Wirecard and the Boglehead Philosophy

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bck63
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Wirecard and the Boglehead Philosophy

Post by bck63 » Sun Jun 28, 2020 10:50 am

Without getting into particulars about the Wirecard disaster, it just confirms to me the soundness of the Boglehead Philosophy and the benefits of diversification. Wirecard went from $74.85 on April 23rd to $0.79 on Friday.

This could happen to any stock, at any time. I am grateful for Jack Bogle, Taylor Larimore and the Bogleheads for teaching me about diversification and indexing. I sold the last of my individual stocks about 18 months ago. Zero regrets.

If, say, Facebook disappeared off the face of the earth today, it would affect 2.1% of my portfolio. A little high for some tastes but still a lot better than holding a few individual stocks.

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Cheez-It Guy
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Re: Wirecard and the Boglehead Philosophy

Post by Cheez-It Guy » Sun Jun 28, 2020 11:00 am

bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!

TheoLeo
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Re: Wirecard and the Boglehead Philosophy

Post by TheoLeo » Sun Jun 28, 2020 1:19 pm

It also makes me wonder how many more scams are in my portfolio...

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TomatoTomahto
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Re: Wirecard and the Boglehead Philosophy

Post by TomatoTomahto » Sun Jun 28, 2020 1:24 pm

Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
I deleted my FB account some time ago. It fell off the face of my universe.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Nate79
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Re: Wirecard and the Boglehead Philosophy

Post by Nate79 » Sun Jun 28, 2020 1:31 pm

Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.

Robot Monster
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Re: Wirecard and the Boglehead Philosophy

Post by Robot Monster » Sun Jun 28, 2020 1:31 pm

Consider what percent of the Berkshire Hathaway portfolio is Apple. Now, someone please correct me if I'm wrong, but by my calculations Apple is 20% of Berkshire. (Berkshire owns approx $88 billion worth of Apple, and Berkshire's market cap is about $427 billion.)

20% is a lot to have in a single stock. Surprising, no?
We are in a permanent and anxious "just don't know" situation, where the stock market is inherently risky because of unstable investor psychology.

TravelGeek
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Re: Wirecard and the Boglehead Philosophy

Post by TravelGeek » Sun Jun 28, 2020 1:40 pm

Nate79 wrote:
Sun Jun 28, 2020 1:31 pm
Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.
To be fair, I don’t think I had heard of Enron before they started making news for accounting fraud.

I was a Worldcom customer (via one of their international calling cards).

I am no longer investing in individual stocks (haven’t for about ten years), not because I am concerned about picking fraudulent companies, but because my experience has shown me that I am really good at picking underperforming companies.

Robot Monster
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Re: Wirecard and the Boglehead Philosophy

Post by Robot Monster » Sun Jun 28, 2020 1:55 pm

TravelGeek wrote:
Sun Jun 28, 2020 1:40 pm
my experience has shown me that I am really good at picking underperforming companies.
Maybe you're missing your true calling: picking individual stocks to short.
We are in a permanent and anxious "just don't know" situation, where the stock market is inherently risky because of unstable investor psychology.

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bck63
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Re: Wirecard and the Boglehead Philosophy

Post by bck63 » Sun Jun 28, 2020 2:00 pm

Nate79 wrote:
Sun Jun 28, 2020 1:31 pm
Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.
It's simple: A company that a few months ago was considered solid is today basically gone. It could happen to any company at any time. Thus the idea of diversification (a Boglehead philosophy) is reinforced with the one company's demise.

Did you really miss it?

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Nate79
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Re: Wirecard and the Boglehead Philosophy

Post by Nate79 » Sun Jun 28, 2020 2:32 pm

bck63 wrote:
Sun Jun 28, 2020 2:00 pm
Nate79 wrote:
Sun Jun 28, 2020 1:31 pm
Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.
It's simple: A company that a few months ago was considered solid is today basically gone. It could happen to any company at any time. Thus the idea of diversification (a Boglehead philosophy) is reinforced with the one company's demise.

Did you really miss it?
Not sure your point. This issue was already discussed at length previously in another thread. They are a small German company, a Fintech payment processor. Whether or not they were solid before this issue happened I have no clue because like most people I hadn't heard of them. Could an actual major company in the US get away with cooking their books today? I don't have a clue but we certainly don't need an example of fraud to prove a point to not invest in single stocks as the Covid-19 and other past lessons lesson had alresdy shown this repeatedly.

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bck63
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Re: Wirecard and the Boglehead Philosophy

Post by bck63 » Sun Jun 28, 2020 2:48 pm

......
Last edited by bck63 on Sun Jun 28, 2020 3:34 pm, edited 1 time in total.

austin757
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Re: Wirecard and the Boglehead Philosophy

Post by austin757 » Sun Jun 28, 2020 2:53 pm

Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
The world would be a better place...

Starfish
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Re: Wirecard and the Boglehead Philosophy

Post by Starfish » Sun Jun 28, 2020 8:51 pm

bck63 wrote:
Sun Jun 28, 2020 10:50 am
Without getting into particulars about the Wirecard disaster, it just confirms to me the soundness of the Boglehead Philosophy and the benefits of diversification. Wirecard went from $74.85 on April 23rd to $0.79 on Friday.

This could happen to any stock, at any time. I am grateful for Jack Bogle, Taylor Larimore and the Bogleheads for teaching me about diversification and indexing. I sold the last of my individual stocks about 18 months ago. Zero regrets.
What if you had 50% Wirecard and 50 Tesla?
Who ever said to own only one company?
If, say, Facebook disappeared off the face of the earth today, it would affect 2.1% of my portfolio. A little high for some tastes but still a lot better than holding a few individual stocks.
That would be very unpleasant. Facebook is one of the more useful things I have on my computer. How else would I keep in touch with friends from long tome ago on 4 continents?

7eight9
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Re: Wirecard and the Boglehead Philosophy

Post by 7eight9 » Sun Jun 28, 2020 9:11 pm

Nate79 wrote:
Sun Jun 28, 2020 2:32 pm
bck63 wrote:
Sun Jun 28, 2020 2:00 pm
Nate79 wrote:
Sun Jun 28, 2020 1:31 pm
Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.
It's simple: A company that a few months ago was considered solid is today basically gone. It could happen to any company at any time. Thus the idea of diversification (a Boglehead philosophy) is reinforced with the one company's demise.

Did you really miss it?
Not sure your point. This issue was already discussed at length previously in another thread. They are a small German company, a Fintech payment processor. Whether or not they were solid before this issue happened I have no clue because like most people I hadn't heard of them. Could an actual major company in the US get away with cooking their books today? I don't have a clue but we certainly don't need an example of fraud to prove a point to not invest in single stocks as the Covid-19 and other past lessons lesson had alresdy shown this repeatedly.
Maybe small in terms of employees but big enough to be a member of the DAX.

First listed on the Frankfurt stock exchange in 2005, by 2018 it elbowed traditional lender Commerzbank out of the blue-chip DAX share index.
In early 2019, Wirecard's market value hit around €17 billion, matching crisis-ridden Deutsche Bank with 15 times fewer workers and revenues.
https://www.rte.ie/news/business/2020/0 ... d-scandal/

DAX --- https://en.wikipedia.org/wiki/DAX
I guess it all could be much worse. | They could be warming up my hearse.

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Picasso
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Re: Wirecard and the Boglehead Philosophy

Post by Picasso » Sun Jun 28, 2020 9:13 pm

TomatoTomahto wrote:
Sun Jun 28, 2020 1:24 pm
Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
I deleted my FB account some time ago. It fell off the face of my universe.
Me neither. That company is a plague.

CardioMD
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Re: Wirecard and the Boglehead Philosophy

Post by CardioMD » Sun Jun 28, 2020 9:47 pm

TomatoTomahto wrote:
Sun Jun 28, 2020 1:24 pm
Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
I deleted my FB account some time ago. It fell off the face of my universe.
Amen.
“The stock market is a giant distraction from the business of investing.” -Jack Bogle

TravelGeek
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Re: Wirecard and the Boglehead Philosophy

Post by TravelGeek » Mon Jun 29, 2020 1:32 am

Starfish wrote:
Sun Jun 28, 2020 8:51 pm
That would be very unpleasant. Facebook is one of the more useful things I have on my computer. How else would I keep in touch with friends from long tome ago on 4 continents?
Email. It worked for me for 20 years before I got a FB account, and email messages were generally more meaningful and thoughtful than today’s brief blurbs on FB. YMMV.

Starfish
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Re: Wirecard and the Boglehead Philosophy

Post by Starfish » Mon Jun 29, 2020 2:11 am

TravelGeek wrote:
Mon Jun 29, 2020 1:32 am
Starfish wrote:
Sun Jun 28, 2020 8:51 pm
That would be very unpleasant. Facebook is one of the more useful things I have on my computer. How else would I keep in touch with friends from long tome ago on 4 continents?
Email. It worked for me for 20 years before I got a FB account, and email messages were generally more meaningful and thoughtful than today’s brief blurbs on FB. YMMV.
It doesn't have a similar result.
I found old friends because they have accounts on FB. I could not connect with them through email.
You put a picture on FB, everybody sees it. I will not write an email to everybody with my not so important picture.

I have many similar stories but this one is representative for me. I was in Mexico once and at night in the hotel I browsed FB. I saw a picture that looked familiar from an old friend I did not see in more than a decade and lived in Paris (I live in California). I zoomed in and saw Quintana Roo plate on a car. I messaged him and 12 hours later we met at a cenote 10 minutes from my hotel. He was only 10 miles away.

This is very typical, I have at least a story like this for every year I had an account. I reconnected with many old friends I would have never seen again otherwise.
How could I do this through email? And I have very little time for this, how can I write emails to tens/hundreds of people?

I never understood what is with FB hate out there, people must do it wrong somehow. I think is one of the best services and human connection tool invented. I spend at most 5-10 minutes a day, sometimes I don't open it for a week. It is not a time hog and it is really useful.

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tre3sori
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Re: Wirecard and the Boglehead Philosophy

Post by tre3sori » Mon Jun 29, 2020 3:54 am

Nate79 wrote:
Sun Jun 28, 2020 1:31 pm
Not sure this is even on the radar for most people. I'd never heard of the company until the recent incident so I don't understand how it in any way reinforces the Bogehead philosophy. Anyways we have had plenty of real lessons in the past that people are actually aware of, for example Enron.
Wirecard has been a pretty hyped stock in Germany for some years now. The Wirecard stock threads in the more known investment forums are very long. A lot of people chasing for yield have invested (and lost) a lot of money in this stock. My Vanguard FTSE All-World ETF only holds 0.02637% in Wirecard stocks as of May 31, 2020 (a loss of $26.37 per $100.000 invested). Had I invested in an old-style "diversified" portfolio of say 50 equally-weighted single stocks and Wirecard happend to be one of them (quite likely for a german investor) my loss would have been more in the ballpark of $2000 per $100.000 invested. So the Boglehead Philosophy of (market capitalization weighted) diversification probably has saved me a 5-figure amount of $$.
Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve. Talmud | 34% Real Estate, 40% VGWL, 17% VAGE, 6% 8PSG, 3% Cash

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firebirdparts
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Re: Wirecard and the Boglehead Philosophy

Post by firebirdparts » Mon Jun 29, 2020 10:01 am

To me, there's a difference between diversification (as above) and boglehead-ism. I prefer to think of index fund holding as a type of extreme diversification, and in fact I try to be caution about underdescribing it in casual conversation and posts. You may find that you still have some pretty big holdings; bigger than 1%.

If you have a 3 fund portfolio, or (heaven forbid) international bond holdings, then that is more like extremely extreme diversification.

It's a wonderful world. We can have that extreme diversification free to the retail investor. And it's not just mostly free, it really is free.
A fool and your money are soon partners

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TheTimeLord
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Re: Wirecard and the Boglehead Philosophy

Post by TheTimeLord » Mon Jun 29, 2020 10:10 am

Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
Facebook has been and continues to be an awesome fund raising tool for charities, especially small charities. The ability to connect small charities and donors is incredible. Thanks to Facebook I can follow several charities and their needs in near real time and meaningfully participate in their mission.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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whodidntante
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Re: Wirecard and the Boglehead Philosophy

Post by whodidntante » Mon Jun 29, 2020 10:21 am

TomatoTomahto wrote:
Sun Jun 28, 2020 1:24 pm
Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
I deleted my FB account some time ago. It fell off the face of my universe.
Same here. I've been hanging out on Twitter and Reddit and both are much more enjoyable. The content and discussion on Reddit is surprisingly good! Facebook would lead you to believe that an anonymous forum leads to horrible behavior but in my experience the opposite is true. And with the moderators and posters and karma system Reddit is self policing. It's mostly on topic discussion though humor is encouraged. And people who just want to cause problems or use the platform to spread political and religious propaganda or hate speech tend to have a short and frustrating experience. The humor can be "adult" at times but I'm an adult as are most humans so I don't mind.

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Cheez-It Guy
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Re: Wirecard and the Boglehead Philosophy

Post by Cheez-It Guy » Mon Jun 29, 2020 2:59 pm

TheTimeLord wrote:
Mon Jun 29, 2020 10:10 am
Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
Facebook has been and continues to be an awesome fund raising tool for charities, especially small charities. The ability to connect small charities and donors is incredible. Thanks to Facebook I can follow several charities and their needs in near real time and meaningfully participate in their mission.
That's a nice success story, and I'm glad it's working for you in this way.

I still can't help but feel that Facebook's contribution to society has been overall negative on balance. I suppose it's a platform and a tool which like any other is subject to potential abuse and misuse. Personally, I can't bring myself to use it anymore. It's become a cesspool.

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TomatoTomahto
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Re: Wirecard and the Boglehead Philosophy

Post by TomatoTomahto » Mon Jun 29, 2020 3:08 pm

Even if you don’t buy everything in “Surveillance Capitalism,” FB is of limited value and greater danger.

Of the old friends I “discovered” via FB, one was a good reconnect for a while (but the reasons for our disconnect resurfaced), one was married and her husband didn’t understand us wanting to be friends after having been romantic (really?? that was 40 years ago; I’m ancient!!), one became a layabout wanting a couch to crash on and money, one didn’t reply, and one’s politics became reprehensible.

Nah. NextDoor is better.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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TheTimeLord
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Re: Wirecard and the Boglehead Philosophy

Post by TheTimeLord » Mon Jun 29, 2020 3:38 pm

Cheez-It Guy wrote:
Mon Jun 29, 2020 2:59 pm
TheTimeLord wrote:
Mon Jun 29, 2020 10:10 am
Cheez-It Guy wrote:
Sun Jun 28, 2020 11:00 am
bck63 wrote:
Sun Jun 28, 2020 10:50 am
If, say, Facebook disappeared off the face of the earth today, . . .
If only we could be so lucky!
Facebook has been and continues to be an awesome fund raising tool for charities, especially small charities. The ability to connect small charities and donors is incredible. Thanks to Facebook I can follow several charities and their needs in near real time and meaningfully participate in their mission.
That's a nice success story, and I'm glad it's working for you in this way.

I still can't help but feel that Facebook's contribution to society has been overall negative on balance. I suppose it's a platform and a tool which like any other is subject to potential abuse and misuse. Personally, I can't bring myself to use it anymore. It's become a cesspool.
Much to my surprise I have even bought an item or two thanks to Facebook ads. Companies who made items that aligned with some of my interests that I would have known about without seeing the ad. Great for entrepreneurs and small start-ups But everyone is different.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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tre3sori
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Re: Wirecard and the Boglehead Philosophy

Post by tre3sori » Wed Jul 08, 2020 3:19 am

tre3sori wrote:
Mon Jun 29, 2020 3:54 am
So the Boglehead Philosophy of (market capitalization weighted) diversification probably has saved me a 5-figure amount of $$.
Addendum: 36.000 people registered on an online platform to participate in a class-action lawsuit against wirecard. The average financial damage per person is $45000. (And no, I don't think that 1 person has a damage of $1.600.000.000 and all the others only a damage of $1)
Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve. Talmud | 34% Real Estate, 40% VGWL, 17% VAGE, 6% 8PSG, 3% Cash

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