The best way to invest is through benign neglect

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Indianrock
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The best way to invest is through benign neglect

Post by Indianrock » Wed Dec 05, 2018 11:40 am

Every day I find more value in these forums. I keep seeing people's signature blocks say things about " I don't know anything." So what is the underlying story to that -- just that buying index funds and pretty much keeping your hands off of them beats "traders" and actively managed funds?

https://www.cbsnews.com/news/know-nothi ... omethings/
If I was king: once a stock is purchased, you hold it for 30 days.

gmaynardkrebs
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Re: The best way to invest is through benign neglect

Post by gmaynardkrebs » Wed Dec 05, 2018 12:30 pm

Indianrock wrote:
Wed Dec 05, 2018 11:40 am
Every day I find more value in these forums. I keep seeing people's signature blocks say things about " I don't know anything." So what is the underlying story to that -- just that buying index funds and pretty much keeping your hands off of them beats "traders" and actively managed funds?

https://www.cbsnews.com/news/know-nothi ... omethings/
After costs are taken into account, passive beats active. QED. However, that only gets you so far. The true value in this forum IMHO is helping to decide on an asset allocation strategy that fits you: your risk tolerance, your age, your life circumstances, your salary, pensions (if any), your dependents' needs, your emotions, etc etc. No better place I've found for that!

Jack FFR1846
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Re: The best way to invest is through benign neglect

Post by Jack FFR1846 » Wed Dec 05, 2018 12:43 pm

Benign neglect you say? Fidelity found this to be pretty much in line with people who received the most return from their 401k account. Although it's sort of difficult for one to not neglect your account when you're dead.

Go to the 30:00 point

https://www.youtube.com/watch?v=T71ibcZAX3I
Bogle: Smart Beta is stupid

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Kenkat
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Re: The best way to invest is through benign neglect

Post by Kenkat » Wed Dec 05, 2018 12:48 pm

Benign neglect, bordering on sloth!

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Cycle
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Re: The best way to invest is through benign neglect

Post by Cycle » Wed Dec 05, 2018 12:51 pm

I just want average returns. A financial advisor will get me that minus expenses. Just doing the 3 fund should get me average returns.

How I became financially independent in my early 30s though was through a high savings rate. With my income, this required avoiding the most expensive luxuries in life like multiple cars, too much house, too much education, etc.

How I will become no longer financially independent is through paying for daycare starting in 6 months... But I'll get back to FI in a year.

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Re: The best way to invest is through benign neglect

Post by Fallible » Wed Dec 05, 2018 1:10 pm

Indianrock wrote:
Wed Dec 05, 2018 11:40 am
Every day I find more value in these forums. I keep seeing people's signature blocks say things about " I don't know anything." So what is the underlying story to that -- just that buying index funds and pretty much keeping your hands off of them beats "traders" and actively managed funds?
https://www.cbsnews.com/news/know-nothi ... omethings/
The article by Larry Swedroe is clear what this is about and what Charles Ellis meant in this case by "benign neglect" and getting that asset allocation right:
The conclusion we can draw is that, as the saying goes, a little knowledge can be a dangerous thing. The reason is that we tend to overestimate the value of the information, and we are overconfident of our abilities to exploit the information.

Many also forget that it's not the amount or quality of the information we have. Instead, what's important is how that information compares to the information held by other investors. In other words, there must be a group of investors you can exploit. Since institutional investors now account for as much as 90 percent of the daily trading, it's hard to think of a group of likely victims that can be exploited sufficiently to offset the greater costs of active management.

Charles Ellis, author of "Winning the Loser's Game," offered this advice: "Everything I know is known by the market and worked in to the market.... The best way to invest is through benign neglect. Get your asset allocation right and leave your investments alone."
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

Indianrock
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Re: The best way to invest is through benign neglect

Post by Indianrock » Wed Dec 05, 2018 1:31 pm

I agree with what's been said ....it's been a number of years since I had a review with a vanguard advisor but I'm doing one tomorrow now that I'm retired and maybe if they have a an arrangement where I can do a once-a-year tune up for a fixed fee I might go that route
main thing at this point is the asset allocation since my emergency fund has grown to over four times my annual retirement income and expenses (all of which do not involve my investment portfolio or required minimum distributions that start next year)
If I was king: once a stock is purchased, you hold it for 30 days.

Elena
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Re: The best way to invest is through benign neglect

Post by Elena » Wed Dec 05, 2018 2:07 pm

Some prefer the term "lazy", quite the oxymoron in a society where effort is valued, and money "works" for one.

harvestbook
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Re: The best way to invest is through benign neglect

Post by harvestbook » Wed Dec 05, 2018 2:22 pm

I totally missed the horror of the 2008 crash in my 401k because I literally did not know how to log in and check it. I think I got a paper statement once a year but didn't track or compare them by any means. I just kept plugging in my 6 percent even though the employer dropped the 3 percent match sometime during that period. To this day I am still not sure what I was invested in, only that I never touched it until I rolled it into an IRA after becoming self-employed. I do remember some of the older, closer-to-retirement people walking around with gray faces, though, especially when the axes started falling.
I'm not smart enough to know, and I can't afford to guess.

gmaynardkrebs
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Re: The best way to invest is through benign neglect

Post by gmaynardkrebs » Wed Dec 05, 2018 2:38 pm

harvestbook wrote:
Wed Dec 05, 2018 2:22 pm
I totally missed the horror of the 2008 crash in my 401k because I literally did not know how to log in and check it. I think I got a paper statement once a year but didn't track or compare them by any means. I just kept plugging in my 6 percent even though the employer dropped the 3 percent match sometime during that period. To this day I am still not sure what I was invested in, only that I never touched it until I rolled it into an IRA after becoming self-employed. I do remember some of the older, closer-to-retirement people walking around with gray faces, though, especially when the axes started falling.
Missed joke first time.
Last edited by gmaynardkrebs on Wed Dec 05, 2018 5:10 pm, edited 1 time in total.

Indianrock
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Re: The best way to invest is through benign neglect

Post by Indianrock » Wed Dec 05, 2018 2:54 pm

Harvestbook that's hilarious 😄
I did check mine then but somehow I managed to leave it alone.

I was going to say something about closing Twitter accounts but it would probably get axed here so I won't
If I was king: once a stock is purchased, you hold it for 30 days.

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arcticpineapplecorp.
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Re: The best way to invest is through benign neglect

Post by arcticpineapplecorp. » Wed Dec 05, 2018 3:28 pm

the article explains it:
The conclusion we can draw is that, as the saying goes, a little knowledge can be a dangerous thing. The reason is that we tend to overestimate the value of the information, and we are overconfident of our abilities to exploit the information.

Many also forget that it's not the amount or quality of the information we have. Instead, what's important is how that information compares to the information held by other investors. In other words, there must be a group of investors you can exploit. Since institutional investors now account for as much as 90 percent of the daily trading, it's hard to think of a group of likely victims that can be exploited sufficiently to offset the greater costs of active management.
people have many biases, overconfidence is one of them.

people also confuse information with knowledge.

They also forget that all information should be known by everyone at the same time. If you have any info someone else doesn't, you can't trade on it so it's worthless (insider trading). Once it becomes news everyone knows it and you can't exploit it, so it's worthless. Can't tell you how many times people even come to bogleheads thinking they've found something no one else has only to be reminded the information they know has already been priced into the market.

It's time in the market that matters. Compounding of interest. It works. Unfortunately, that's not how people operate. People are very short-sighted (want to get rich quick, not slowly). That will be their downfall, unfortunately. Slow and steady wins the race.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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arcticpineapplecorp.
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Re: The best way to invest is through benign neglect

Post by arcticpineapplecorp. » Wed Dec 05, 2018 3:33 pm

Jack FFR1846 wrote:
Wed Dec 05, 2018 12:43 pm
Benign neglect you say? Fidelity found this to be pretty much in line with people who received the most return from their 401k account. Although it's sort of difficult for one to not neglect your account when you're dead.

Go to the 30:00 point

https://www.youtube.com/watch?v=T71ibcZAX3I
this has been debunked. Unfortunately, it's become an urban legend. It may be true that people who forgot they had the funds did better, but they still had to buy index funds over actively managed (likely). But there was no such study at Fidelity showing dead people did better than the living investors. Just not true:

source: http://financialuproar.com/2016/08/30/r ... tors-best/
Fidelity, which has received inquiries about the study ever since, without knowing why, told me this week that it had never produced such a study.

Oh man that’s great. Somebody made the whole thing up.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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digarei
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Re: The best way to invest is through benign neglect

Post by digarei » Wed Dec 05, 2018 3:58 pm

gmaynardkrebs wrote:
Wed Dec 05, 2018 2:38 pm
harvestbook wrote:
Wed Dec 05, 2018 2:22 pm
I totally missed the horror of the 2008 crash in my 401k because I literally did not know how to log in and check it. I think I got a paper statement once a year but didn't track or compare them by any means. I just kept plugging in my 6 percent even though the employer dropped the 3 percent match sometime during that period. To this day I am still not sure what I was invested in, only that I never touched it until I rolled it into an IRA after becoming self-employed. I do remember some of the older, closer-to-retirement people walking around with gray faces, though, especially when the axes started falling.
Did they have newspapers or TV where you live?
I’m guessing that the “older, closer-to-retirement people” were doing most of the reading and watching.

Like harvestbook, I just kept plugging away with my head down. While the financial doomsayers were forecasting... well, doom, I clung to the belief that eventually the markets would recover. I could have been—and could still be—proven wrong, but in 2008 pessimism if followed by action would have dismantled my capacity to reach any level of financial independence. And as Cycle emphasized above, it was an accelerated savings/investing rate that made this possible.

A little infomation can be dangerous. However, pessimism is not usually associated with success.
Connect with Bogleheads in Northern California! Click the link under my user info/avatar.

Indianrock
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Re: The best way to invest is through benign neglect

Post by Indianrock » Fri Dec 07, 2018 9:58 am

Jack FFR1846 great video interview with J L Collins. I may buy his book. Had a phone session yesterday with a Vanguard advisor. Good talk and no high pressure to sign up for "active" management.
.3 % annual charge, based on funds managed, for them to manage, which apparently is a quarterly review and tune-up. I'm going to take a serious look at what he proposes out of this free session and most likely continue my "mostly hands off, mostly target date fund" approach. I want to see what he suggests as far as the excess $100k sitting in my emergency fund. He also mentioned there can be value in actually slowing the growth of my IRAs ( target year vanguard funds ) from a tax perspective.

They don't offer and he doesn't recommend the annual flat-fee advisory approach: either the investor is disciplined and implemented the suggested changes ( in which case the annual review was a waste of time and money ) , or the investor is not disciplined, doesn't listen, so the annual review is also a waste of time and money. He did say , particularly for those with significant vanguard investments, that you could call in "every two years or so" and get another free 45-minute session.
If I was king: once a stock is purchased, you hold it for 30 days.

heyyou
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Re: The best way to invest is through benign neglect

Post by heyyou » Fri Dec 07, 2018 8:21 pm

The best way to invest is through benign neglect
Patience is fullness.

ljb
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Re: The best way to invest is through benign neglect

Post by ljb » Fri Dec 07, 2018 9:30 pm

A wise man once told me "Look at your portfolio every day and you will always be unhappy. Look at it every ten years, and you will always be happy."

I too largely missed the horror of the 2008 crash, because I has my 401k and Roth contributions automated and hardly ever looked at my balances. At that point, I was already completely in index funds, and felt no need to look.

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