
Occasionally new alternatives may arise as potential portfolio additions. If these are worthwhile additions, then they are worthwhile additions. A small improvement is an improvement. Portfolio improvements will occur at the margins. So each investor needs to decide if the marginal improvement is worth the marginal cost. If one makes a well conceived portfolio change towards more complex, then there shouldn’t be much reason to change it in the future. And sticking to the more complex plan is really no more work than sticking to the simple one.
I think the real issue is costs. Each marginal improvement to the portfolio comes at increased marginal cost, and each investor needs to decide when the marginal cost outweighs the marginal benefit.
Rick states that the complex portfolio should be superior to the simple one. If in practice it is not superior, then that is likely due to investor behavior. And behavior can and should be controlled. In fact, if one has a solid diversified relatively complex plan, then he has more reason to stick with conviction to the plan. He knows his bets are well diversified across sources of return, not betting a single factor, market beta. Interested to see where this conversation goes.

Dave

User avatar
Rick Ferri
Posts: 8607
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: To be or not to be complex, that is the question

Post by Rick Ferri » Wed May 30, 2018 10:18 am

David Jay wrote:
Wed May 30, 2018 9:51 am
A favorite quote: "In theory, theory and practice are the same; in practice, they're not."
True. But theory also sells complexity well. Consider the large number of advisers who put something like this in their marketing material:

We put Nobel-prize winning research into practice.

Theory could produce a higher return, but if an adviser is in the mix, the “alpha goes to the manager”, something I’ve said for years. I don’t think the net return to investors after adviser cost has been or will be any higher than a Life-Strategy Fund with the same stock-bond allocation.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

2015
Posts: 2154
Joined: Mon Feb 10, 2014 2:32 pm

Re: To be or not to be complex, that is the question

Post by 2015 » Wed May 30, 2018 10:28 am

For me, none of this is new news or particularly eye opening. As I have said many times, once you expand your horizons and study outside of the fields of investing, economics, and personal finance, you find simplicity everywhere.

But...eft.com financial bloggers (and the like) and academics gotta eat, and there are egos to be fed on the Bogleheads forum. Too bad it's all terribly misleading for most investors:

https://behaviouralinvestment.com/2018/ ... ural-bias/\
Noise has profound implications for investors, but is often ignored or, at least underappreciated. It can be difficult to accept that our judgements can be shaped by erroneous, often farcically minor, factors. Furthermore, we are often uncertain about the key variables that define any given problem.

User avatar
David Jay
Posts: 5770
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: To be or not to be complex, that is the question

Post by David Jay » Wed May 30, 2018 10:31 am

Rick Ferri wrote:
Wed May 30, 2018 10:18 am
I don’t think the net return to investors after adviser cost has been or will be any higher than a Life-Strategy Fund with the same stock-bond allocation.
Coming from you, I consider that to be a quotable quote.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

GAAP
Posts: 686
Joined: Fri Apr 08, 2016 12:41 pm

Re: To be or not to be complex, that is the question

Post by GAAP » Wed May 30, 2018 10:48 am

In my case, it's simplicity for my heirs, not just for me.

I'm naturally inclined toward the more complex sliced/diced/tilted portfolio -- but need to consider heirs that are not ready to manage such a portfolio. It would be irresponsible on my part to leave them with something that they don't understand, and that is more difficult to change to something they do understand.

reformed.trader
Posts: 41
Joined: Sat Apr 15, 2017 11:14 pm

Re: To be or not to be complex, that is the question

Post by reformed.trader » Wed May 30, 2018 10:51 am

With the plethora of investment options available to the average investor now that are cheap and tax efficient and handle all the complex stuff for you, you can make a factor tilted diversified portfolio with 5 funds or less pretty easily. If the benefits of steering away from market cap weightings are widely accepted and easily accessible, I don't know why people wouldn't do it. Heck Meb Faber's one fund, GAA, will do it all for you. The one fund portfolio!

dknightd
Posts: 1032
Joined: Wed Mar 07, 2018 11:57 am

Re: To be or not to be complex, that is the question

Post by dknightd » Wed May 30, 2018 10:52 am

columbia wrote:
Wed May 30, 2018 6:59 am

I have “reduced” my portfolio to 3 balanced funds + TIAA Traditional.
I'm curious which 3 funds you choose since I'm also with TIAA

columbia
Posts: 1100
Joined: Tue Aug 27, 2013 5:30 am

Re: To be or not to be complex, that is the question

Post by columbia » Wed May 30, 2018 10:59 am

dknightd wrote:
Wed May 30, 2018 10:52 am
columbia wrote:
Wed May 30, 2018 6:59 am

I have “reduced” my portfolio to 3 balanced funds + TIAA Traditional.
I'm curious which 3 funds you choose since I'm also with TIAA
This one in 403b:
https://www.marketwatch.com/investing/fund/qcscpx

JoeRetire
Posts: 1684
Joined: Tue Jan 16, 2018 2:44 pm

Re: To be or not to be complex, that is the question

Post by JoeRetire » Wed May 30, 2018 11:55 am

Rick Ferri wrote:
Wed May 30, 2018 6:42 am
The outcome of simplicity is actually greater in real life than the outcome for complexity, even if in theory complexity outperforms.

- We know complexity will cost more and that it takes up more of our time.
- Complexity changes. What will be new that we'll have to include in a portfolio 5 or 10 years from now?
- I noticed the advocates for complex on this board never seem to be satisfied with what they have. They are seeking (or chasing) a perfect portfolio that can only be known in retrospect.
- These issues lead to cognitive errors. How many times will we change a complex strategy? Probably several.
- Complexity will require adding the next "evidence-based" asset class, factor or strategy.
You seem to be describing complex DIY schemes.

I suspect I agree with your basic premise - if you are going to do your analysis, planning and investing yourself, it needs to be very simple, or you have a high chance of going awry. (For similar reasons, I used to take my car apart and put it back together. With today's complex cars, I no longer try to do much DIY mechanical work.)

There seems to be lots of disagreement on this forum about how simple, "simple" actually needs to be. Sometimes it seems that folks are playing Name That Tune with the number of funds in their portfolio (I invest using 3 funds. I invest using 2 funds...)

User avatar
cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: To be or not to be complex, that is the question

Post by cfs » Wed May 30, 2018 12:06 pm

Thank you Mister Rick for this good conversation. I am in the process of "decomplexing" my portfolio, and at the end of the day I will have a simple one consisting of one or two funds max. Good luck, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

PhilosophyAndrew
Posts: 456
Joined: Sat Aug 13, 2016 10:06 am

Re: To be or not to be complex, that is the question

Post by PhilosophyAndrew » Wed May 30, 2018 12:31 pm

JoeRetire wrote:
Wed May 30, 2018 11:55 am
Rick Ferri wrote:
Wed May 30, 2018 6:42 am
The outcome of simplicity is actually greater in real life than the outcome for complexity, even if in theory complexity outperforms.

- We know complexity will cost more and that it takes up more of our time.
- Complexity changes. What will be new that we'll have to include in a portfolio 5 or 10 years from now?
- I noticed the advocates for complex on this board never seem to be satisfied with what they have. They are seeking (or chasing) a perfect portfolio that can only be known in retrospect.
- These issues lead to cognitive errors. How many times will we change a complex strategy? Probably several.
- Complexity will require adding the next "evidence-based" asset class, factor or strategy.
You seem to be describing complex DIY schemes.

I suspect I agree with your basic premise - if you are going to do your analysis, planning and investing yourself, it needs to be very simple, or you have a high chance of going awry. (For similar reasons, I used to take my car apart and put it back together. With today's complex cars, I no longer try to do much DIY mechanical work.)

There seems to be lots of disagreement on this forum about how simple, "simple" actually needs to be. Sometimes it seems that folks are playing Name That Tune with the number of funds in their portfolio (I invest using 3 funds. I invest using 2 funds...)
What I see on the board is much effort devoted to comparing various reasonable strategies in minute detail. This leads to a kind of analytical compexity that may also lead to the portfolio complexity that Rick decries.

Minute dissections of small differences between 1-fund, 2-fund, 3-fund, and 4-fund portfolios are an example of this. As long as any of the simple portfolios align with your needs and goals, it makes no material difference which one you choose — you will eventually win the game if you slect and implement any one of them.

To me, the biggest opportunity to help others financially is to make sure they have the financial fundamentals in place, for example by helping them identify and fill in gaps in their investment knowledge, helping them to develop a rational and simple investment strategy, a solid plan, and helping them find the motivation and discipline to follow that strategy over the long-run while minimizing behavioral mistakes.

By contrast, minute analysis of small advantages of one approach over another make no practical difference in investors’ lives — except a negative difference if they lead investors to over-complicate their investment strategies or ping-pong from one ‘optimal’ strategy to the next.

There are many roads to Dublin, as a wise man sometimes
says. So, why not pick one simple strategy and hold it for the rest of your life, making modest and discIplined changes only on those few ocassions when your circumstances change materially?

Chasing optimal investment strategies may not be as grave an investing sIn as as chasing performance, but selecting a rational, simple strategy that meets your needs and sticking to it constitutes a laudable form of simplicity.

Andy.

radiowave
Posts: 1871
Joined: Thu Apr 30, 2015 5:01 pm

Re: To be or not to be complex, that is the question

Post by radiowave » Wed May 30, 2018 12:35 pm

Rick there is another perspective on your question and that is the number of accounts as a form of complexity. I started my Boglehead journey a few years ago trying to get my arms around nearly two dozen different brokerages across several jobs between my spouse and I as well as multiple Roth IRAs, Rollover IRAs, taxable brokerage accounts, multiple savings, checking accounts, etc.. That took about 2 years to get down to a dozen or so manageable accounts. We use a modified version of the 3 fund portfolio across those accounts, so the total fund variability is small, and we still have some target retirment funds at low costs.

What happens when the spouse managing all of these accounts and funds is no longer able to do so? That is a practical issue regarding complex portfolios.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

dknightd
Posts: 1032
Joined: Wed Mar 07, 2018 11:57 am

Re: To be or not to be complex, that is the question

Post by dknightd » Wed May 30, 2018 12:59 pm

columbia wrote:
Wed May 30, 2018 10:59 am

This one in 403b:
https://www.marketwatch.com/investing/fund/qcscpx
Unfortunately I have four TIAA accounts. One of them consists of only the one you mention, traditional, and real estate.
Other accounts I have to be a little more stock heavy to make up for it.

ThrustVectoring
Posts: 575
Joined: Wed Jul 12, 2017 2:51 pm

Re: To be or not to be complex, that is the question

Post by ThrustVectoring » Wed May 30, 2018 1:26 pm

bondsr4me wrote:
Wed May 30, 2018 7:53 am
"less" time spent on managing investments can mean "more" time enjoying life.
Even if you're robotically trying to maximize your net worth at age 65, there's better uses of your time. Half a percentage over the three-fund portfolio is a home run, but for a young-ish investor with $20k invested, that's only $100/yr. Learning how to cook meals over the weekend for delicious weekday lunches would be a better choice for a Sunday. Or credit card rewards, or bank account sign-up bonuses. Hell, signing up for Uber and driving would let you stash away more money.

Point is, once you're investing in cheap total market index funds, squeezing out the last few basis points pays way less than alternatives. That's assuming the best-case scenario, too. Unless you're managing truly massive amounts of money, these questions are of academic interest only.
Current portfolio: 60% VTI / 40% VXUS

User avatar
Toons
Posts: 13044
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: To be or not to be complex, that is the question

Post by Toons » Wed May 30, 2018 1:29 pm

"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee




:happy :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
1210sda
Posts: 1416
Joined: Wed Feb 28, 2007 8:31 am

Re: To be or not to be complex, that is the question

Post by 1210sda » Wed May 30, 2018 1:53 pm

I went through this website. It's really good. I was "shocked" to learn that the creator "Zach" is only 24 years old.

Thanks Snarly for providing the link.

1210

asif408
Posts: 1493
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: To be or not to be complex, that is the question

Post by asif408 » Wed May 30, 2018 1:53 pm

I think that any advantage of complexity is lost by most due to behavioral issues. But I also think some people can handle it, some will do better, and even if they do worse, if it doesn't hurt their long-term returns much, it gives them something to do. Most people who are here have some level of interest in investing above average and probably have difficulty with inaction. They also probably save enough that a few percentage points difference in return either way won't make much difference to their lifestyle in retirement.

Simplest to me would be a target date (TD) fund in all accounts. I do add some complexity above that by using 4-5 individual funds, partly because:
- I like controlling the percentages in my allocation and adjusting as needed as my personal situation changes
- TD funds aren't available in all my accounts commission free, so a regular purchase plan would be a drag on returns in several accounts, especially for small purchases in some of them

I will say, though, my personal rule now is that I should be able to count the number of investments I have on one hand. Anything beyond that is unnecessarily complex.

User avatar
1210sda
Posts: 1416
Joined: Wed Feb 28, 2007 8:31 am

Re: To be or not to be complex, that is the question

Post by 1210sda » Wed May 30, 2018 2:02 pm

GAAP wrote:
Wed May 30, 2018 10:48 am
In my case, it's simplicity for my heirs, not just for me.
Excellent point !

I do it for the same exact reason.

Even to the extent of accepting the small tax inefficiencies of having a Lifestrategy Fund or the Balanced Index fund in a taxable account. I believe the simplicity benefits for them (of such a portfolio) outweigh the cost of additional taxes.

1210

User avatar
galeno
Posts: 1413
Joined: Fri Dec 21, 2007 12:06 pm

Re: To be or not to be complex, that is the question

Post by galeno » Wed May 30, 2018 2:15 pm

If you want to complicate an excellent 2 fund/ETF portfolio for a USD based investor.

1. Start with X% FTSE all world all cap equity index (VT) + Y% Interm term USA treasuries (VDTY) adjusted for risk tolerance / preference.

2. Slice, dice, and tilt equities.

3. Slice, dice, and tilt FI.


Our port for example

1. 40% VWRD + 60% VDTY

2. Tilt equities to smaller cap: 30% VWRD + 10% WSML

3. Slice, dice, and tilt for protection against unexpected inflation, reach for yield a bit, and cash for convenience. 20% VDTY + 15% IDTP + 20% VDCP + 5% CASH
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%.

TM90
Posts: 112
Joined: Mon Mar 06, 2017 2:13 am

Re: To be or not to be complex, that is the question

Post by TM90 » Wed May 30, 2018 2:44 pm

A complex portfolio can also be simple like a global multifactor etf combined with a intermediate term Treasury etf but I guess that's not the point Rick is trying to make...

michaeljc70
Posts: 3870
Joined: Thu Oct 15, 2015 3:53 pm

Re: To be or not to be complex, that is the question

Post by michaeljc70 » Wed May 30, 2018 2:47 pm

For 20+ years, I was buying a slew of individual stocks, mutual funds, ETFs, bonds, options, commodity funds, leveraged funds, etc. I had some great winners (triple financials in 2009-2010, GM/Ford bonds in the great recession) and great losers (stocks that I rode down and kept buying). It is hard to calculate my risk adjusted return, but I would guess if I came out ahead of the market, it wouldn't be by much (and since some things were high risk, maybe I trailed the market adjusted for risk). I now have a 4 fund portfolio (contemplating going to 3, down from an 8 fund) and sleep much better.

I think the more "stuff" you have and the more you play with it, the more it makes you feel like you are "doing" something. I always researched things and kept up on economics, geopolitical issues, investing, etc, but with all that movement emotions do come more into play. When I had the 8 fund portfolio, sitting watching the commodities do nothing (or go down) while the market was soaring for a couple years, I decided to simplify down to the 4 funds. And no, if commodities take off I won't be jumping back in. The only thing I question now is international bonds, but since I have them and it is such a small part of my portfolio, it probably doesn't matter either way.
Last edited by michaeljc70 on Wed May 30, 2018 3:01 pm, edited 1 time in total.

WhyNotUs
Posts: 1358
Joined: Sun Apr 14, 2013 11:38 am

Re: To be or not to be complex, that is the question

Post by WhyNotUs » Wed May 30, 2018 2:57 pm

Rick Ferri wrote:
Wed May 30, 2018 6:42 am

Simpler is better. Less is more.

Rick Ferri
I read the board for a while as I struggled with my native desire to think that I could out think the average. Each time Taylor posted his long list of quotes I would read them again and continue modest moves toward three funds. Then when I realized that he was an accomplished sailor, I paid even more attention!

For some of us, it just takes a while.......
I own the next hot stock- VTSAX

User avatar
Taylor Larimore
Advisory Board
Posts: 27609
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: To be or not to be complex, that is the question

Post by Taylor Larimore » Wed May 30, 2018 3:16 pm

Bogleheads:

I had a similar experience to Rick's. When we moved our portfolio from Merrill Lynch to Vanguard in 1986, we started with 16 Vanguard "diversified" funds designed to "beat the market." As time went by, with experience and much study, I realized it was not necessary to own 16 funds and our complex portfolio was hurting more than helping. Accordingly, I began collecting the advice of investment experts (including Rick Ferri) which has changed my investing life for the better. These experts can do the same for you.
Scott Adams, author of Dilbert: "I once tried to write a book about personal investing. After extensive research I realized I could describe everything that a young first-time investor needs to know on one page."

Antoine de Saint-Exupéry: "A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away."

Christine Benz, Morningstar Director of Personal Finance: "Simplicity is one of the greatest--but in my view, woefully underrated--virtues when managing a portfolio."

Bill Bernstein, author of Four Pillars of Investing: ""The more real people I get to know, the more I am convinced the simpler the solution, the better the solution."

Richard Bernstein, Merrill Lynch strategist: "Investors find it hard to believe that ignoring the vast majority of investment noise might actually improve their performance."

Jack Bogle: "Simplicity is the master key to financial success."

Dan Bortolotti, CFP, and author of The Money Sense Guide to the Perfect Portfolio: "The peace of mind that comes with a simple investing strategy is priceless."

Jack Brennan, former Vanguard CEO and author of Straight Talk on Investing: "It's in the interest of many financial service companies to make you think that investing is difficult.--It's really quite simple."

Warren Buffet: "To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these."

Scott Burns, creator of The Couch Potato Strategy: The advocates of complexity are generally people who are making their living from the complexity they create for us.”

Ben Carlson, author of A Wealth of Common Sense: ""I’ve spent my entire career working in portfolio management. This experience has taught me that less is always more when making investment decisions. Simplicity trumps complexity."

Jean Chatzky, NBC Financial Editor: "The problem with so much personal financial advice is that it's unnecessarily complicated, often with the goal of selling you something you don't need."

Andrew Clarke, author of "Wealth of Experience": "In investing, simple is usually more productive than complex."

Jonathan Clements, Wall Street Journal columnist: "Investing is simple. To be sure, you can make it ludicrously complicated."

J.L.Collins, author of The Simple Path to Wealth: The more complex an investment is, the less likely it is to be profitable. At best they are costly. At worst they are a cesspool of swindlers.

Paul Crafter, author of "Investment Guide": "After doing it all, I now feel I've come around in a complete circle, ending up with this: The more I learn, the less I really need to know."

James Dahle, Editor of The White-Coat Investor: "In my view, the simpler the financial product, the better it is for the consumer."

Edsger Dijkstra, famed physicist: “Simplicity is a great virtue but it requires hard work to achieve it and education to appreciate it. And to make matters worse: complexity sells better.”

Laura Dogu, Ambassador to Nicaragua and co-author of "The Bogleheads Guide to Retirement Planning": A simple portfolio is actually the ultimate in sophistication. It almost always lowers cost (including taxes), makes analysis easier, simplifies rebalancing, simplifies tax-preparation, reduces paper-work and record-keeping, and enables caregivers and heirs to easily take-over the portfolio when necessary. Best of all, a simple portfolio allows the investor to spend more time with family and friends."

Michael Edesess, author of The Big Invesment Lie: "As a mathematician I know when mathematical-sounding analyses are little more than elaborate sales pitches, designed to thoroughly obscure the simple fact that smart investing is non-mathematical and accessible to everyone."

Albert Einstein: "The five ascending levels of intellect are: smart, intelligent, brilliant, genius, simple."

Charles Ellis, co-author of "The Elements of Investing": "KISS investing--Keep It Simple, Sweetheart--is the best and easiest and lowest cost and worry-free way to invest for retirement security."

Javier Estrada Ph.D., Professor of finance: "Simplicity is often underrated; simple static strategies (balanced portfolios) have been shown to perform as well as—and often better than—more complex strategies in a wide variety of settings."

Paul Farrell, author of "The Lazy Person's Guide to Investing": "Perhaps the most amazing insight I got out of this review of the investment habits of Nobel laureates is the simplicity of their investing strategies."

Rick Ferri, CFA, advisor, and author of six financial books:[/i] "Don’t assume that a complex strategy is better than a simple strategy. The only thing extra complexity is likely to add is extra cost."

The Finance Buff: "Making fewer decisions usually leads to better results than making more decisions."

Future Metrics looked at the performance of 224 pension plans over about 14 years compared with the performance of 60% S&P 500 index and 40% aggregate bond index benchmark. Of those 224 plans, only 19 beat that simple benchmark.

Gensler & Baer, authors of "The Great Mutual Fund Trap": "If you simply buy and hold you don't need to read investing magazines, watch financial news networks, subscribe to newsletters, or pay a broker to execute new trades."

Benjamin Graham, author, teacher, famed investor: "If you merely try to bring just a little extra knowledge and cleverness to bear upon your investment program, instead of realizing a little better than normal results, you may well find that you have done worse. -- In the stock market, the more elaborate and abstruse the mathematics, the more uncertain and speculative are the conclusions we draw therefrom."

Alan Greenspan, former Chairman of the Federal Reserve: "This decade is strewn with examples of bright people who thought they built a better mousetrap that could consistently extract abnormal returns from financial markets. Some succeed for a time. But while there may occasionally be misconfigurations among market prices that allow abnormal returns, they do not persist."

Morgan Housel: financial columnist for Wall Street Journal and Motley Fool's "Simple almost always beats complex."

Daniel Kahneman, Nobel Laureate: "All of us would be better investors if we just made fewer decisions"

Edmund Kean: "Complexity is easy. Simplicity is hard."

Kiplinger: "The big secret to successful investing is that it's actually not all that complicated. Most of the mumbo jumbo doesn't matter."

Darrow Kirkpatrick, author of Retiring Sooner: "In financial life, you should run from complexity, and run toward simplicity."

Michael LeBoeuf, author of "The Millionaire in You": "The master key to wealth can be summed up in just one word: Simplicity."

Bruce Lee: "One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity"

Leonardo da Vinci: “Simplicity is the ultimate sophistication.”

Peter Lynch, legendary fund manager: "If you spend more than fifteen minutes a year worrying about the market, you've wasted twelve minutes."

MIT Study: "The less well-informed group did far better than the group that was given all the financial news."

Scott MacKillop, CEO First Ascent Asset Management: " People who don’t know any better equate complexity with sophistication. But truly it takes more sophistication to build elegantly simple portfolios."

Joe Maglia, CEO TD Ameritrade: "Wall Street goes out of its way to make investing incredibly sophisticated and complex because they can make a tremendous amount of money by doing so."

Burton Malkiel, author of "Random Walk Down Wall Street": "The overarching rule for achieving financial security: Keep it simple. -- The most important financial advice is stunningly simple and fits on an index card."

John Markese, CEO of American Association of Individual Investors: "If you have more than eight funds you should slap yourself."

Wm McNabb, Vanguard CEO: "If you can't understand an investment product in five minutes, walk away."

Eric McWhinnie, chief analyst, Wall Street Cheat Sheet: "Keep your investment strategy simple and steer clear of complicated vehicles that are designed to benefit the people selling them."

James Montier, author of The Little Book of Behavioral Investing : "Never underestimate the value of doing nothing."

Morningstar Guide to Mutual Funds: "Good investing doesn't have to be complicated. In fact, simplification may lead to better investment results."

Issac Newton: “Truth is ever to be found in the simplicity, and not in the multiplicity and confusion of things.”

Suze Orman: "We make investing so complicated and it really is not. -- A total market index fund is a great one-stop-shopping choice that provides you instant diversification among different types of stocks."

Mike Piper, financial author: "There's an entire industry built on convincing us that investing is complicated."

"David Nadig, president of Index Universe's ETF Analytics: "Most investors—myself included—are better off the simpler we keep things."

Jane Bryant Quinn, syndicated columnist and author of "Smart and Simple Financial Strategies": "You shouldn't buy anything too complex to explain to the average 12-year old."

John Rekenthaler, Morningstar Research Director: "How many funds should you have? Four to six should do.-- A complex investment strategy, with many moving parts, means more wheels that are stuck at any given time, leading to more questions and more uncertainty."

Rodc on Bogleheads Forum: "While doing this financial engineering my wife who does no math just shook her head at my optimization games and said, 'Rod, life is uncertain, get over it.' After a lot of work, I discovered much to my surprise, she was right."

Allan Roth, CFP, CPA, author and advisor: "Investing in eight words: Maximize diversification and discipline; minimize expenses and emotions.”

Paul Samuelson, Nobel Laureate: "Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

Bill Schulthies, author of "The Coffeehouse Investor": "When you simplify your investment decisions, not only do you enrich your life by spending more time on families, friends and careers, but you enhance portfolio returns in the process."

Chandon Sengupta, author of "The Only Proven Road to Investment Success": "There is overwhelming evidence that the simplest possible investment method works much better than all the other more complex ones."

George Sisti, CFP, MarketWatch contributor: "There is no perfect portfolio — yours should emphasize simplicity and shun complexity."

Larry Swedroe, author of "The Successful Investor Today": "The more complex the investment, the faster you should run away."

David Swensen, Yale Chief Investment Officer: "As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run."

Henry David Thoreau: “Our life is frittered away by detail. Simplify, simplify.”

Andrew Tobias, author of The Only Investment Guide You Will Ever Need: "I believe in selecting the most straightforward and easiest-to-implement strategy for achieving our goals."

Tweddell and Pierce, authors of "Winning with Index Mutual Funds": "Keep it simple. Investment success depends on asset allocation, diversification, and risk management, not on complexity."

Eric Tyson, author of "Mutual Funds for Dummies:" "Planners may try to make it all so complicated that you believe you can't possibly manage your finances or make major financial decisions without them."

Walter Updegrave, Editor of Money magazine: "Simpler is better. Ignore the siren song of sophisticated investments"

Richard Young, author of "The Intelligence Report": "If you can't run your portfolio taking 60 minutes a month, it's too complicated."

Karen Wallace, Morningstar senior editor: "Having fewer accounts can help you streamline your monitoring and rebalancing efforts. And having your assets in one place can allow you to better assess your overall asset mix.

Jason Zweig, Wall Street Journal columnist and author of "The Intelligent Investor": "The less you fool with your portfolio, the less often you'll play the fool."

Warren Buffett: "There seems to be some perverse human characteristic that likes to make easy things difficult."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
spdoublebass
Posts: 470
Joined: Thu Apr 27, 2017 10:04 pm
Location: NY

Re: To be or not to be complex, that is the question

Post by spdoublebass » Wed May 30, 2018 3:19 pm

Great post Mr. Ferri.

It made me think of a few things.

- A comment I received here early on in this forum was "until you have 20K in your portfolio, don't worry about slicing and dicing, just keep saving and put it in TSM".....
I think this was great advice. They were not poking fun of my small portfolio, just giving me really sound advice.

- I don't want to speak for others, but I know for me, I have to remind myself that my portfolio is good enough and I'm not being lazy by keeping it as is. Sometimes my blue collar mentality creeps in and I start thinking well if I just work harder and research more I can do something better...etc..... Nothing I can do will change the markets.
I'm trying to think, but nothing happens

snarlyjack
Posts: 780
Joined: Fri Aug 28, 2015 12:44 pm
Location: Montana

Re: To be or not to be complex, that is the question

Post by snarlyjack » Wed May 30, 2018 3:37 pm

1210sda,

Thank You, it's good to hear...

Meet some Millennial's (that I read, excellent info).
Let's math this up...

Early Retirement Now, Dr. ERN PHD. Economics.
Actuary On Fire, MS Actuary.
Four Pillar Freedom, BS Statistics.
Millennial Revolution, BS Engineering.
(me) SJ. BS Finance.

Our generation are not total grunges...

User avatar
friar1610
Posts: 1312
Joined: Sat Nov 29, 2008 9:52 pm
Location: MA South Shore

Re: To be or not to be complex, that is the question

Post by friar1610 » Wed May 30, 2018 3:39 pm

dbr wrote:
Wed May 30, 2018 7:30 am
I am a strong believer in our maxim that the worst enemy of a good plan is a better plan.

I find complex investment analysis intellectually interesting but have no desire to make any practical application. My answer about SCV tilting, for example, is that I don't because I don't need to and I don't want to. A simple three fund portfolio has been good enough for me. I am not going to answer "which bond fund?" either.

I would extend the same comment to retirement studies. The stuff is intellectually interesting but I have no interest in engineering withdrawals and all that stuff down to the nit. I guess that is why I have such disdain for buckets, LMP, and other schemes, even VPW, which does have some rationale.
This is exactly my thinking. Although, like Rick, it took me a while to get there.
Friar1610

User avatar
Kenkat
Posts: 4430
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: To be or not to be complex, that is the question

Post by Kenkat » Wed May 30, 2018 4:00 pm

Wow, is there no one to defend a little complexity? It’s been pretty much a US large growth run here lately so there hasn’t been much for the slicers to cheer about recently.

I have had a relatively modest slant to small and value since 2000; I’ve owned REIT, Small Value, EM since then, for example. Large value since the mid-90’s. I don’t see my portfolio as particularly complex - I don’t make changes beyond the occasional (and infrequent) rebalance and it doesn’t really seem to cost any more either - not significantly at least. I’ve tracked my return against simple LifeStrategy and Target Retirement funds since 1999 and overall it has helped my performance. Not so much lately, but overall, yes.

I am sticking with my current approach but simple works too; it is really more about savings rate and staying invested in whatever you choose that matters, in my experience.

User avatar
1210sda
Posts: 1416
Joined: Wed Feb 28, 2007 8:31 am

Re: To be or not to be complex, that is the question

Post by 1210sda » Wed May 30, 2018 4:08 pm

snarlyjack wrote:
Wed May 30, 2018 3:37 pm
1210sda,

Thank You, it's good to hear...

Meet some Millennial's (that I read, excellent info).
Let's math this up...

Early Retirement Now, Dr. ERN PHD. Economics.
Actuary On Fire, MS Actuary.
Four Pillar Freedom, BS Statistics.
Millennial Revolution, BS Engineering.
(me) SJ. BS Finance.

Our generation are not total grunges...

LOL, there is hope. :D
(I am impressed)
1210sda

snarlyjack
Posts: 780
Joined: Fri Aug 28, 2015 12:44 pm
Location: Montana

Re: To be or not to be complex, that is the question

Post by snarlyjack » Wed May 30, 2018 4:23 pm

Rick,

This is great information.

10 charts 10 insights.

enjoy...

http://www.fourpillarfreedom.com/10-charts-10-insights/

Dave55
Posts: 377
Joined: Tue Sep 03, 2013 2:51 pm
Location: Colorado

Re: To be or not to be complex, that is the question

Post by Dave55 » Wed May 30, 2018 4:25 pm

Thanks Rick, excellent post. I chased alpha for decades and I am now totally set with:
VTI + VXUS + VBTLX + VFIDX

Dave

Post Reply