2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

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simplesauce
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2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by simplesauce »

The 2020 Edition of "A Random Walk Down Wall Street" has been released. This book was (and still is) brilliant and I value it immensely. But I thought it would be interesting to compare it to some of the previous editions, given that Dr. Malkiel's advice continues to fluctuate (or evolve) for investors.

A Specific Index-Fund Portfolio for Aging Baby Boomers

2007 edition:
34% - Total US Stock Market
8.5% - Developed International Index
7.5% - Emerging Markets Index
12.5% - REIT Index

32.5% - Total Bond Market
5% - Cash


2015 & 2020 editions:
27% - Total US Stock Market
14% - Developed International Index
14% - Emerging Markets Index
12.5% - REIT Index

Replaced Total Bond Market with:
12.5% - Dividend Growth Stock Fund
7.5% - Emerging Market Bonds
7.5% - Corporate Bonds (Intermediate or Long)
5% - Cash


On Smart Beta
2007 edition: - "While all of these strategies have some merit, some more than others, not one is able consistently to penetrate the veil of unpredictability cloaking the market"..."whatever patterns or ex post irrationalities have existed are unlikely to persist and will not provide investors with a method to obtain extraordinary returns."
2015 edition: - "This chapter shows why "smart beta" flunks the safety test, and why it is not as smart as it claims to be. This chapter concludes that "smart beta" is not a smart way to go for the individual investor, and it argues that the tried-and-true approach---investing in low-cost, broad-based, capitalization-weighted index funds---is still the best way to build an investment portfolio."
2020 edition: - "Smart beta investing with single-factor products has not turned out to be smart investing"..."Multifactor "smart beta" funds appear to have produced better results by taking advantage of the low or negative correlations between the factors. Especially if they can be obtained with low expense ratios, they could supplement a broad-based core index portfolio"..."And if you do want to add additional risk factors in the pursuit of extra return, I recommend a low-expense multifactor offering rather than a fund concentrating on one risk factor."

On Emerging Markets
2007 edition: - No emphasis.
2015 & 2020 editions:- "The emerging markets of the world (China, India and Brazil) have been growing much faster than the developed economies. I suggest that a substantial part of every portfolio be invested in emerging markets."

On "Bond Substitutes" (using emerging markets bonds and high dividend-paying stocks)
2007 edition: - No mention.
2015 & 2020 editions: - "Extremely low interest rates present a daunting challenge for bond investors. All the developed countries of the world are burdened with excessive amounts of debt"..."We have seen this movie before. At the end of World War II, the United States deliberately kept interest rates at very low levels to help service the debt that had accumulated during the war. By doing so, the United States reduced its debt-to-GDP ratio from 122 percent in 1946 to 33 percent in 1980. But it was achieved at the expense of bondholders. This is what is meant by the term "financial repression"..."During periods of financial repression the standard recommendations regarding bonds need to be fine-tuned and a partial substitution of stocks for bonds in that part of the portfolio designed for lower risk may be appropriate.”

On China
2007 edition: - No recommendation.
2015 edition: - "One adjustment that I make in my own indexed portfolio is to overweight China relative to its weight in the world index benchmark. I do so because I believe that China gets too low a weight relative to its economic importance." (He recommended 3 ETFs including YAO, HAO, and TAO.) "As a result (of "float" weighting) China gets only about 2 percent of the weight in the world indexes, whereas, adjusted for purchasing-power parity, China's GDP is about 13 percent of the world's GDP and is growing rapidly. Hence, I believe that investors need to put more China into their portfolios than is available in general world or emerging market index funds.”
2020 edition: - No recommendation.

On Closed-End Funds ("The Malkiel Step")
2007 & 2015 edition: - "I like to buy shares in a special type of mutual fund called a closed-end fund when they are available at attractive discounts"..."When discounts of 10 percent or more exist, it is time to open your wallet to closed-end funds." (He offers recommendations for emerging-market and municipal bond closed-end funds.)
2020 edition: - No mention.

(I propose the question to Bogleheads: Do portfolios need to be adjusted this frequently? Is the continuous research compelling or necessary? Or can the “classic” indexed portfolios still be a fine option for the future?)
Last edited by simplesauce on Sat May 09, 2020 10:31 am, edited 27 times in total.
Shortsellforfun
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by Shortsellforfun »

Great summary of updates. Happy to see not a lot of changes - at this point, passive indexing is nearly King (it wasn't in at First Edition).

I read RWDWS in 1990s and had great influence on me and family. It appeals to logic and rationality which are typically in short supply when considering investments (not the at the Bogleheads tho!). I remember and acted on the CEF advice -- not a good return on my time overall; probably all arbitraged out by computers now.

Now, who's going to write a Random Walk Down Epidemiology Street? Nisiprius? :beer
BH+
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by BH+ »

simplesauce wrote: Thu May 07, 2020 11:57 pm
On "Bond Substitutes (using emerging markets bonds and high dividend-paying stocks)
2007 edition: - No mention.
2015 & 2020 editions: - "Extremely low interest rates present a daunting challenge for bond investors. All the developed countries of the world are burdened with excessive amounts of debt"..."We have seen this movie before. At the end of World War II, the United States deliberately kept interest rates at very low levels to help service the debt that had accumulated during the war. By doing so, the United States reduced its debt-to-GDP ratio from 122 percent in 1946 to 33 percent in 1980. But it was achieved at the expense of bondholders. This is what is meant by the term "financial repression"..."During periods of financial repression the standard recommendations regarding bonds need to be fine-tuned and a partial substitution of stocks for bonds in that part of the portfolio designed for lower risk may be appropriate."
I read the book many years ago and found it an interesting read and very informative.

I would however vehemently disagree that dividend stocks could function as a replacement for bonds, regardless of interest or dividend rates.
klaus14
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by klaus14 »

simplesauce wrote: Thu May 07, 2020 11:57 pm On "Bond Substitutes" (using emerging markets bonds and high dividend-paying stocks)
2007 edition: - No mention.
2015 & 2020 editions: - "Extremely low interest rates present a daunting challenge for bond investors. All the developed countries of the world are burdened with excessive amounts of debt"..."We have seen this movie before. At the end of World War II, the United States deliberately kept interest rates at very low levels to help service the debt that had accumulated during the war. By doing so, the United States reduced its debt-to-GDP ratio from 122 percent in 1946 to 33 percent in 1980. But it was achieved at the expense of bondholders. This is what is meant by the term "financial repression"..."During periods of financial repression the standard recommendations regarding bonds need to be fine-tuned and a partial substitution of stocks for bonds in that part of the portfolio designed for lower risk may be appropriate."
This is interesting. However, both EM Bonds and divided stocks crashed in March due to coronavirus. Whereas, treasuries did fine. So they are not really substitute.
Main substitute i am using is gold (10%), and I/EE bonds as much as i can.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by mrspock »

This reaffirms my AA decision to go 70/30 in retirement vs. 60/40. I'd rather have a bit more volatility vs. risk that interest rates stay low for a long period of time. 60/40 will definitely be less volatile.... but if your lunch gets eaten by inflation then what you've got is a lower vol portfolio which shrinking before your eyes each year. Doesn't seem like a good trade off IMO.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

Shortsellforfun wrote: Fri May 08, 2020 12:07 am Great summary of updates. Happy to see not a lot of changes - at this point, passive indexing is nearly King (it wasn't in at First Edition).

I read RWDWS in 1990s and had great influence on me and family. It appeals to logic and rationality which are typically in short supply when considering investments (not the at the Bogleheads tho!). I remember and acted on the CEF advice -- not a good return on my time overall; probably all arbitraged out by computers now.

Now, who's going to write a Random Walk Down Epidemiology Street? Nisiprius? :beer
Can you tell me more about the closed-end fund experience? Dr. Malkiel recommends a China fund called TDF since it is trading at a discount of more than 15%. The expense ratios on closed-end funds are sometimes very high. What fund did you invest in?
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by bottlecap »

Thanks for the updates, that's interesting. It might spur a little more research on my part.

It is a great book.

JT
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by birdog »

mrspock wrote: Fri May 08, 2020 1:51 am This reaffirms my AA decision to go 70/30 in retirement vs. 60/40. I'd rather have a bit more volatility vs. risk that interest rates stay low for a long period of time. 60/40 will definitely be less volatile.... but if your lunch gets eaten by inflation then what you've got is a lower vol portfolio which shrinking before your eyes each year. Doesn't seem like a good trade off IMO.
My thoughts as well. My current plan has my asset allocation trajectory ratcheting down to 75-25 for retirement. I understand there is extra risk by holding a stock heavy portfolio but I also think a bond heavy portfolio comes with its own set of risks (interest rate risk, risk of negative real returns, risk of depleting portfolio). I like the inflation protection that equities give and since I’ll be keeping a certain number of years of expenses in bonds I feel that further allows me to select a more aggressive portfolio.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by petulant »

While I respect Dr. Malkiel's efforts to educate investors, I am still very skeptical of this idea that investment decisions should be made on the basis that stock allocation and GDP growth rates or shares are directly connected. Yes, emerging markets see economic growth, but that doesn't mean the equities of companies located in these markets are good investment options. GDP growth means more economic activity, which is consistent with labor force and population growth, productivity growth, and new capital invested. Whether those items lead to outsized profits is an entirely different question. Further, even if it can lead to more profits, there's an issue with whether American investors can actually access those cost-effectively. With weaker investor protections and worse governance in many emerging markets, this is not clear to me. Lastly, to the extent Americans can participate in profit growth through exposure to emerging markets, the same exposure is available through equities of U.S. and other developed countries. Many of the factories, distribution operations, and technology systems across the world are owned or partly owned by developed county stalwarts like Nestle, Toyota, Coca Cola, or Alphabet. I just don't see a good argument that investors should overweight emerging markets.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by midareff »

Thanks for taking the time to lay that out simplesauce. As far as changing portfolios.. from the perspective of a retiree there are things that are some changes that seem to be forced.... or at least altered with time since 2007. With the ten year treasury now at .72% yield and an Ally Bank savings account at 1.5%, and 12 month rolling CPI-U at 2.0%, how much do you really want to keep in treasuries? or the Total Bond Market. How much international, be it China or whatever do you really want? China's markets, financial data and much else is too murky for me to want to invest in and I can't seem to warm up to investing significant money in international for the occasional slight edge vs the persistent significant under performance.

No doubt treasuries have done spectacularly so far this year, by the end of the year will corporates have overtaken them? Again, at .72% yield and much higher rates available at banks and credit unions for saving accounts and CDs are treasuries attracting the smart money at those rates? or just the bulk dollars that have to go risklessly somewhere?

Final thought... it's tough to keep selling the same book unless you don't revise it from time to time.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

midareff wrote: Fri May 08, 2020 6:58 am Thanks for taking the time to lay that out simplesauce. As far as changing portfolios.. from the perspective of a retiree there are things that are some changes that seem to be forced.... or at least altered with time since 2007. With the ten year treasury now at .72% yield and an Ally Bank savings account at 1.5%, and 12 month rolling CPI-U at 2.0%, how much do you really want to keep in treasuries? or the Total Bond Market. How much international, be it China or whatever do you really want? China's markets, financial data and much else is too murky for me to want to invest in and I can't seem to warm up to investing significant money in international for the occasional slight edge vs the persistent significant under performance.

No doubt treasuries have done spectacularly so far this year, by the end of the year will corporates have overtaken them? Again, at .72% yield and much higher rates available at banks and credit unions for saving accounts and CDs are treasuries attracting the smart money at those rates? or just the bulk dollars that have to go risklessly somewhere?

Final thought... it's tough to keep selling the same book unless you don't revise it from time to time.
My pleasure. And yes, it is interesting to consider the book is being revised for the sake of sales. But I don’t know Dr. Malkiel well enough to contemplate his motives. Nonetheless, his writings make clear that he does not prefer plain vanilla portfolios anymore.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by wolf359 »

klaus14 wrote: Fri May 08, 2020 12:54 am
simplesauce wrote: Thu May 07, 2020 11:57 pm On "Bond Substitutes" (using emerging markets bonds and high dividend-paying stocks)
2007 edition: - No mention.
2015 & 2020 editions: - "Extremely low interest rates present a daunting challenge for bond investors. All the developed countries of the world are burdened with excessive amounts of debt"..."We have seen this movie before. At the end of World War II, the United States deliberately kept interest rates at very low levels to help service the debt that had accumulated during the war. By doing so, the United States reduced its debt-to-GDP ratio from 122 percent in 1946 to 33 percent in 1980. But it was achieved at the expense of bondholders. This is what is meant by the term "financial repression"..."During periods of financial repression the standard recommendations regarding bonds need to be fine-tuned and a partial substitution of stocks for bonds in that part of the portfolio designed for lower risk may be appropriate."
This is interesting. However, both EM Bonds and divided stocks crashed in March due to coronavirus. Whereas, treasuries did fine. So they are not really substitute.
Main substitute i am using is gold (10%), and I/EE bonds as much as i can.
Well, do you want income, or downside protection? Bonds used to provide both, but in the past decade or more, they haven't.

I've come to the conclusion that I want downside protection, not income, and had to quantify exactly how much I want it (given that holding it pays little.)

I hold an emergency fund (cash) as well, even though I also advocate using your taxable account as an extended emergency fund. It's just that I have higher quality holdings (treasuries and FDIC insured high yield savings accounts) so I can hold the minimum necessary to meet my needs, then throw the rest into equities.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by midareff »

simplesauce wrote: Fri May 08, 2020 7:28 am
midareff wrote: Fri May 08, 2020 6:58 am Thanks for taking the time to lay that out simplesauce. As far as changing portfolios.. from the perspective of a retiree there are things that are some changes that seem to be forced.... or at least altered with time since 2007. With the ten year treasury now at .72% yield and an Ally Bank savings account at 1.5%, and 12 month rolling CPI-U at 2.0%, how much do you really want to keep in treasuries? or the Total Bond Market. How much international, be it China or whatever do you really want? China's markets, financial data and much else is too murky for me to want to invest in and I can't seem to warm up to investing significant money in international for the occasional slight edge vs the persistent significant under performance.

No doubt treasuries have done spectacularly so far this year, by the end of the year will corporates have overtaken them? Again, at .72% yield and much higher rates available at banks and credit unions for saving accounts and CDs are treasuries attracting the smart money at those rates? or just the bulk dollars that have to go risklessly somewhere?

Final thought... it's tough to keep selling the same book unless you don't revise it from time to time.
My pleasure. And yes, it is interesting to consider the book is being revised for the sake of sales. But I don’t know Dr. Malkiel well enough to contemplate his motives. Nonetheless, his writings make clear that he does not prefer plain vanilla portfolios anymore.
Methinks it's tough to visualize a 30 year retirement from a "traditional" 60/40 portfolio with a 60/40 US/International equity split and IT Treasuries.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by firebirdparts »

Shortsellforfun wrote: Fri May 08, 2020 12:07 am Now, who's going to write a Random Walk Down Epidemiology Street? Nisiprius? :beer
I'm reminded of Patrick the Starfish and his story about the ugly barnacle.
A fool and your money are soon partners
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

Shortsellforfun wrote: Fri May 08, 2020 12:07 am Great summary of updates. Happy to see not a lot of changes - at this point, passive indexing is nearly King (it wasn't in at First Edition).

I read RWDWS in 1990s and had great influence on me and family. It appeals to logic and rationality which are typically in short supply when considering investments (not the at the Bogleheads tho!). I remember and acted on the CEF advice -- not a good return on my time overall; probably all arbitraged out by computers now.

Now, who's going to write a Random Walk Down Epidemiology Street? Nisiprius? :beer
I would very much like to hear Nisiprius' feedback! He has written about the changing advice in this book before.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by streetsahead »

For someone who hasn't read this book before but interested would you recommend going with the latest edition?
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by Bitzer »

The longer I invest, the more I like the "set it and forget it" three fund type strategy. I realize that things (investing conditions) change over time, but I think there can be some performance chasing involved too.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

streetsahead wrote: Fri May 08, 2020 9:33 am For someone who hasn't read this book before but interested would you recommend going with the latest edition?
It’s a great book and it introduced me to passive investing. It’s entertaining and very well written. But it’s a tough call on which edition to read. It depends on you. If you are able to take the overall message and keep it simple, then the 2020 version is fine.

But if you are going to be looking to follow his every piece of advice, the 2015 or 2020 versions can be challenging because he discusses investing in China, some smart-beta, corporate bonds, emerging markets bonds, dividend stocks, etc. His portfolios have become more complicated.

And I am asking the forum, as Dr. Malkiel presents new research, is it necessary to adjust the original, simple portfolios, to accommodate the recent market environment as he suggests?
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by zonto »

As another data point, in the 2012 version (page 378) Malkiel lists the following portfolio for "Age: Mid-Fifties" (which I assume corresponds to those in the original post):
  • 55% stocks (one-half in U.S. stocks with good representation of smaller growth companies; one-half in international stocks, including emerging markets)
  • 12.5% real estate (REITs)
  • 27.5% bonds (zero-coupon Treasury bonds, no-load high-grade bond fund, some Treasury inflation protection securities; if bonds are to be held outside of tax-favored retirement plans, tax-exempt bonds should be used)
  • 5% cash (money market fund or short-term bond fund (average maturity 1 to 1.5 years)
"For real-world portfolios, the main impact of diversification is to narrow the dispersion of outcomes. [T]he most important impact is to make the worst outcomes less bad." (Vineviz)
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

zonto wrote: Fri May 08, 2020 11:22 am As another data point, in the 2012 version (page 378) Malkiel lists the following portfolio for "Age: Mid-Fifties" (which I assume corresponds to those in the original post):
  • 55% stocks (one-half in U.S. stocks with good representation of smaller growth companies; one-half in international stocks, including emerging markets)
  • 12.5% real estate (REITs)
  • 27.5% bonds (zero-coupon Treasury bonds, no-load high-grade bond fund, some Treasury inflation protection securities; if bonds are to be held outside of tax-favored retirement plans, tax-exempt bonds should be used)
  • 5% cash (money market fund or short-term bond fund (average maturity 1 to 1.5 years)
Thanks! I don’t have the 2012 version but it looks like he still had not yet discarded Total Bond and adopted the substitute bond portfolio. That must have happened in 2015.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by tibbitts »

simplesauce wrote: Fri May 08, 2020 11:11 am
streetsahead wrote: Fri May 08, 2020 9:33 am For someone who hasn't read this book before but interested would you recommend going with the latest edition?
It’s a great book and it introduced me to passive investing. It’s entertaining and very well written. But it’s a tough call on which edition to read. It depends on you. If you are able to take the overall message and keep it simple, then the 2020 version is fine.

But if you are going to be looking to follow his every piece of advice, the 2015 or 2020 versions can be challenging because he discusses investing in China, some smart-beta, corporate bonds, emerging markets bonds, dividend stocks, etc. His portfolios have become more complicated.

And I am asking the forum, as Dr. Malkiel presents new research, is it necessary to adjust the original, simple portfolios, to accommodate the recent market environment as he suggests?
The answer is yes, if you want to follow Malkiel - there's really no choice. If you don't then you have to make up your own mind. Most Bogleheads probably no longer agree with or endorse his thinking.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by simplesauce »

tibbitts wrote: Fri May 08, 2020 1:13 pm
simplesauce wrote: Fri May 08, 2020 11:11 am
streetsahead wrote: Fri May 08, 2020 9:33 am For someone who hasn't read this book before but interested would you recommend going with the latest edition?
It’s a great book and it introduced me to passive investing. It’s entertaining and very well written. But it’s a tough call on which edition to read. It depends on you. If you are able to take the overall message and keep it simple, then the 2020 version is fine.

But if you are going to be looking to follow his every piece of advice, the 2015 or 2020 versions can be challenging because he discusses investing in China, some smart-beta, corporate bonds, emerging markets bonds, dividend stocks, etc. His portfolios have become more complicated.

And I am asking the forum, as Dr. Malkiel presents new research, is it necessary to adjust the original, simple portfolios, to accommodate the recent market environment as he suggests?
The answer is yes, if you want to follow Malkiel - there's really no choice. If you don't then you have to make up your own mind. Most Bogleheads probably no longer agree with or endorse his thinking.
I'd agree. I have trouble following "one" expert, and I've submitted to trusting Vanguard's expertise with asset allocation by using their Target Date Funds.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by Ferdinand2014 »

I am happy with and will continue to invest all of my money in a low cost S&P 500 index fund for all of my equity investments. I fail to see the need to do anything different.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by birdog »

Ferdinand2014 wrote: Fri May 08, 2020 5:50 pm I am happy with and will continue to invest all of my money in a low cost S&P 500 index fund for all of my equity investments. I fail to see the need to do anything different.
Agree. Simplicity always seems to win out in the long run in my opinion.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by BigJohn »

This is actually a bit disappointing to me. This book, likely the 07 or 12 version, was one of the readings that created my paradigm shift to simple index investing. I personally wouldn’t touch his current recommendations with a 10 foot pole, especially replace of safe bonds with riskier assets and smart beta. It’s unclear to me what “research” in the last eight years has resulted in these fundamental shifts. Is there really any or is this just recency bias and yield chasing disguised as research?
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by protagonist »

simplesauce wrote: Fri May 08, 2020 9:25 am
Shortsellforfun wrote: Fri May 08, 2020 12:07 am Great summary of updates. Happy to see not a lot of changes - at this point, passive indexing is nearly King (it wasn't in at First Edition).

I read RWDWS in 1990s and had great influence on me and family. It appeals to logic and rationality which are typically in short supply when considering investments (not the at the Bogleheads tho!). I remember and acted on the CEF advice -- not a good return on my time overall; probably all arbitraged out by computers now.

Now, who's going to write a Random Walk Down Epidemiology Street? Nisiprius? :beer
I would very much like to hear Nisiprius' feedback! He has written about the changing advice in this book before.
I think this post by Bigskyguy in response to another "what to do" post in another thread says it all well:

"bigskyguy wrote: ↑Sat May 09, 2020 11:31 am
I don't suspect that you are going to get any guidance that will prove satisfactory, because there are no clear parallels that combine a heavily indebted economy on a rapid and prolonged rise, suddenly punctuated by a global pandemic with a highly infective virus that does not have either a proven preventative (vaccine) or treatment, and requires us to curtail many activities upon which our economy relies. We are, in many ways, at the mercy of forces that are for now, and for an uncertain future, completely out of our individual control, and for which our prior experiences can provide precious little guidance. A lot of uncertainties. Not a good scenario for making informed decision making."
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by 1789 »

Ferdinand2014 wrote: Fri May 08, 2020 5:50 pm I am happy with and will continue to invest all of my money in a low cost S&P 500 index fund for all of my equity investments. I fail to see the need to do anything different.
Excellent. I love the book but i see a lot of different funds that are recommended which i think is not a must to have.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by 1789 »

streetsahead wrote: Fri May 08, 2020 9:33 am For someone who hasn't read this book before but interested would you recommend going with the latest edition?
Latest edition is good as it talks about bitcoin madness in the section where bubbles discussed. I think its important to understand that.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Thales »

I have the last three copies of this book and ignored his specific allocation particularly with regards to property. The fixed income side did not protect the portfolio much with its equity like performance. I was really more interested in the equity, fixed income and cash allocations in retirement.

When the book came out at our local university bookshop there was a big queue of lecturers buying it.

After the virus market collapse I am staying with developed markets only and fixed income 50/50 using two ETFs. There seems little point putting more than 50% in equities as the return risk benefit tails off.

I had been playing with a swedroe approach. The factor funds I tried did not really yield much benefit and seemed to cancel each other out. Value and small crashed. Property did the same. True fixed income worked.

So it is a 60/40 vanguard fund for our longer term investments and 50/40/10 equity/fixed income/ cash for my pension income and the cash i will use for income and hedging another crash with an inverse tracker.

Does anybody else think that these 25% crashes in the S&P are becoming more frequent with three out of the last five over fifty years occurring in the last twenty years. Thinking QE is responsible and the fed is in a mess now and cannot get out of this.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by willthrill81 »

klaus14 wrote: Fri May 08, 2020 12:54 am
simplesauce wrote: Thu May 07, 2020 11:57 pm On "Bond Substitutes" (using emerging markets bonds and high dividend-paying stocks)
2007 edition: - No mention.
2015 & 2020 editions: - "Extremely low interest rates present a daunting challenge for bond investors. All the developed countries of the world are burdened with excessive amounts of debt"..."We have seen this movie before. At the end of World War II, the United States deliberately kept interest rates at very low levels to help service the debt that had accumulated during the war. By doing so, the United States reduced its debt-to-GDP ratio from 122 percent in 1946 to 33 percent in 1980. But it was achieved at the expense of bondholders. This is what is meant by the term "financial repression"..."During periods of financial repression the standard recommendations regarding bonds need to be fine-tuned and a partial substitution of stocks for bonds in that part of the portfolio designed for lower risk may be appropriate."
This is interesting. However, both EM Bonds and divided stocks crashed in March due to coronavirus. Whereas, treasuries did fine. So they are not really substitute.
Main substitute i am using is gold (10%), and I/EE bonds as much as i can.
I agree that Treasuries have been much better for diversification than EM bonds, corporate bonds, and dividend stocks. I agree that I bonds especially are a good deal right now, and a small allocation to gold seems very reasonable. Even Karsten from Early Retirement Now has conceded that a small allocation to gold would have helped investors in rough historic scenarios.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by topper1296 »

Thank you for compiling this information. I recently picked up the new edition and will starting reading it shortly.

On a side note, a friend of mine recently sent me an original edition he found from 1973 and the price listed on it says $7.95.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Eagle33 »

topper1296 wrote: Sat May 09, 2020 12:19 pm Thank you for compiling this information. I recently picked up the new edition and will starting reading it shortly.

On a side note, a friend of mine recently sent me an original edition he found from 1973 and the price listed on it says $7.95.
If we adjust that for inflation it becomes $46.22 in 2020 dollars.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by BalancedJCB19 »

Very interesting and good job on showing the differences.

I'll stick what Jack told me and said it until the end of his life. A simple balanced fund for most investors will be just fine. If it's good enough for Jack's Grandchildren, it's good enough for me.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by nisiprius »

See also Walking Down Wall Street in 1973.

I think the book has been misinterpreted a bit. A Random Walk Down Wall Street was intended as a punning way to suggest a ramble through assorted investing topics. However, it was one of the earliest books to talk about Fama, the idea that stock prices are a random walk, and the topic of index funds (which didn't exist yet).
What we need is a no-load, minimum management-fee mutual fund that simply buys the hundreds of stocks making up the broad stock-market averages and does no trading from security to security in an attempt to catch the winners. Whenever below-average performance on the part of any mutual fund is noticed, fund spokesmen are quick to point out "You can't buy the averages." It's time the public could.
The book has therefore been thought of as being more single-mindedly centered on indexing than it ever was.

The closest thing to a contemporary book review I could find was "Research vs. Rhesus: Is It Smart For You to Investigate, Then Invest?", Vartanig G. Vartan, New York Times, Oct 14, 1973, p. 181. In part:
...a new book on investing, "A Random Walk Down Wall Street" ... struck a responsive chord almost from the opening page: "In essence, the random walk theory espouses the belief that future stock prices cannot be predicted. It says that a blindfolded monkey throwing darts at the newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts." He was talking straight to me, this author, Burton G. Malkiel.... I read on for a few chapters, savoring the putdown of both technical stock analysis and fundamental analysis, softly murmuring "Amen."...

It turned out that halfway through--after systematically destroying every investment approach known to man--the author began to hedge. On Page 172 I read of his "only lukewarm endorsement of the random walk" and my heart sank....

Toward the end of the book there was a discussion of the "Malkiel Method" for picking individual stocks... for what its worth, the Professor offered several rules--with illustrations taken from his own portfolio stocks:
  • Confine purchases to companies that appear able to sustain above average earnings growth for at least five years.
  • Never pay more for a stock than can reasonably be justified by a firm foundation of value.
  • Search for stocks "whose stories of anticipated growth are ones on which investors can build castles in the air."
  • Trade as little as possible. Generally speaking, hang on to the winners and kick out the losers.
What troubled me about these ground rules was that they seemed to involve a much finer talent for prediction than I had in me.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by abuss368 »

Ferdinand2014 wrote: Fri May 08, 2020 5:50 pm I am happy with and will continue to invest all of my money in a low cost S&P 500 index fund for all of my equity investments. I fail to see the need to do anything different.
Agree as we simplified to total stock and total bond.

Simplicity wins! Thank you Jack Bogle.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by abuss368 »

He used to be a board member at Vanguard!
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by simplesauce »

nisiprius wrote: Sat May 09, 2020 7:27 pm See also Walking Down Wall Street in 1973.

I think the book has been misinterpreted a bit. A Random Walk Down Wall Street was intended as a punning way to suggest a ramble through assorted investing topics. However, it was one of the earliest books to talk about Fama, the idea that stock prices are a random walk, and the topic of index funds (which didn't exist yet).
What we need is a no-load, minimum management-fee mutual fund that simply buys the hundreds of stocks making up the broad stock-market averages and does no trading from security to security in an attempt to catch the winners. Whenever below-average performance on the part of any mutual fund is noticed, fund spokesmen are quick to point out "You can't buy the averages." It's time the public could.
The book has therefore been thought of as being more single-mindedly centered on indexing than it ever was.

The closest thing to a contemporary book review I could find was "Research vs. Rhesus: Is It Smart For You to Investigate, Then Invest?", Vartanig G. Vartan, New York Times, Oct 14, 1973, p. 181. In part:
...a new book on investing, "A Random Walk Down Wall Street" ... struck a responsive chord almost from the opening page: "In essence, the random walk theory espouses the belief that future stock prices cannot be predicted. It says that a blindfolded monkey throwing darts at the newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts." He was talking straight to me, this author, Burton G. Malkiel.... I read on for a few chapters, savoring the putdown of both technical stock analysis and fundamental analysis, softly murmuring "Amen."...

It turned out that halfway through--after systematically destroying every investment approach known to man--the author began to hedge. On Page 172 I read of his "only lukewarm endorsement of the random walk" and my heart sank....

Toward the end of the book there was a discussion of the "Malkiel Method" for picking individual stocks... for what its worth, the Professor offered several rules--with illustrations taken from his own portfolio stocks:
  • Confine purchases to companies that appear able to sustain above average earnings growth for at least five years.
  • Never pay more for a stock than can reasonably be justified by a firm foundation of value.
  • Search for stocks "whose stories of anticipated growth are ones on which investors can build castles in the air."
  • Trade as little as possible. Generally speaking, hang on to the winners and kick out the losers.
What troubled me about these ground rules was that they seemed to involve a much finer talent for prediction than I had in me.
Wow, I must say I had never thought of it this way. Yet it makes so much sense. Your realization of what this book is, is a game changer for me. The book really isn’t a guide to asset allocation or index investing. It’s a collection of random investing topics and histories. Malkiel himself has a fairly complicated portfolio and makes plenty of bets on emerging markets, China, closed-end funds, and more. I think for the individual investor looking for a simple way to invest their retirement funds, this book is probably not the guide to follow. I myself have been overwhelmed by it with each new edition. I still do want to ask the question however; does the “new” research Malkiel introduces with each edition warrant consideration? His positions continue to evolve. His 2020 edition suggests the usefulness and potential benefit of including a multi-factor fund. Is this something we need to pay attention to? Or is the original research of “buying the market” good enough?
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Blue456 »

simplesauce wrote: Thu May 07, 2020 11:57 pm The 2020 Edition of "A Random Walk Down Wall Street" has been released. This book was (and still is) brilliant and I value it immensely. But I thought it would be interesting to compare it to some of the previous editions, given that Dr. Malkiel's advice continues to fluctuate (or evolve) for investors.

A Specific Index-Fund Portfolio for Aging Baby Boomers

2007 edition:
34% - Total US Stock Market
8.5% - Developed International Index
7.5% - Emerging Markets Index
12.5% - REIT Index

32.5% - Total Bond Market
5% - Cash


2015 & 2020 editions:
27% - Total US Stock Market
14% - Developed International Index
14% - Emerging Markets Index
12.5% - REIT Index

Replaced Total Bond Market with:
12.5% - Dividend Growth Stock Fund
7.5% - Emerging Market Bonds
7.5% - Corporate Bonds (Intermediate or Long)
5% - Cash

So only 15% allocated to fixed income that has very high correlation to equity. I wonder about his reasoning behind this and why he chose to use bonds in his portfolio instead of going 100% equity. That 5% allocation to cash is also interesting. What would be advantage of having cash as opposed to using certificates of deposits or short term treasuries. Unless of course by cash he just means liquid assets. His emerging market emphasis seems to be on par with Swensen.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Northern Flicker »

Dividend growth stocks incorporate term exposure (interest rate sensitivity) and I believe underperformed the broad market from 1966-1980. Increasing equity exposure may reduce inflation risk but converting the equity exposure from a broad index fund to dividend growth stocks may just embed a moderate amount of the term exposure and inflation risk eliminated from bonds into the stock portfolio.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by protagonist »

Blue456 wrote: Sun May 10, 2020 6:16 pm
simplesauce wrote: Thu May 07, 2020 11:57 pm The 2020 Edition of "A Random Walk Down Wall Street" has been released. This book was (and still is) brilliant and I value it immensely. But I thought it would be interesting to compare it to some of the previous editions, given that Dr. Malkiel's advice continues to fluctuate (or evolve) for investors.

A Specific Index-Fund Portfolio for Aging Baby Boomers

2007 edition:
34% - Total US Stock Market
8.5% - Developed International Index
7.5% - Emerging Markets Index
12.5% - REIT Index

32.5% - Total Bond Market
5% - Cash


2015 & 2020 editions:
27% - Total US Stock Market
14% - Developed International Index
14% - Emerging Markets Index
12.5% - REIT Index

Replaced Total Bond Market with:
12.5% - Dividend Growth Stock Fund
7.5% - Emerging Market Bonds
7.5% - Corporate Bonds (Intermediate or Long)
5% - Cash

So only 15% allocated to fixed income that has very high correlation to equity. I wonder about his reasoning behind this and why he chose to use bonds in his portfolio instead of going 100% equity. That 5% allocation to cash is also interesting. What would be advantage of having cash as opposed to using certificates of deposits or short term treasuries. Unless of course by cash he just means liquid assets. His emerging market emphasis seems to be on par with Swensen.
He never recommends CDs?

I also think that, though not diversified, a huge number of Americans have the largest amount of their assets invested in their home(s), which, even if their primary residence, and not commercial, is a real estate investment. If you have ,say, 70% of your assets in undiversifed real estate, is it really wise to put another 12.5% of what is left into REITs? That leaves the vast majority of your eggs in the real estate sector. When my FL home lost about 60-70% of its value following the 2008 crash I was really happy I was not in REITs . "The NAREIT All Equity REITs Index fell from a high of 10,256 in January 2007 to a low of 3,337, in February 2009, a cumulative loss of 67%, with the largest fall of 60% between September 2008 and February 2009".
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by grabiner »

protagonist wrote: Mon May 11, 2020 3:03 pm I also think that, though not diversified, a huge number of Americans have the largest amount of their assets invested in their home(s), which, even if their primary residence, and not commercial, is a real estate investment. If you have ,say, 70% of your assets in undiversifed real estate, is it really wise to put another 12.5% of what is left into REITs? That leaves the vast majority of your eggs in the real estate sector. When my FL home lost about 60-70% of its value following the 2008 crash I was really happy I was not in REITs.
The difference between these two situations is that a change in value of your personal residence does not usually affect your standard of living. When the real estate market crashed, your personal residence still provided you with a place to live.

The diversification is more of an issue, but it is independent of what happens to REITs. If the quality of your neighborhood declines, the value of your personal residence will decline, because it now provides you a less desirable place to live
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Northern Flicker »

grabiner wrote: Mon May 11, 2020 9:52 pm
protagonist wrote: Mon May 11, 2020 3:03 pm When my FL home lost about 60-70% of its value following the 2008 crash I was really happy I was not in REITs.
The difference between these two situations is that a change in value of your personal residence does not usually affect your standard of living. When the real estate market crashed, your personal residence still provided you with a place to live.
This often is not true. If you have a mortgage and lose your job in the downturn, you may not be able to keep the home, and the leverage would mean that some or all the home equity you have accrued will be wiped out. Having a tilt to REITs in one’s retirement portfolio was a correlated risk to this event in 2008/2009.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by palanzo »

birdog wrote: Fri May 08, 2020 6:46 am
mrspock wrote: Fri May 08, 2020 1:51 am This reaffirms my AA decision to go 70/30 in retirement vs. 60/40. I'd rather have a bit more volatility vs. risk that interest rates stay low for a long period of time. 60/40 will definitely be less volatile.... but if your lunch gets eaten by inflation then what you've got is a lower vol portfolio which shrinking before your eyes each year. Doesn't seem like a good trade off IMO.
My thoughts as well. My current plan has my asset allocation trajectory ratcheting down to 75-25 for retirement. I understand there is extra risk by holding a stock heavy portfolio but I also think a bond heavy portfolio comes with its own set of risks (interest rate risk, risk of negative real returns, risk of depleting portfolio). I like the inflation protection that equities give and since I’ll be keeping a certain number of years of expenses in bonds I feel that further allows me to select a more aggressive portfolio.
What bond funds would you use for the 25%?
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by palanzo »

midareff wrote: Fri May 08, 2020 7:38 am
simplesauce wrote: Fri May 08, 2020 7:28 am
midareff wrote: Fri May 08, 2020 6:58 am Thanks for taking the time to lay that out simplesauce. As far as changing portfolios.. from the perspective of a retiree there are things that are some changes that seem to be forced.... or at least altered with time since 2007. With the ten year treasury now at .72% yield and an Ally Bank savings account at 1.5%, and 12 month rolling CPI-U at 2.0%, how much do you really want to keep in treasuries? or the Total Bond Market. How much international, be it China or whatever do you really want? China's markets, financial data and much else is too murky for me to want to invest in and I can't seem to warm up to investing significant money in international for the occasional slight edge vs the persistent significant under performance.

No doubt treasuries have done spectacularly so far this year, by the end of the year will corporates have overtaken them? Again, at .72% yield and much higher rates available at banks and credit unions for saving accounts and CDs are treasuries attracting the smart money at those rates? or just the bulk dollars that have to go risklessly somewhere?

Final thought... it's tough to keep selling the same book unless you don't revise it from time to time.
My pleasure. And yes, it is interesting to consider the book is being revised for the sake of sales. But I don’t know Dr. Malkiel well enough to contemplate his motives. Nonetheless, his writings make clear that he does not prefer plain vanilla portfolios anymore.
Methinks it's tough to visualize a 30 year retirement from a "traditional" 60/40 portfolio with a 60/40 US/International equity split and IT Treasuries.
Maybe so but what is the alternative?
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by smitcat »

protagonist wrote: Mon May 11, 2020 3:03 pm
Blue456 wrote: Sun May 10, 2020 6:16 pm
simplesauce wrote: Thu May 07, 2020 11:57 pm The 2020 Edition of "A Random Walk Down Wall Street" has been released. This book was (and still is) brilliant and I value it immensely. But I thought it would be interesting to compare it to some of the previous editions, given that Dr. Malkiel's advice continues to fluctuate (or evolve) for investors.

A Specific Index-Fund Portfolio for Aging Baby Boomers

2007 edition:
34% - Total US Stock Market
8.5% - Developed International Index
7.5% - Emerging Markets Index
12.5% - REIT Index

32.5% - Total Bond Market
5% - Cash


2015 & 2020 editions:
27% - Total US Stock Market
14% - Developed International Index
14% - Emerging Markets Index
12.5% - REIT Index

Replaced Total Bond Market with:
12.5% - Dividend Growth Stock Fund
7.5% - Emerging Market Bonds
7.5% - Corporate Bonds (Intermediate or Long)
5% - Cash

So only 15% allocated to fixed income that has very high correlation to equity. I wonder about his reasoning behind this and why he chose to use bonds in his portfolio instead of going 100% equity. That 5% allocation to cash is also interesting. What would be advantage of having cash as opposed to using certificates of deposits or short term treasuries. Unless of course by cash he just means liquid assets. His emerging market emphasis seems to be on par with Swensen.
He never recommends CDs?

I also think that, though not diversified, a huge number of Americans have the largest amount of their assets invested in their home(s), which, even if their primary residence, and not commercial, is a real estate investment. If you have ,say, 70% of your assets in undiversifed real estate, is it really wise to put another 12.5% of what is left into REITs? That leaves the vast majority of your eggs in the real estate sector. When my FL home lost about 60-70% of its value following the 2008 crash I was really happy I was not in REITs . "The NAREIT All Equity REITs Index fell from a high of 10,256 in January 2007 to a low of 3,337, in February 2009, a cumulative loss of 67%, with the largest fall of 60% between September 2008 and February 2009".
"When my FL home lost about 60-70% of its value following the 2008 crash I was really happy I was not in REITs ."
I do not know why your Florida home would drop much more than the average but the good news is that it has risen substantially since 2008.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by Dottie57 »

Bitzer wrote: Fri May 08, 2020 10:27 am The longer I invest, the more I like the "set it and forget it" three fund type strategy. I realize that things (investing conditions) change over time, but I think there can be some performance chasing involved too.
+1. With bond interest so low, I do have to look at retirement income more. Retiring in early 2018, I believe I need to re-evaluate the percent of my portfolio I will use for income
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by midareff »

palanzo wrote: Tue Jun 23, 2020 1:33 am
midareff wrote: Fri May 08, 2020 7:38 am
simplesauce wrote: Fri May 08, 2020 7:28 am
midareff wrote: Fri May 08, 2020 6:58 am Thanks for taking the time to lay that out simplesauce. As far as changing portfolios.. from the perspective of a retiree there are things that are some changes that seem to be forced.... or at least altered with time since 2007. With the ten year treasury now at .72% yield and an Ally Bank savings account at 1.5%, and 12 month rolling CPI-U at 2.0%, how much do you really want to keep in treasuries? or the Total Bond Market. How much international, be it China or whatever do you really want? China's markets, financial data and much else is too murky for me to want to invest in and I can't seem to warm up to investing significant money in international for the occasional slight edge vs the persistent significant under performance.

No doubt treasuries have done spectacularly so far this year, by the end of the year will corporates have overtaken them? Again, at .72% yield and much higher rates available at banks and credit unions for saving accounts and CDs are treasuries attracting the smart money at those rates? or just the bulk dollars that have to go risklessly somewhere?

Final thought... it's tough to keep selling the same book unless you don't revise it from time to time.
My pleasure. And yes, it is interesting to consider the book is being revised for the sake of sales. But I don’t know Dr. Malkiel well enough to contemplate his motives. Nonetheless, his writings make clear that he does not prefer plain vanilla portfolios anymore.
Methinks it's tough to visualize a 30 year retirement from a "traditional" 60/40 portfolio with a 60/40 US/International equity split and IT Treasuries.
Maybe so but what is the alternative?
Well Palanzo... the alternative for me is IT and LT munis in taxable with some CDs and TSM in taxable IT Corporate Index with the S&P500 in my IRA. I speculate a bit in my Roth and as far as the last 12 months go my total dividend is 2.17% and 9.02% total return..... on a 50% equities portfolio.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by Blue456 »

protagonist wrote: Mon May 11, 2020 3:03 pm
I also think that, though not diversified, a huge number of Americans have the largest amount of their assets invested in their home(s), which, even if their primary residence, and not commercial, is a real estate investment.
When I retire most Americans will have student loans. So this pattern of owning a house is strictly for baby boomers. And either way, if he is counting owning a house as part of the bonds allocation then he should place that in his portfolio.
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Re: The changing advice of "A Random Walk Down Wall Street" - 2007 to 2020

Post by dziuniek »

petulant wrote: Fri May 08, 2020 6:50 am While I respect Dr. Malkiel's efforts to educate investors, I am still very skeptical of this idea that investment decisions should be made on the basis that stock allocation and GDP growth rates or shares are directly connected. Yes, emerging markets see economic growth, but that doesn't mean the equities of companies located in these markets are good investment options. GDP growth means more economic activity, which is consistent with labor force and population growth, productivity growth, and new capital invested. Whether those items lead to outsized profits is an entirely different question. Further, even if it can lead to more profits, there's an issue with whether American investors can actually access those cost-effectively. With weaker investor protections and worse governance in many emerging markets, this is not clear to me. Lastly, to the extent Americans can participate in profit growth through exposure to emerging markets, the same exposure is available through equities of U.S. and other developed countries. Many of the factories, distribution operations, and technology systems across the world are owned or partly owned by developed county stalwarts like Nestle, Toyota, Coca Cola, or Alphabet. I just don't see a good argument that investors should overweight emerging markets.
I guess a point could be made about currency diversification. Yes, a lot of these companies deal in USD, but not all. There is some doom and gloom in regards to the dollar's reserve currency status, though I think it's overblown. Then again, who knows.
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Re: 2007 to 2020: The changing advice of "A Random Walk Down Wall Street"

Post by nedsaid »

It would appear that Malkiel's advice is sort of a random walk itself.
A fool and his money are good for business.
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