Three most important elements of investment success

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Rick Ferri
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Three most important elements of investment success

Post by Rick Ferri » Thu Jul 11, 2019 7:35 am

Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

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

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747driver
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Re: Three most important elements of investment success

Post by 747driver » Thu Jul 11, 2019 7:40 am

Well said.
A clear conscience is a great pillow.

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Re: Three most important elements of investment success

Post by jello_nailer » Thu Jul 11, 2019 7:54 am

Occam's Razor.
Basically - when there are multiple solutions, the simplest one, or the one with the least assumptions, is the better choice. Goes back 800 years, probably still true.

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Re: Three most important elements of investment success

Post by RJC » Thu Jul 11, 2019 8:04 am

This is a great reminder especially after reading all those US/INTL threads.

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vineviz
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Re: Three most important elements of investment success

Post by vineviz » Thu Jul 11, 2019 8:19 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio . . .
I'd like to see the thread where someone is optimizing exposure to 37 different factors. Link, please?

Seriously, the three elements you laid out represent excellent advice. Why cloud the message with snarky comments and strawman arguments?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Nate79
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Re: Three most important elements of investment success

Post by Nate79 » Thu Jul 11, 2019 8:34 am

This is very good advice. I especially agree with #1 as I believe savings rate trumps almost everything.

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Re: Three most important elements of investment success

Post by David Jay » Thu Jul 11, 2019 8:35 am

vineviz wrote:
Thu Jul 11, 2019 8:19 am
Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio . . .
I'd like to see the thread where someone is optimizing exposure to 37 different factors. Link, please?
Your sarcasm detector is inop.
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Re: Three most important elements of investment success

Post by tadamsmar » Thu Jul 11, 2019 8:36 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Not exactly on the mark, or did you mean?:

1. Spend one cent below your means and save that.
2. Devote all your free time on tax avoidance.

Probably not,

1. "Save enough" is better.
2. You need to apply the 80-20 rule or similar to tax avoidance. Tax avoidance is a bottomless pit.

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Re: Three most important elements of investment success

Post by 1955Chevy » Thu Jul 11, 2019 8:43 am

tadamsmar wrote:
Thu Jul 11, 2019 8:36 am
Tax avoidance is a bottomless pit.
I don't think this captures what he said. He didn't say "Use tax avoidance" which would indeed be muddy.

He said to utilize tax deferred/free accounts, which will be taking advantage of tax savings. Again, keeping it simple.
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Re: Three most important elements of investment success

Post by Howard Donnelly » Thu Jul 11, 2019 9:00 am

I love it!

One question please: Would you explain your statement: "Complexity is the mother of simplicity."?

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Re: Three most important elements of investment success

Post by Sandtrap » Thu Jul 11, 2019 9:11 am

Yes.
There are many paths to wealth and all of them share and include those three concepts.

Thanks for posting.
j
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Re: Three most important elements of investment success

Post by mtmingus » Thu Jul 11, 2019 9:14 am

Great summary!
Have been practicing both (1) and (2) consistently and learnt how important (3) is till a few years ago!

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Re: Three most important elements of investment success

Post by dcabler » Thu Jul 11, 2019 9:31 am

Sandtrap wrote:
Thu Jul 11, 2019 9:11 am
Yes.
There are many paths to wealth and all of them share and include those three concepts.

Thanks for posting.
j
Thank you! Quite a diplomatic way of putting it. :D

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Re: Three most important elements of investment success

Post by nisiprius » Thu Jul 11, 2019 9:38 am

jello_nailer wrote:
Thu Jul 11, 2019 7:54 am
Occam's Razor.
Basically - when there are multiple solutions, the simplest one, or the one with the least assumptions, is the better choice. Goes back 800 years, probably still true.
He didn't mention Occam, but in 2001, Bogle wrote:
Pillar 2. When All Else Fails, Fall Back on Simplicity.

There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund. Ignore interim fluctuations in their net asset values. Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change. When there are multiple solutions to a problem, choose the simplest one.
For the record, in case anyone cites a spurious Einstein quotation, the Quote Investigator could not find evidence that Einstein really said "Everything should be made as simple as possible, but not simpler." That appears to be composer Roger Sessions' paraphrase of what he "remembers" Einstein said "in effect." The closest thing to an actual quotation from Einstein is a 1933 passage:
It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience.
Last edited by nisiprius on Thu Jul 11, 2019 10:06 am, edited 1 time in total.
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Re: Three most important elements of investment success

Post by 9-5 Suited » Thu Jul 11, 2019 9:57 am

Simplicity is of immense value in a number of different ways, and this advice is spot on. Savings rate will dominate most any other decision en route to financial success, although perhaps growing one’s income isn’t talked about enough as a key pillar.

One quibble, Occam’s Razor doesn’t really apply to the Bogleheads vs. Swedroeheads debates. That principle is about not introducing additional assumptions when explaining phenomena. Like if a package shows up at your door, Occam’s Razor says the UPS man left it there not a spaceship from Mars.

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Re: Three most important elements of investment success

Post by nisiprius » Thu Jul 11, 2019 10:05 am

John C. Bogle devoted a full chapter of Common Sense on Mutual Funds to "Investing with Simplicity." The chapter is very similar to this speech on the Vanguard website, Investing with Simplicity.; a pity that technical glitches have resulted in the loss of all charts.

For years I used the Fidelity Freedom 2020 fund, which is a fund of funds. The current composition is:

Fidelity Series Intrinsic Opportunities Fund 5.61%
Fidelity Series Large Cap Stock Fund 4.73%
Fidelity Series Growth Company Fund 4.41%
Fidelity Series Stock Selector Large Cap Value Fund 3.65%
Fidelity Series Value Discovery Fund 2.62%
Fidelity Series Opportunistic Insights Fund 2.43%
Fidelity Series Blue Chip Growth Fund 2.16%
Fidelity Series Small Cap Opportunities Fund 1.97%
Fidelity Series Large Cap Value Index Fund 1.34%
Fidelity Series All-Sector Equity Fund 1.21%
Fidelity Series Small Cap Discovery Fund 0.63%

Fidelity Series Commodity Strategy Fund 2.79%

Fidelity Series International Growth Fund 5.72%
Fidelity Series International Value Fund 5.31%
Fidelity Series International Small Cap Fund 1.25%
Fidelity Series Canada Fund 0.59%

Fidelity Series Emerging Markets Opportunities Fund 6.24%
Fidelity Series Emerging Markets Fund 0.66%

Fidelity Series Investment Grade Bond Fund 24.75%
Fidelity Series Long-Term Treasury Bond Index Fund 5.41%
Fidelity Series Inflation-Protected Bond Index Fund 5.50%
Fidelity Series High Income Fund 0.74%
Fidelity Series Floating Rate High Income Fund 0.14%
Fidelity Series International Credit Fund 0.07%
Fidelity Series Emerging Markets Debt Fund 0.69%
Fidelity Series Real Estate Income Fund 0.49%
Fidelity Series Government Money Market Fund 6.84%
Fidelity Series Short-Term Credit Fund 1.70%
Fidelity Cash Central Fund 0.26%

When I first became aware of Vanguard Target Retirement 2020, it was a fund-of-funds with four funds in it. They have since added a fifth. I remember thinking there was something deeply wrong, that Vanguard was taking some kind of lazy shortcut, that this was some kind of junior-grade, amateur-night fund.

Needless to say... Portfolio 1 is 100% Fidelity Freedom 2020...

Source

Image

Although the differences are small, over twelve years I don't see that Fidelity got any benefit at all from their complexity.
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.

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Re: Three most important elements of investment success

Post by DaftInvestor » Thu Jul 11, 2019 10:10 am

The biggest element to my investment success is what I would think of as rule #0 to be inserted in front of 1 through 3:

#0) Maximize your salary/income to your highest ability so you have more money to invest.

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.

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Re: Three most important elements of investment success

Post by Stinky » Thu Jul 11, 2019 10:13 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.
The Boglehead philosophy in less than 50 words.

Very well stated.
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Re: Three most important elements of investment success

Post by caponicus » Thu Jul 11, 2019 10:19 am

Nice graphic comparing Fidelity Freedom Fund 2020 vs Vanguard Target Retirement 2020. I suppose Fidelity's 0.60 expense ratio can explain a big part of the difference in CAGR. That ER is why I abandoned their fund, just as much if not more so than it's complexity.

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Re: Three most important elements of investment success

Post by Greg in Idaho » Thu Jul 11, 2019 11:01 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Yep...so why are we still here???

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Re: Three most important elements of investment success

Post by Mickey7 » Thu Jul 11, 2019 11:03 am

As always, spot on Rick.

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Re: Three most important elements of investment success

Post by oldzey » Thu Jul 11, 2019 11:24 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Thanks for continuing to remind us of Jack's mission, Rick!
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Re: Three most important elements of investment success

Post by overst33r » Thu Jul 11, 2019 11:29 am

Greg in Idaho wrote:
Thu Jul 11, 2019 11:01 am
Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Yep...so why are we still here???
Us youngins need a reminder every now and then. :sharebeer

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Re: Three most important elements of investment success

Post by flyingaway » Thu Jul 11, 2019 11:34 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Every ordinary people can do that.
The really "smart" guys (e.g., hedge fund managers) will say that they can trade stocks and live above the means and still retire early.

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Re: Three most important elements of investment success

Post by Rick Ferri » Thu Jul 11, 2019 5:35 pm

Howard Donnelly wrote:
Thu Jul 11, 2019 9:00 am
I love it!

One question please: Would you explain your statement: "Complexity is the mother of simplicity."?
My friend, Allan Roth (who is undergoing hip surgery today) often says, "There is complexity in finding simplicity".

Einstein says, "Out of complexity, find simplicity"

I said, "Complexity is the mother of simplicity."

OK, so, I'm not Einstein. :mrgreen:

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Re: Three most important elements of investment success

Post by Rick Ferri » Thu Jul 11, 2019 5:36 pm

Greg in Idaho wrote:
Thu Jul 11, 2019 11:01 am
Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Yep...so why are we still here???
:beer Because we LOVE being here!
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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Re: Three most important elements of investment success

Post by Howard Donnelly » Thu Jul 11, 2019 5:39 pm

Rick Ferri wrote:
Thu Jul 11, 2019 5:35 pm
Howard Donnelly wrote:
Thu Jul 11, 2019 9:00 am
I love it!

One question please: Would you explain your statement: "Complexity is the mother of simplicity."?
My friend, Allan Roth (who is undergoing hip surgery today) often says, "There is complexity in finding simplicity".

Einstein says, "Out of complexity, find simplicity"

I said, "Complexity is the mother of simplicity."

OK, so, I'm not Einstein. :mrgreen:

Rick
Thank you, Rick.

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Re: Three most important elements of investment success

Post by fortyofforty » Thu Jul 11, 2019 5:48 pm

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
Thank you, Rick. Simple and succinct. We all need reminders not to get hung up on the minutia that are debated endlessly here.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Re: Three most important elements of investment success

Post by Fallible » Thu Jul 11, 2019 5:50 pm

Thanks, Rick, for that firm nudge back to simplicity, to the forest we too often lose sight of for the trees, to the big picture that can tell us what's really important to invest well, and to good old, plain old common sense. It's another reminder why (to paraphrase) investing is simple, but not we all-too-human investors.
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Re: Three most important elements of investment success

Post by willthrill81 » Thu Jul 11, 2019 5:56 pm

I think we can simplify the wording even more so.

"Spend significantly less than you earn, and tax-efficiently invest your savings."
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Re: Three most important elements of investment success

Post by Watty » Thu Jul 11, 2019 5:57 pm

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.
I would suggest one change to be;

3) Invest in a very simple portfolio of low cost broad market index funds using an allocation you can stick with.


In a 401k where you do not have control of the funds that are available controlling the costs can be a challenge.

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Re: Three most important elements of investment success

Post by Silence Dogood » Thu Jul 11, 2019 5:58 pm

Excellent post, OP!

Maybe we should start a Boglehead haiku thread?

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Re: Three most important elements of investment success

Post by trustquestioner » Thu Jul 11, 2019 6:10 pm

I have my entire IRA in Wellington. Too simple?

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Re: Three most important elements of investment success

Post by columbia » Thu Jul 11, 2019 6:34 pm

nisiprius wrote:
Thu Jul 11, 2019 10:05 am
John C. Bogle devoted a full chapter of Common Sense on Mutual Funds to "Investing with Simplicity." The chapter is very similar to this speech on the Vanguard website, Investing with Simplicity.; a pity that technical glitches have resulted in the loss of all charts.

For years I used the Fidelity Freedom 2020 fund, which is a fund of funds. The current composition is:

Fidelity Series Intrinsic Opportunities Fund 5.61%
Fidelity Series Large Cap Stock Fund 4.73%
Fidelity Series Growth Company Fund 4.41%
Fidelity Series Stock Selector Large Cap Value Fund 3.65%
Fidelity Series Value Discovery Fund 2.62%
Fidelity Series Opportunistic Insights Fund 2.43%
Fidelity Series Blue Chip Growth Fund 2.16%
Fidelity Series Small Cap Opportunities Fund 1.97%
Fidelity Series Large Cap Value Index Fund 1.34%
Fidelity Series All-Sector Equity Fund 1.21%
Fidelity Series Small Cap Discovery Fund 0.63%

Fidelity Series Commodity Strategy Fund 2.79%

Fidelity Series International Growth Fund 5.72%
Fidelity Series International Value Fund 5.31%
Fidelity Series International Small Cap Fund 1.25%
Fidelity Series Canada Fund 0.59%

Fidelity Series Emerging Markets Opportunities Fund 6.24%
Fidelity Series Emerging Markets Fund 0.66%

Fidelity Series Investment Grade Bond Fund 24.75%
Fidelity Series Long-Term Treasury Bond Index Fund 5.41%
Fidelity Series Inflation-Protected Bond Index Fund 5.50%
Fidelity Series High Income Fund 0.74%
Fidelity Series Floating Rate High Income Fund 0.14%
Fidelity Series International Credit Fund 0.07%
Fidelity Series Emerging Markets Debt Fund 0.69%
Fidelity Series Real Estate Income Fund 0.49%
Fidelity Series Government Money Market Fund 6.84%
Fidelity Series Short-Term Credit Fund 1.70%
Fidelity Cash Central Fund 0.26%

When I first became aware of Vanguard Target Retirement 2020, it was a fund-of-funds with four funds in it. They have since added a fifth. I remember thinking there was something deeply wrong, that Vanguard was taking some kind of lazy shortcut, that this was some kind of junior-grade, amateur-night fund.

Needless to say... Portfolio 1 is 100% Fidelity Freedom 2020...

Source

Image

Although the differences are small, over twelve years I don't see that Fidelity got any benefit at all from their complexity.
TIAA target funds suffer from this problem, too (in addition to their bloated expenses).

20 different sub-funds:
https://www.nuveen.com/mutual-funds/tia ... titutional

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Re: Three most important elements of investment success

Post by vineviz » Thu Jul 11, 2019 6:43 pm

columbia wrote:
Thu Jul 11, 2019 6:34 pm
TIAA target funds suffer from this problem, too (in addition to their bloated expenses).

20 different sub-funds:
There's nothing wrong with having a lot of sub-funds, per se. It's arguably unnecessary (8-10 funds should be plenty) but it's not detrimental.

The high expenses, though, are definitely a red flag.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Three most important elements of investment success

Post by Fallible » Thu Jul 11, 2019 6:45 pm

Rick Ferri wrote:
Thu Jul 11, 2019 5:35 pm
Howard Donnelly wrote:
Thu Jul 11, 2019 9:00 am
I love it!

One question please: Would you explain your statement: "Complexity is the mother of simplicity."?
My friend, Allan Roth (who is undergoing hip surgery today) often says, "There is complexity in finding simplicity".

Einstein says, "Out of complexity, find simplicity"

I said, "Complexity is the mother of simplicity."

OK, so, I'm not Einstein. :mrgreen:
Rick
I wondered the same thing as Howard. Close as I could come was that it often takes learning something complex to see how simple it is. And once you learn this and appreciate its simplicity, you can explain it simply.

And I'm not Einstein either. :-)
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

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Re: Three most important elements of investment success

Post by arcticpineapplecorp. » Thu Jul 11, 2019 7:05 pm

nisiprius wrote:
Thu Jul 11, 2019 10:05 am
John C. Bogle devoted a full chapter of Common Sense on Mutual Funds to "Investing with Simplicity." The chapter is very similar to this speech on the Vanguard website, Investing with Simplicity.; a pity that technical glitches have resulted in the loss of all charts.

For years I used the Fidelity Freedom 2020 fund, which is a fund of funds. The current composition is:

Fidelity Series Intrinsic Opportunities Fund 5.61%
Fidelity Series Large Cap Stock Fund 4.73%
Fidelity Series Growth Company Fund 4.41%
Fidelity Series Stock Selector Large Cap Value Fund 3.65%
Fidelity Series Value Discovery Fund 2.62%
Fidelity Series Opportunistic Insights Fund 2.43%
Fidelity Series Blue Chip Growth Fund 2.16%
Fidelity Series Small Cap Opportunities Fund 1.97%
Fidelity Series Large Cap Value Index Fund 1.34%
Fidelity Series All-Sector Equity Fund 1.21%
Fidelity Series Small Cap Discovery Fund 0.63%

Fidelity Series Commodity Strategy Fund 2.79%

Fidelity Series International Growth Fund 5.72%
Fidelity Series International Value Fund 5.31%
Fidelity Series International Small Cap Fund 1.25%
Fidelity Series Canada Fund 0.59%

Fidelity Series Emerging Markets Opportunities Fund 6.24%
Fidelity Series Emerging Markets Fund 0.66%

Fidelity Series Investment Grade Bond Fund 24.75%
Fidelity Series Long-Term Treasury Bond Index Fund 5.41%
Fidelity Series Inflation-Protected Bond Index Fund 5.50%
Fidelity Series High Income Fund 0.74%
Fidelity Series Floating Rate High Income Fund 0.14%
Fidelity Series International Credit Fund 0.07%
Fidelity Series Emerging Markets Debt Fund 0.69%
Fidelity Series Real Estate Income Fund 0.49%
Fidelity Series Government Money Market Fund 6.84%
Fidelity Series Short-Term Credit Fund 1.70%
Fidelity Cash Central Fund 0.26%

When I first became aware of Vanguard Target Retirement 2020, it was a fund-of-funds with four funds in it. They have since added a fifth. I remember thinking there was something deeply wrong, that Vanguard was taking some kind of lazy shortcut, that this was some kind of junior-grade, amateur-night fund.

Needless to say... Portfolio 1 is 100% Fidelity Freedom 2020...

Source

Image

Although the differences are small, over twelve years I don't see that Fidelity got any benefit at all from their complexity.
So I was wondering if you were doing some sleight of hand stuff. You see, I was wondering (and was correct) if you were using the Fidelity Freedom 2020 Fund (FFFDX) or the Fidelity Freedom Index 2020 Fund (FPIFX), because as I've pointed out before, they're not the same. The freedom fund is actively managed unlike the freedom index fund. And therefore the freedom 2020 fund has higher costs to manage than the Freedom Index 2020 fund. You did, in fact, use the actively managed version of the 2020 fund with fidelity. Not sure if that was intentional or not.

So I re-ran the numbers to see if the fidelity freedom index2020 fund came closer to the vanguard td 2020 fund. Sure enough, it didn't. The fidelity freedom index 2020 fund also underperformed vanguard's 2020 td fund according to portfolio visualizer (here portfolio 1 is FPIFX, not FFFDX as originally used in Nisiprius' post):

Image

source:
https://www.portfoliovisualizer.com/bac ... 0&total3=0
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

looking
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Re: many ways to go not only indexing but just indivisual stocks

Post by looking » Thu Jul 11, 2019 7:41 pm

Those multimillionaires made money investing stocks, none of them invested in the index fund in the fidelity or in the vanguard, i never heard those multimillionaires made money investing index fund.
So what i'm saying many ways to go for success in investing in the stock market.

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joe8d
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Re: Three most important elements of investment success

Post by joe8d » Thu Jul 11, 2019 7:46 pm

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
:thumbsup
All the Best, | Joe

SantaClaraSurfer
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Re: Three most important elements of investment success

Post by SantaClaraSurfer » Thu Jul 11, 2019 8:58 pm

Agreed.

Number 1 is most of the ballgame. (We just downsized our vacation to keep to this goal. We will still have a blast!)

Number 2 can be counterintuitive (esp. maxing 401(k) and living on net pay) but is most of the rest of the ballgame.

Number 3 has less impact on ultimate outcomes, in my view, but has a vital role to play in dealing with challenges. Having a solid plan, keeping it simple, makes it easier to stay the course. Doing 1 & 2 can be undermined if you can't stick to it.

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Re: Three most important elements of investment success

Post by livesoft » Thu Jul 11, 2019 9:16 pm

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.
Thank goodness we can get out of the repetitive grind and do anything we want with our investing once we are wealthy. :)
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heyyou
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Re: Three most important elements of investment success

Post by heyyou » Fri Jul 12, 2019 12:50 am

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.
Wealthy was not my goal, I only wanted a comfortable retirement. Note that saving a noticeable amount of your income for more than two decades, conditions you to living on less than those who spend all of a similar sized, or larger income. DW and I were able to retire early when my pension credits reached our post-savings spending level. That is far from wealthy, we just no longer needed to have jobs, in order to fund our conservative living expenses i.e. in 2008-2009.

naha66
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Re: Three most important elements of investment success

Post by naha66 » Fri Jul 12, 2019 1:31 am

DaftInvestor wrote:
Thu Jul 11, 2019 10:10 am
The biggest element to my investment success is what I would think of as rule #0 to be inserted in front of 1 through 3:

#0) Maximize your salary/income to your highest ability so you have more money to invest.

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.
Says who,what's wealthy to you is not the same for me. They are plenty of lower middle class earners who consider themselves wealthy with between 500k and 1 millon in net worth at retirement, not everybody lives in a HCOL area.

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Re: Three most important elements of investment success

Post by RadAudit » Fri Jul 12, 2019 5:49 am

looking wrote:
Thu Jul 11, 2019 7:41 pm
Those multimillionaires made money investing stocks, none of them invested in the index fund in the fidelity or in the vanguard, i never heard those multimillionaires made money investing index fund.
naha66 wrote:
Fri Jul 12, 2019 1:31 am
They are plenty of lower middle class earners who consider themselves wealthy with between 500k and 1 millon in net worth at retirement, not everybody lives in a HCOL area.
Different people. Different goals.

My goal wasn't "wealth", per se. My goal was "enough." Simplicity and index funds were appropriate tools for getting to enough. Just hoping that "enough" is really enough. Maybe I should of erred on the high side of that estimate; but, time has a way of answering that question. So, we'll see. But, if I come up short - for whatever reason - index funds won't be reason for failure.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

DaftInvestor
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Re: Three most important elements of investment success

Post by DaftInvestor » Fri Jul 12, 2019 6:13 am

naha66 wrote:
Fri Jul 12, 2019 1:31 am
DaftInvestor wrote:
Thu Jul 11, 2019 10:10 am
The biggest element to my investment success is what I would think of as rule #0 to be inserted in front of 1 through 3:

#0) Maximize your salary/income to your highest ability so you have more money to invest.

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.
Says who,what's wealthy to you is not the same for me. They are plenty of lower middle class earners who consider themselves wealthy with between 500k and 1 millon in net worth at retirement, not everybody lives in a HCOL area.
Sure - its all relative.
I was keying in on the textbook definiton of wealthy:
someone who has accumulated substantial wealth relative to others in their society or reference group
You can't deny that even in a LCOL area its easier to build wealth if your income is on the upper end for the area you live in. Now if your goals are comfort/lifestyle/work-life-balance and wealth plays a lessor factor in these goals for you there is certainly nothing wrong with that.

Ferdinand2014
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Re: Three most important elements of investment success

Post by Ferdinand2014 » Fri Jul 12, 2019 6:37 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
Complexity is the mother of simplicity. The more I read on Bogleheads about the optimal blend of 37 different factors in a portfolio, the more I'm reminded that none of that matters to your success. The three key elements of investment success are:

1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.

Repeat 1-3 until wealthy.

Thank you very much.

Rick Ferri
A common trait of exceptionally intellectually gifted individuals is to be able to take a complex subject and make it simple to understand to an average person. Bogle, Buffett and Swensen come to mind. They also advocate simplicity in portfolio design.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

MathIsMyWayr
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Re: Three most important elements of investment success

Post by MathIsMyWayr » Fri Jul 12, 2019 6:52 am

Rick Ferri wrote:
Thu Jul 11, 2019 7:35 am
1) Spend below your means and save the excess.
2) Take full advantage of tax savings by using tax-deferred and tax-free accounts.
3) Invest in a very simple portfolio of broad market index funds using an allocation you can stick with.
+1. 1) and 2) may be readily proved.
All the fancy voodoo arguments, terminologies, and pseudo math are created all the time to dispute or improve 3) with utter failure.

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dwickenh
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Re: Three most important elements of investment success

Post by dwickenh » Fri Jul 12, 2019 7:45 am

RJC wrote:
Thu Jul 11, 2019 8:04 am
This is a great reminder especially after reading all those US/INTL threads.
+1
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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dwickenh
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Re: Three most important elements of investment success

Post by dwickenh » Fri Jul 12, 2019 7:54 am

DaftInvestor wrote:
Thu Jul 11, 2019 10:10 am
The biggest element to my investment success is what I would think of as rule #0 to be inserted in front of 1 through 3:

#0) Maximize your salary/income to your highest ability so you have more money to invest.

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.
I disagree. Wealth is relative to expenses. I did not maximize my salary/income to my highest ability(time constraints).
I spent ample time with my spouse and 4 children while striking a balance between career/income and home life.
I now have 40 times yearly expenses covered with investments at the age of 64 and 4 great children on their own.
That is wealthy to me, but may not impress those looking at numbers only.

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

KlangFool
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Re: Three most important elements of investment success

Post by KlangFool » Fri Jul 12, 2019 8:09 am

DaftInvestor wrote:
Thu Jul 11, 2019 10:10 am
The biggest element to my investment success is what I would think of as rule #0 to be inserted in front of 1 through 3:

#0) Maximize your salary/income to your highest ability so you have more money to invest.

If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. (Very little excess to save)
If you choose a job/career that makes a high salary - you can make lots of mistakes before you implement rules 1 through 3 and still become very wealthy.
DaftInvestor,

<< If you choose a job/career that makes little money you can follow 1 through 3 to your hearts content and never be wealthy. >>

I disagreed.

1) Coming from a culture/country where the average gross saving rate 30+%, income is never an obstacle to saving.

2) Many of my family members are FI and millionaires. Not all of them have a high income.

3) In fact, in my opinion, besides not helpful, this is harmful. Many people complained that they could not save because their income is not high enough. This is true regardless of their income level. Average American gross saving rate is less than 5%. As per my observation, the low saving rate is consistent across all income level.

KlangFool

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