Key differences between investing philosophies: Swedroe vs. Bogle

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
azanon
Posts: 1971
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by azanon » Wed Oct 03, 2018 3:15 pm

vineviz wrote:
Wed Oct 03, 2018 2:42 pm
azanon wrote:
Wed Oct 03, 2018 2:30 pm
Is Larry's never-ending research only for new investors who haven't yet selected a portfolio that they're trying to adhere to, or would Larry recommend that investors adjust their portfolio every time some new improvement is discovered by him that may earn them a few more bps?
Larry isn't conducting any research that I'm aware of. Mostly he is writing about research that others have conducted, making it accessible to investors who don't follow things at their primary source.
Just so it's clear, you didn't answer my question, merely clarified it. I accept the clarification, and will continue to await an answer from the OP.

User avatar
vineviz
Posts: 2084
Joined: Tue May 15, 2018 1:55 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by vineviz » Wed Oct 03, 2018 3:20 pm

azanon wrote:
Wed Oct 03, 2018 3:15 pm
vineviz wrote:
Wed Oct 03, 2018 2:42 pm
azanon wrote:
Wed Oct 03, 2018 2:30 pm
Is Larry's never-ending research only for new investors who haven't yet selected a portfolio that they're trying to adhere to, or would Larry recommend that investors adjust their portfolio every time some new improvement is discovered by him that may earn them a few more bps?
Larry isn't conducting any research that I'm aware of. Mostly he is writing about research that others have conducted, making it accessible to investors who don't follow things at their primary source.
Just so it's clear, you didn't answer my question, merely clarified it. I accept the clarification, and will continue to await an answer from the OP.
Well, your question is a bit of a false dichotomy isn't it?

Or maybe it's rhetorical, and you're trying to make a point. If so, I'm afraid that point isn't quite clear.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Fallible
Posts: 6540
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Fallible » Wed Oct 03, 2018 3:29 pm

Ron Scott wrote:
Wed Oct 03, 2018 11:13 am
There always seems to be a thread promoting a financial advisor named Larry Swedroe here on the Bogleheads board.

I’m sure there are many points of agreement between him and Jack Bogle.

Question: What are the key differences between them and who is right, in your opinion?
I've read many books and articles by both Bogle and Swedroe over the years and there are many important similarities between them when it comes to helping the average investor understand and avoid behavioral errors such as overconfidence, loss aversion, herd following, etc., etc. These similarities include, or are even based on, keeping investments simple. So I am surprised and concerned when I see so much emphasis on more complex investments such as factor investing that could attract investors who don't fully understand them or have the patience and discipline they require, no matter how expertly they are described.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

User avatar
mrspock
Posts: 105
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by mrspock » Wed Oct 03, 2018 3:36 pm

Ron Scott wrote:
Wed Oct 03, 2018 11:29 am
So the key difference between them is that Larry’s philosophy yield better results over time? But that is somehow not good for the “average investor“?
Confused...
I run into this in my field all the time so I'll take a stab at this. I think what the author might be getting at here is that having a "philosophy" which is provably better, but ultimately the average investor is not able to consistently execute it, is not actually superior in practice.

Great ideas aren't enough.... you need to be able execute on them and do so consistently to make them worth anything. Visit the USPTO if you need more proof of this :D .

HEDGEFUNDIE
Posts: 1000
Joined: Sun Oct 22, 2017 2:06 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by HEDGEFUNDIE » Wed Oct 03, 2018 3:41 pm

mrspock wrote:
Wed Oct 03, 2018 3:36 pm
Ron Scott wrote:
Wed Oct 03, 2018 11:29 am
So the key difference between them is that Larry’s philosophy yield better results over time? But that is somehow not good for the “average investor“?
Confused...
I run into this in my field all the time so I'll take a stab at this. I think what the author might be getting at here is that having a "philosophy" which is provably better, but ultimately the average investor is not able to consistently execute it, is not actually superior in practice.

Great ideas aren't enough.... you need to be able execute on them and do so consistently to make them worth anything. Visit the USPTO if you need more proof of this :D .
When TSM drops 50% will the average investor be able to stay the course? Yes hopefully he/she will have a bond allocation to counteract the equity losses but seeing that line item in your portfolio go red will still hurt.

With the latest multifactor research you could be invested in a basket of equities that is more diversified than TSM in terms of risk, have lower drawdowns, and therefore make it easier to stay the course. And all in one fund just like TSM.

Wakefield1
Posts: 857
Joined: Mon Nov 14, 2016 10:10 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Wakefield1 » Wed Oct 03, 2018 3:46 pm

(Before I read through the thread)
exquisitely complex analysis and calculations and deliberations in order to chase down a possible small return advantage (or tax reduction) vs. "KISS" and earn the market return ("keep it simple,xxxxxx") (xxxxxx might run afoul of moderator rules)

Random Walker
Posts: 3207
Joined: Fri Feb 23, 2007 8:21 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Random Walker » Wed Oct 03, 2018 4:08 pm

azanon wrote:
Wed Oct 03, 2018 2:30 pm
Random Walker wrote:
Wed Oct 03, 2018 12:25 pm
Well, I’m the guy who posts his articles. Just to be clear, I’m not promoting him or his business. I’m promoting the education he provides. As you wrote, there is overwhelming agreement between Swedroe and Bogle. They both certainly agree that markets are highly efficient, costs matter tremendously, high quality bonds are the best diversifier of equity risk, and active management is a loser’s game.

Dave

Sent from my iPad
Is Larry's never-ending research only for new investors who haven't yet selected a portfolio that they're trying to adhere to, or would Larry recommend that investors adjust their portfolio every time some new improvement is discovered by him that may earn them a few more bps? Stated another way, when can an investor feel comfortable that he/she has a strategy that she can stick with for a long duration, and then just tune out the new noise? Do you recommend that investors monitor this research, at the potential risk of not staying the course for the portfolio that they already have?
Perhaps I can answer your question from my own personal experience as a client of Larry’s firm, BAM. I have had a well thought out investment policy statement in the form of an asset allocation that has functioned as my default anchor baseline. Any deviation from it requires a good strong reason. I’ve been a client for almost 10 years now. Over time personal circumstance has changed: I’ve aged 10 years closer to retirement, market has been generous, valuations have increased, future expected returns have decreased. The investing industry has changed as well: new vehicles become available, academic thinking evolves, costs to invest have decreased some.

Some changes are minor and can be done immediately when a new fund becomes available. For example BAM felt a superior SV fund became available several years ago. It makes sense to direct new additions to that fund, but not worthwhile to take the tax hit of selling the old fund and entering the new one.

Bigger changes such as incorporation of a whole new investment into the asset allocation require more consideration. Over time the rational investor, in response to changes in personal circumstance, will appropriately consider bigger changes to his asset allocation. At these times, I think it’s appropriate to consider incorporating any potential new vehicles. Always better to make changes when possible with new additions, redirected dividends, or maturing bond than to sell a fund and take a tax hit. In my case, over the last several years, I’ve taken on all of the new vehicles recommended by Larry’s firm in a fashion consistent with my changing goals and risk tolerance, sensitivity to taxes, and favoring using new funds over selling shares already invested.

None of these changes are willy nilly or just intended until the next new thing comes along. The baseline is always a set it and forget it AA. But investing evolves, and we can opportunistically incorporate these innovations according to our personal circumstance. In my case, I’ve entered the alternatives concomitantly with decreasing my overall equity exposure as retirement approaches. I guess each situation is unique. Factors to consider are the incremental benefit of the change, the tax hit to make the change, and how quickly the change could be made with new additions (size of portfolio relative to savings rate)

Dave

Greenman72
Posts: 157
Joined: Fri Nov 01, 2013 2:17 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Greenman72 » Wed Oct 03, 2018 4:47 pm

Elysium wrote:
Wed Oct 03, 2018 12:32 pm
Just wanted to point out the obvious, before this gets out of hand. This comparison is a farce, as they are not equals.

Bogle is a titan of the industry who started a revolution and built the most successful and largest investment company in the world. He has made it possible for millions of ordinary investors reach their goals and dreams.

With all due respect to Larry, he is not on the same level as Bogle.
In absolutely no way does this answer the question of "What is the difference in their investment philosophies?"

And Capital Group / American funds started a revolution and built the largest investment company in the world before Vanguard ever existed. They also made it possible for millions of ordinary investors to reach their goals and dreams.

User avatar
Rick Ferri
Posts: 8600
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Rick Ferri » Wed Oct 03, 2018 4:54 pm

livesoft wrote:
Wed Oct 03, 2018 11:48 am
But Rick Ferri, you have written and published entire books in the past that have essentially validated a strategy similar to that espoused by Larry Swedroe. I realize that one can change, but just dropping in on this thread and not covering your past ... is that fair and honest?

Should we be burning your old books now?
I’ve also advocated strongly for simplicity via the two fund portfolio, three fund portfolio and Core-4.

Complexity isn’t needed, but if you want to do it, then that’s fine. Do it cheaply and in moderation, which is what I advocate in my books.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

garlandwhizzer
Posts: 2025
Joined: Fri Aug 06, 2010 3:42 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by garlandwhizzer » Wed Oct 03, 2018 4:58 pm

I wrote:
Warren Buffett and Jack Bogle are the opposite of dull and slow witted. . . .
vineviz replied:
That's debatable, wouldn't you say?
I don't believe it is debatable. Jack Bogle discovered and first described the elegance and effectiveness of simple index investing while still a student at Princeton. That discovery has transformed investing and increasingly dominates the market now. Buffett's long term results in value investing and his ability to discern true value rather than a value trap are the stuff of legends. Perhaps vineviz is joking. I would also add to that list Rick Ferri, a thoroughly accomplished investment guru, and Nobel Prize winner Willam Sharpe of Stanford both of whom are fans of simple low cost indexing. Personally I don't think it makes little, if any, difference in the long run which approach you take as long as you stick with it. Both will get you where you want to go if you keep costs low. Long term increased cost is a significant hurdle to overcome.

Garland Whizzer

User avatar
bertilak
Posts: 6132
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by bertilak » Wed Oct 03, 2018 5:22 pm

Elysium wrote:
Wed Oct 03, 2018 12:21 pm
Bogle's advice is timeless and it will stand the test of time. Swedroe's advice is flavor of the decade, it may not stand the test of time. Question one need to ask, do I feel lucky?
I agree, especially about the "feel" part. Complicated strategies, either managed by you or by some fund manager, require a bit of faith that you "feel" you understand them. The problem is, there is always a new strategy just around the corner with an even better salesman promoting it.

The best thing is to settle down and stay the course. This is easier to do if the course is straightforward AND if the promise of the new course is hard to spot somewhere down in the noise level.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

User avatar
corn18
Posts: 1007
Joined: Fri May 22, 2015 6:24 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by corn18 » Wed Oct 03, 2018 5:28 pm

Swedroehead is too hard to pronounce.

User avatar
Rowan Oak
Posts: 277
Joined: Mon May 09, 2016 2:11 pm
Location: Yoknapatawpha

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Rowan Oak » Wed Oct 03, 2018 5:36 pm

Imagine you're an inexperienced investor just finding the Bogleheads forum for the first time and you stumble upon this post. There should be a disclaimer on this section of the forum warning new visitors that they will probably leave more confused than when they came in.

Taylor Larimore's simplicity link: "Simplicity is the master key to financial success." -- Jack Bogle
Last edited by Rowan Oak on Thu Oct 04, 2018 8:04 am, edited 2 times in total.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

stlutz
Posts: 4790
Joined: Fri Jan 02, 2009 1:08 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by stlutz » Wed Oct 03, 2018 8:24 pm

The view of Bogle that many people have here is more of a caricature than a reality. For example:

--In the late 90s he practiced valuation-based market timing.
--He is largely against the broadest forms of diversification (e.g. owning all stocks across the world)
--He has advocated chasing yield in fixed income because there are "too many" Treasury bonds in the Aggregate Bond index.

Those are all ideas that are generally the minority opinion around here.

None of the "experts" we like are really into pure Boglehead ideology.

For me, Bogle, Swedroe, Ferri and others have all influenced my views and not always in expected ways. For example, Swedroe convinced me more than anybody that there probably isn't a forward-looking value premium. Regardless, they are all well worth reading and we all then have to make up our own minds about what to do and then live with the results.

User avatar
nisiprius
Advisory Board
Posts: 36899
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by nisiprius » Wed Oct 03, 2018 8:31 pm

The phrase "real science" is provocative.

I say that economics is a "social science."

As evidence for that assertion, I present my alma mater, which has a well-known economics department. The economics department is within the School of Humanities, Arts, and Social Sciences.

As for investing, John Bogle wrote this in his book Clash of the Cultures: Investment versus Speculation

Image
Last edited by nisiprius on Wed Oct 03, 2018 8:34 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Toons
Posts: 13017
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Toons » Wed Oct 03, 2018 8:34 pm

Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am
Jack believes in portfolio simplicity.
Larry believes in portfolio complexity.
I believe in Jack.

Rick Ferri
+1
: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

azanon
Posts: 1971
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by azanon » Thu Oct 04, 2018 4:27 am

Random Walker wrote:
Wed Oct 03, 2018 4:08 pm
azanon wrote:
Wed Oct 03, 2018 2:30 pm
Random Walker wrote:
Wed Oct 03, 2018 12:25 pm
Well, I’m the guy who posts his articles. Just to be clear, I’m not promoting him or his business. I’m promoting the education he provides. As you wrote, there is overwhelming agreement between Swedroe and Bogle. They both certainly agree that markets are highly efficient, costs matter tremendously, high quality bonds are the best diversifier of equity risk, and active management is a loser’s game.

Dave

Sent from my iPad
Is Larry's never-ending research only for new investors who haven't yet selected a portfolio that they're trying to adhere to, or would Larry recommend that investors adjust their portfolio every time some new improvement is discovered by him that may earn them a few more bps? Stated another way, when can an investor feel comfortable that he/she has a strategy that she can stick with for a long duration, and then just tune out the new noise? Do you recommend that investors monitor this research, at the potential risk of not staying the course for the portfolio that they already have?
Perhaps I can answer your question from my own personal experience as a client of Larry’s firm, BAM. I have had a well thought out investment policy statement in the form of an asset allocation that has functioned as my default anchor baseline. Any deviation from it requires a good strong reason. I’ve been a client for almost 10 years now. Over time personal circumstance has changed: I’ve aged 10 years closer to retirement, market has been generous, valuations have increased, future expected returns have decreased. The investing industry has changed as well: new vehicles become available, academic thinking evolves, costs to invest have decreased some.

Some changes are minor and can be done immediately when a new fund becomes available. For example BAM felt a superior SV fund became available several years ago. It makes sense to direct new additions to that fund, but not worthwhile to take the tax hit of selling the old fund and entering the new one.

Bigger changes such as incorporation of a whole new investment into the asset allocation require more consideration. Over time the rational investor, in response to changes in personal circumstance, will appropriately consider bigger changes to his asset allocation. At these times, I think it’s appropriate to consider incorporating any potential new vehicles. Always better to make changes when possible with new additions, redirected dividends, or maturing bond than to sell a fund and take a tax hit. In my case, over the last several years, I’ve taken on all of the new vehicles recommended by Larry’s firm in a fashion consistent with my changing goals and risk tolerance, sensitivity to taxes, and favoring using new funds over selling shares already invested.

None of these changes are willy nilly or just intended until the next new thing comes along. The baseline is always a set it and forget it AA. But investing evolves, and we can opportunistically incorporate these innovations according to our personal circumstance. In my case, I’ve entered the alternatives concomitantly with decreasing my overall equity exposure as retirement approaches. I guess each situation is unique. Factors to consider are the incremental benefit of the change, the tax hit to make the change, and how quickly the change could be made with new additions (size of portfolio relative to savings rate)

Dave
Thanks Dave for the detailed response, and you explain very well why you take the approach that you do.

I do admit though that I personally identify far more with strategies involving portfolios that could be potentially be adopted for a lifetime. I can never forget those studies that show the average investor earning some 3% less return than a benchmark portfolio with the same asset allocation, because human nature has us buying and selling (or "tweaking") at the wrong time. I just don't trust my instincts enough to think I'm the exception. And I couldn't trust a firm to have better instincts either. I secretly suspect (without knowing for sure) that some of the best end results at Vanguard (where I invest) occur by those that just buy one of their balanced funds and then never mess with it.

livesoft
Posts: 62776
Joined: Thu Mar 01, 2007 8:00 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by livesoft » Thu Oct 04, 2018 4:36 am

Rick Ferri wrote:
Wed Oct 03, 2018 4:54 pm
livesoft wrote:
Wed Oct 03, 2018 11:48 am
But Rick Ferri, you have written and published entire books in the past that have essentially validated a strategy similar to that espoused by Larry Swedroe. I realize that one can change, but just dropping in on this thread and not covering your past ... is that fair and honest?

Should we be burning your old books now?
I’ve also advocated strongly for simplicity via the two fund portfolio, three fund portfolio and Core-4.

Complexity isn’t needed, but if you want to do it, then that’s fine. Do it cheaply and in moderation, which is what I advocate in my books.

Rick Ferri
Thanks for the helpful added words.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
steve321
Posts: 248
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by steve321 » Thu Oct 04, 2018 5:01 am

Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

Elysium
Posts: 1304
Joined: Mon Apr 02, 2007 6:22 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Elysium » Thu Oct 04, 2018 7:22 am

Greenman72 wrote:
Wed Oct 03, 2018 4:47 pm
Elysium wrote:
Wed Oct 03, 2018 12:32 pm
Just wanted to point out the obvious, before this gets out of hand. This comparison is a farce, as they are not equals.

Bogle is a titan of the industry who started a revolution and built the most successful and largest investment company in the world. He has made it possible for millions of ordinary investors reach their goals and dreams.

With all due respect to Larry, he is not on the same level as Bogle.
In absolutely no way does this answer the question of "What is the difference in their investment philosophies?"

And Capital Group / American funds started a revolution and built the largest investment company in the world before Vanguard ever existed. They also made it possible for millions of ordinary investors to reach their goals and dreams.
I have already answered it in a post above the one you quoted. May be you missed it.

User avatar
Rick Ferri
Posts: 8600
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Rick Ferri » Thu Oct 04, 2018 7:30 am

steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

User avatar
steve321
Posts: 248
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by steve321 » Thu Oct 04, 2018 7:46 am

Rick Ferri wrote:
Thu Oct 04, 2018 7:30 am
steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
I don't have a John Wayne quote to match yours of Ronald Reagan. Sorry. So I'll settle for one by Einstein instead:
Unthinking respect for authority is the greatest enemy of truth.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

Random Walker
Posts: 3207
Joined: Fri Feb 23, 2007 8:21 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Random Walker » Thu Oct 04, 2018 8:21 am

Azanon,
Hard to argue with you. Anytime I’ve made a change, I ask myself why I am making it over and over. For me, I don’t worry about performance chasing. My bigger psychological concern is whether I’m doing something just for the sake of adding something more unique or esoteric for some kind of country club effect. This is especially true when marginal improvements in portfolio efficiency come at increased marginal cost. I take a lot of piece of mind in the fact that I’ve never added an asset class to my portfolio because of good past performance. I think more about correlations and expected after tax returns: how a new potential addition is expected to mix in the portfolio.

Dave

snailderby
Posts: 29
Joined: Thu Jul 26, 2018 11:30 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by snailderby » Thu Oct 04, 2018 8:46 am

Differences:

1. Swedroe has argued that there may be merit in targeting factors other than market beta (such as size, value, quality, and momentum). Bogle is a proponent of owning the total (domestic) stock market.

2. Swedroe has also suggested that investors can achieve higher returns without higher risk (or similar returns with less risk) by allocating a smaller percentage of a portfolio to equities but then targeting certain classes of equities that have a higher-expected return. My sense is that most Bogleheads would simply change their equity-bond ratio if they wanted to take on more or less risk.
Last edited by snailderby on Thu Oct 04, 2018 5:24 pm, edited 1 time in total.

User avatar
steve321
Posts: 248
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by steve321 » Thu Oct 04, 2018 9:51 am

snailderby wrote:
Thu Oct 04, 2018 8:46 am
My sense is that most Bogleheads would simply change their equity-bond ratio if they wanted to take on more or less risk.
what about fat tails and the risk of Black Swan events?
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

Greenman72
Posts: 157
Joined: Fri Nov 01, 2013 2:17 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Greenman72 » Thu Oct 04, 2018 9:51 am

To be honest, I've actually never read anything by Rick Ferri. (But I did buy two of your books--just never got around to reading them. So you're welcome.) I did glance at them, however, and I thought they were rather simple--made for novices and individual investors who want to DIY. And as best I can tell, it seems to smack of the KISS principle. (Which can be a good thing.)

I do read Swedroe's articles fairly regularly, and plan to someday read some of his books. His articles are definitely not for novices or the average DIY'er. His articles are for knowledgeable professionals. (EG -- I'm a CFA, and even I sometimes have trouble understanding everything that he's talking about.) He definitely takes an academic approach to investing principles. Whether or not his research has a real benefit to the client, I do not know. (Statistical significance does not equal economic significance.)

These two guys are really serving two different audiences, so comparing them is not really fair to either. (I know this doesn't answer the Bogle vs. Swedroe question, but Bogle hasn't written much in several years, so it's hard to know what he thinks in today's environment.)

Jiu Jitsu Fighter
Posts: 138
Joined: Mon Nov 21, 2016 10:22 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Jiu Jitsu Fighter » Thu Oct 04, 2018 9:56 am

I've only read one of Jack's books. I can only read how costs matter so many times. I've read all of Larry's books.

The 100% in a total domestic fund (less the allocation to his son's actively managed fund) with age in bonds isn't for me. Or, buy the entire haystack and by haystack, Jack means US stocks only regardless of valuations. He does not believe in any form of the EMH, yet has built an empire around this concept.

Larry doesn't believe in active management unless you count quant screens. He continuously writes articles once the SPIVA report is released to hammer home the fact that active management is a loser's game. He uses published research to recommend weighting certain factors in order to increase the allocation to safe assets to result in the same returns for less risk.

I only see evidence-based doctors, why would I not have an evidenced-based portfolio? On the other hand, when friends ask for investment advice who have no interest in finance/investments, I steer them toward the three-fund portfolio or recommend an advisor to them because I know that staying the course is the most important thing. Most people need their hands held during a recession. However, if one is interested in the science of investing and can, for the most part, keep the behavioral demons away, Larry introduces you to the latest research which has certainly led me digging deeper into that research resulting in a portfolio design that still is very inexpensive (only costs a bit more than total stock market and total bond market with age in bonds). Getting over the tracking error is the only hurdle.

User avatar
Rowan Oak
Posts: 277
Joined: Mon May 09, 2016 2:11 pm
Location: Yoknapatawpha

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Rowan Oak » Thu Oct 04, 2018 10:27 am

steve321 wrote:
Thu Oct 04, 2018 7:46 am
Rick Ferri wrote:
Thu Oct 04, 2018 7:30 am
steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
I don't have a John Wayne quote to match yours of Ronald Reagan. Sorry. So I'll settle for one by Einstein instead:
Unthinking respect for authority is the greatest enemy of truth.
steve321:

The quotes you are using are completely out of context and don't apply to this discussion.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

User avatar
steve321
Posts: 248
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by steve321 » Thu Oct 04, 2018 10:42 am

Rowan Oak wrote:
Thu Oct 04, 2018 10:27 am
steve321 wrote:
Thu Oct 04, 2018 7:46 am
Rick Ferri wrote:
Thu Oct 04, 2018 7:30 am
steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
I don't have a John Wayne quote to match yours of Ronald Reagan. Sorry. So I'll settle for one by Einstein instead:
Unthinking respect for authority is the greatest enemy of truth.
steve321:

The quotes you are using are completely out of context and don't apply to this discussion.
All right then. Have you got a Faulkner quote that applies? :wink:
All I'm saying is that you can either base your conclusions on data and research studies (as Mr Swedroe does), or have a kind of cult of personality and believe in someone's authority, because he is Jack (which is what Mr Ferri wrote). I think the first approach is healthier. I believe in something if data and serious research proves it, not because Jack says it.
Does this apply to the discussion?
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

Random Walker
Posts: 3207
Joined: Fri Feb 23, 2007 8:21 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Random Walker » Thu Oct 04, 2018 11:45 am

steve321 wrote:
Thu Oct 04, 2018 9:51 am
snailderby wrote:
Thu Oct 04, 2018 8:46 am
My sense is that most Bogleheads would simply change their equity-bond ratio if they wanted to take on more or less risk.
what about fat tails and the risk of Black Swan events?
Significant issue! One of the big contrasts between the Swedroe and Bogle approaches is that Swedroe is diversifying across different less than perfectly correlated and uncorrelated sources of risk. To increase expected return with Boglehead approach, one simply assumes more of the same kind of risk, market beta. Diversifying across sources of return, diversifying into higher expected return asset classes, and concomitantly increasing the allocation to safe bonds should lessen ill effects of fat left tails and Black Swans. Right tail gets cut too: expected portfolio SD is smaller for same expected return as a TSM type portfolio.

Dave

User avatar
nedsaid
Posts: 10508
Joined: Fri Nov 23, 2012 12:33 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by nedsaid » Thu Oct 04, 2018 11:59 am

I think Larry Swedroe vs. John Bogle is cutting edge vs. tried and true.

I really think that Mr. Bogle believes that we can be too smart for our own good. It seems that we try to out think the rest of the market participants and Bogle believes such efforts are doomed to fail. Swedroe believes there are market anomalies that can be exploited and that such anomalies are both behavior based and risk based.

If I believed that these anomalies (factors) were risk based, I would just shy away. But my belief is that the factors have their roots in human nature and human behavior. Since human nature really doesn't change, I would expect that over time that humans would make the same behavioral errors over and over again. The fear and greed thing. Even if investors learn their lessons, there is always a crop of new suckers to make the old behavioral lessons. In other words, old and wise investors eventually die off and relatively young and inexperienced investors rise to take their place.

Bogle's approach works because you just take what the markets give you in return less very minor costs. Swedroe's approach takes more complexity and has higher costs, you also have to take into account that some investment vehicles designed to capture factors are better than others. Swedroe is always on the lookout for the "best" vehicles. This can be disheartening when you realize you might be in the "wrong" investment vehicles. On the other hand, there are some excellent low-cost vehicles like ETFs that attempt to capture the factors.
A fool and his money are good for business.

User avatar
Munir
Posts: 2466
Joined: Mon Feb 26, 2007 4:39 pm
Location: Oregon

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Munir » Thu Oct 04, 2018 1:04 pm

steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
I assume that Rick is saying that he agrees with Jack because Jack advocates simplicity and not that Rick advocates simplicity because Jack said it.

columbia
Posts: 1004
Joined: Tue Aug 27, 2013 5:30 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by columbia » Thu Oct 04, 2018 1:22 pm

“The Death of Expertise” (Tom Nichols) is an interesting read.

I can guarantee you that said author would value the expertise of Misters Bogle, Swedroe, Ferri and Larrimore.

Fallible
Posts: 6540
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Fallible » Thu Oct 04, 2018 1:35 pm

steve321 wrote:
Thu Oct 04, 2018 7:46 am
Rick Ferri wrote:
Thu Oct 04, 2018 7:30 am
steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
I don't have a John Wayne quote to match yours of Ronald Reagan. Sorry. So I'll settle for one by Einstein instead:
Unthinking respect for authority is the greatest enemy of truth.
Assuming these quotes above are being used to say that believing in John Bogle, the man largely responsible for giving us small investors a "fair shake," is tantamount to "abandoning reason," is "wrong," and is "unthinking," I will say this: I can be wrong, unreasonable and unthinking at times, as we all can; but when it comes to investing greats like Bogle, Buffett, Munger, Graham, etc., it's a safe bet that we're thinking, both reasonably and correctly. And that doesn't mean agreeing with everything they say or do, but recognizing and acknowledging the best of it.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

User avatar
vineviz
Posts: 2084
Joined: Tue May 15, 2018 1:55 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by vineviz » Thu Oct 04, 2018 1:36 pm

Munir wrote:
Thu Oct 04, 2018 1:04 pm
steve321 wrote:
Thu Oct 04, 2018 5:01 am
Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am

I believe in Jack.

Rick Ferri
“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
I assume that Rick is saying that he agrees with Jack because Jack advocates simplicity and not that Rick advocates simplicity because Jack said it.
That's charitable. I assumed that if he simply believed in simplicity that Rick would simply have said so, rather than appealing to Bogle as some sort of authority.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Grt2bOutdoors
Posts: 19335
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Grt2bOutdoors » Thu Oct 04, 2018 2:14 pm

corn18 wrote:
Wed Oct 03, 2018 5:28 pm
Swedroehead is too hard to pronounce.
I prefer “friend of Larry”. Much easier. :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 19335
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Grt2bOutdoors » Thu Oct 04, 2018 2:20 pm

Elysium wrote:
Wed Oct 03, 2018 12:21 pm
Difference between Jack's advice and Larry's, I will put it this way:

Bogle's advice is timeless and it will stand the test of time. Swedroe's advice is flavor of the decade, it may not stand the test of time. Question one need to ask, do I feel lucky?

Full disclosure: I do not own a 3-fund portfolio, but I am not an active investor in the sense I buy & hold low cost funds with intention of forever, in this regard I am following Jack's advice.
Flavor of the decade huh? Well, I have a few of Larry’s books, the earliest variation of this strategy harkens back to the 1990’s. Larry is not as old as Jack, (I do thank Jack for founding Vanguard and giving us small guys a fair shake) but give Larry a few more decades - then we’ll see how it holds up. Twenty years is not enough time to make a fair determination.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

KlangFool
Posts: 10445
Joined: Sat Oct 11, 2008 12:35 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by KlangFool » Thu Oct 04, 2018 2:26 pm

Folks,

I am

A) 40% Wellington fund (65/35) actively managed large value focus. I do not trust myself to rebalance when hell freeze over.

B) 40% 3 funds portfolio.

C) 20% Larry portfolio (10% small cap value, 10% Intermediate-term treasury).

I pick all 3 options. My AA is 60/40.

KlangFool

User avatar
steve321
Posts: 248
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by steve321 » Thu Oct 04, 2018 2:41 pm

Fallible wrote:
Thu Oct 04, 2018 1:35 pm
when it comes to investing greats like Bogle, Buffett, Munger, Graham, etc., it's a safe bet that we're thinking, both reasonably and correctly. And that doesn't mean agreeing with everything they say or do, but recognizing and acknowledging the best of it.
So you are comparing Bogle to Buffett, Munger and Graham? They don't seem to have that much in common as investors; the other three have been able to consistently pick individual stocks (and businesses) that have greatly outperformed the market.
Mr Bogle has developed the index fund at low cost (based on an idea of Samuelson). He did a truly great service to people like me (and I imagine you) who cannot pick individual stocks, but he has little to do with those three other investors. In fact they are quite the opposite in many ways, Bogle has allowed people who have no stock picking skills to buy the haystack and not get fleeced by Wall Street; the other three are able to understand which needles you should buy.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

chisey
Posts: 223
Joined: Mon Apr 16, 2007 10:47 am

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by chisey » Thu Oct 04, 2018 2:56 pm

Swedroe and many others have built a layer of research-based investing advice overtop a landscape that Bogle made possible. In that sense they stand on the shoulders of a giant. I think all we can really debate here is whether Larry sees further than Bogle or not.

Personally, I think yes-- diversifying across risks is a step forward. So I try to do that. But I also think it can be reasonably argued that the portfolio changes Swedroe advocates is fiddling at the margins; low cost and direct access to broad markets were a giant leap for investors, by comparison.

So for my part, I thank both. The world needs giants and people willing to get on their shoulders to look for more.

User avatar
nisiprius
Advisory Board
Posts: 36899
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by nisiprius » Thu Oct 04, 2018 3:08 pm

Some key differences:

Although he doesn't make it perfectly explicit, Larry Swedroe's philosophy is advisor-centered. The investments he has suggested for implementing his strategies are funds that are intended to be bought through advisors. Do-it-yourselfers in the forum find ways around it; some 401(k) plans include some DFA funds; from time to time people have discovered apparent glitches in brokerage platforms and have successfully placed orders for AQR funds without meeting the stated million-dollar minimums; and of course, people implement his factor-based strategies using non-DFA funds and ETFs. But the main thrust of his strategy assumes that you will use an advisor. You will pay something like 1%/year in advisory fees, but you obtain valuable services from the advisor that are hopefully worth 1%/year to you.

a) In 1998 or so, the strategies he was advocating in, e.g. The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Invests Today was similar to Bogle's in the sense that both approaches involved

1) low-expense ratio
2) passive
3) mutual funds
4) holding long-only portfolios
5) of traditional securities (stocks and bonds).

(I'll skip the "purity" arguments about whether DFA funds are truly passive; they're an inch away from index funds and a mile away from actively managed funds). At this point, the divergence between Swedroe and Bogle was largely the use of factor tilts and greater portfolio complexity in Swedroe's strategies.

b) About 2008, Larry Swedroe started to diverge on points (1) and (5) by advocating collateralized commodity futures (CCFs), often called "commodities." He sometimes mentioned PCRIX, the PIMCO Real Return Commodity Strategy Fund, which currently has a 1.24% ER.

In his book, "Common Sense on Mutual Funds," Bogle does not mention "commodities" at all except in the completely different sense of equity portfolios being commodities (i.e. similar to each other in all important respects).

c) About 2014, Larry Swedroe's articles began to speak highly of QSPIX (and QSPNX), the AQR Style Premia Alternative Fund. So, he was now diverging on points 1, 2, 4, and 5. It's a leveraged long-short portfolio. It invests in alternatives. Larry Swedroe would dispute point 4 because he has a definition of "passive" which he feels QSPIX meets, but the prospectus for the fund says "the fund is actively managed." On point 5, the official expense ratio is 2.58%. Larry Swedroe argues for subtracting expenses he believes don't belong in the expense ratio, and dividing by two because it gives you twice the factor exposure, but even after you do this you are still in "traditional active fund" 1% ER territory, not Vanguard/DFA low-ER territory.

d) About 2017, Larry Swedroe diverged on point 3 (and probably all the others by usual Boglehead standards) by championing three Stone Ridge "interval funds," which are not mutual funds and do not have the guaranteed daily liquidity of mutual funds.

Not being one of Larry Swedroe's firm's clients, I don't have any examples of actual portfolios his firm has recommended. If any clients want to post details here, it would be interesting. I'm guessing that a high percentage of these portfolios is still made up of low-expense near-passive mutual funds holding long-only portfolios of traditional securities.
Last edited by nisiprius on Thu Oct 04, 2018 4:49 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
nedsaid
Posts: 10508
Joined: Fri Nov 23, 2012 12:33 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by nedsaid » Thu Oct 04, 2018 3:21 pm

Nisiprius, my journey was different than Swedroe's as you describe above.

I started out with an IRA with FDIC Insured Certificates of Deposit. I bought my first mutual fund, an active fund in July 1984. In 1988, I took my IRA to a friend who entered the brokerage business. So then I went to a low turnover Value strategy with individual stocks. Even then, I bought 3 US Treasury Zero Coupon Bonds and a Certificate of deposit. Later on, I did more diversified active stock funds. Early on, I did investing based both on Value with part of my investments and part with Earnings and Price Momentum with another part of my investments. Factor investing before I even knew what it was. In the mid-1990's I started indexing and then really committed to it in 1999.

I also found that I started as an ultra conservative investor in my twenties and got to be pedal to the metal by the time I was forty. Gradually, I have been taking my portfolio back towards conservatism. Still a factor investor but seeing the wisdom in the simpler indexing approach.
A fool and his money are good for business.

GammaPoint
Posts: 2609
Joined: Sun Aug 02, 2009 10:25 am
Location: Washington

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by GammaPoint » Thu Oct 04, 2018 3:34 pm

Unless I've been grossly misled, the breaking down of equity returns into exposures to various factors is a real phenomenon. Those factors may have a risk explanation, a behavioral explanation, or both. They may persist in the future or they may not. For me, I'm willing to believe they are real enough to pay a small ER premium for them (0.5% is probably my upper limit, though my top holding right now is FNDE's 0.39%). Tilting to quality and value make enough intuitive sense to me that I prefer to invest that way, and so tilting to those factors gives me a portfolio that I believe in and am more likely to stay the course with.

I don't dabble in anything more complex than factor exposures, partially because I am very sensitive to high ERs but also don't have the time right now to fully understand what I'd be investing in.

I appreciate both what Bogle and Swedroe have done for my investing education, and don't really understand why this issue has to be so contentious. Often it seems that individuals are so uncertain in their own investing methodology that they want to reassure themselves by bashing the approaches of others. Complexity vs simplicity, stocks vs bonds, chocolate vs vanilla, there's a path for everyone.

heyyou
Posts: 3175
Joined: Tue Feb 20, 2007 4:58 pm

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by heyyou » Thu Oct 04, 2018 4:00 pm

Is the Trev H four fund portfolio complex, with twice as many equity funds as a 2 fund total domestic and total foreign portfolio?
Trev H has factor exposure using funds with VG ERs.

If simplicity is paramount, then a total world cap weighted fund is the best fund, but few are doing that, including the pillars of the BHs site.

Broad market exposure is more even with the more complex portfolios, more uneven with single, cap weighted funds.

User avatar
Rowan Oak
Posts: 277
Joined: Mon May 09, 2016 2:11 pm
Location: Yoknapatawpha

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Rowan Oak » Thu Oct 04, 2018 5:07 pm

steve321 wrote:
Thu Oct 04, 2018 10:42 am
Rowan Oak wrote:
Thu Oct 04, 2018 10:27 am
steve321 wrote:
Thu Oct 04, 2018 7:46 am
Rick Ferri wrote:
Thu Oct 04, 2018 7:30 am
steve321 wrote:
Thu Oct 04, 2018 5:01 am


“As soon as we abandon our reason and are content to rely on authority, there is no end to our troubles.” ― Bertrand Russell
In this case, as Ronald Reagan once said to Mikhail Gorbachev, “I’d agree with you, but then we would both be wrong.”
I don't have a John Wayne quote to match yours of Ronald Reagan. Sorry. So I'll settle for one by Einstein instead:
Unthinking respect for authority is the greatest enemy of truth.
steve321:

The quotes you are using are completely out of context and don't apply to this discussion.
All right then. Have you got a Faulkner quote that applies? :wink:
"The past is never dead. It's not even past." has often come to mind when thinking about why many investors believe in market timing strategies and how that past affects the present.

(Act I Scene III of Requiem for a Nun - William Faulkner)

Coincidentally, both Jack Bogle and William Faulkner took inspiration from Shakespeare's Macbeth, “a tale told by an idiot, full of sound and fury, signifying nothing”.

For Faulkner, it was the title of his fourth novel, The Sound and the Fury. It was Faulkner’s own favorite novel, he says, because it is his “most splendid failure.”

For Jack Bogle, he often describes the "dramatic daily fluctuations of the stock market, however meaningless in the long-run—as “a tale told by an idiot, full of sound and fury, signifying nothing”"

I apologize for rambling on.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

Fallible
Posts: 6540
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Fallible » Thu Oct 04, 2018 6:22 pm

steve321 wrote:
Thu Oct 04, 2018 2:41 pm
Fallible wrote:
Thu Oct 04, 2018 1:35 pm
when it comes to investing greats like Bogle, Buffett, Munger, Graham, etc., it's a safe bet that we're thinking, both reasonably and correctly. And that doesn't mean agreeing with everything they say or do, but recognizing and acknowledging the best of it.
So you are comparing Bogle to Buffett, Munger and Graham? They don't seem to have that much in common as investors; the other three have been able to consistently pick individual stocks (and businesses) that have greatly outperformed the market.
Mr Bogle has developed the index fund at low cost (based on an idea of Samuelson). He did a truly great service to people like me (and I imagine you) who cannot pick individual stocks, but he has little to do with those three other investors. In fact they are quite the opposite in many ways, Bogle has allowed people who have no stock picking skills to buy the haystack and not get fleeced by Wall Street; the other three are able to understand which needles you should buy.
Look beyond the exceptional intelligence that led to their successful investment styles and see their wisdom, which “transcends the day-to-day noise in the financial markets,” according to an article in Forbes. The article, "Investing's Great Minds Think Alike," is by Rick Ferri:

https://www.forbes.com/2010/06/03/inves ... fb93e13aca
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

larryswedroe
Posts: 15711
Joined: Thu Feb 22, 2007 8:28 am
Location: St Louis MO

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by larryswedroe » Thu Oct 04, 2018 7:05 pm

few thoughts to get facts right
First, to say I don't favor simplicity is simply an absurd statement. It's as silly as saying I favor high cost funds!!!

But I don't favor simplicity (or lowest expense) at the expense of more efficient portfolios that significantly reduce dispersion of returns (or add value with higher expected returns). As good example we pushed DFA to create their core funds so that portfolios with multi factor exposures could be built with just one domestic fund and one international and one EM. And my own portfolio, the Larry Portfolio, for equities, can be built with just two funds BOSVX and DWUSX, and wrote blog showing that, and it is just as simple as Taylor's or Bogle's two fund portfolio. And bonds can simply use Treasuries and CDs. Doesn't get simpler. But for munis, with larger portfolios a fund is less efficient relative to a separate account because there are significant advantages of building an individual portfolio from tax perspective.

Now if want to consider adding alternatives, which isn't a requirement, funds such as lendx and srrix are very simple. Others like QSPRX are more complex and should only be used by those who can either take the time to understand them or have full faith in their advisor.

AS to risks, iMO the type portfolio I recommend for investors does take on tracking error risk, but so does the two fund portfolio because it has international assets. More importantly it has historically produced much lower dispersion of returns with less tail risks which IMO is the real key to staying disciplined, much more important than tracking error. The reason is that the single riskiest factor by far is market beta. And traditional portfolios are almost all market beta and nothing else, or little else.

Bottom line, simplicity for its own sake makes no sense, things should be as simple as possible to achieve the objective in the most efficient way, but not simpler. So you can use the academic research and have a very simple two fund portfolio, just like Taylor has two. And you can even do it in multi factor like with new funds from Goldman and Vanguard, etc. Or you can add alternatives that make it bit more complex, but more efficient. And this simplicity is so overrated anyway as even with alternatives you can have portfolio with the number of funds being able to be counted on your hands.

Hope that is helpful
Larry

User avatar
willthrill81
Posts: 6170
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by willthrill81 » Thu Oct 04, 2018 7:28 pm

azanon wrote:
Wed Oct 03, 2018 2:20 pm
I'm reminded of the primary lesson from Mebane Faber's book, "Global Asset Allocation". He compared numerous lazy portfolios, including those that would be consistent with both Bogle and Swedroe's views, and found that the difference between the long-term performance of the best performing portfolio and the worst one, was less than 1%. So I recall he reasoned that as long as you don't pay too much for whatever portfolio strategy that you're using, and you stick with your chosen strategy, your time is better spent playing golf and living life than anguishing over which is better.
:sharebeer

The "cost matters hypothesis" has a lot going for it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Grt2bOutdoors
Posts: 19335
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Grt2bOutdoors » Thu Oct 04, 2018 7:36 pm

Thanks for posting Larry.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
Taylor Larimore
Advisory Board
Posts: 27529
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Key differences between investing philosophies: Swedroe vs. Bogle

Post by Taylor Larimore » Thu Oct 04, 2018 7:40 pm

Rick Ferri wrote:
Wed Oct 03, 2018 11:16 am
Jack believes in portfolio simplicity.
Larry believes in portfolio complexity.
I believe in Jack.

Rick Ferri
Bogleheads:

I believe in Jack and Rick Ferri.

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

Locked