A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
Rick Ferri
Posts: 9153
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Rick Ferri » Fri Jul 03, 2020 1:37 pm

In 1973, a newly tenured Princeton economics professor named Burton Malkiel published a book titled, A Random Walk Down Wall Street. His call for the creation of an index fund that tracked hundreds of stocks on the market with minimum turnover and cost was an inspiration to Jack Bogle, who a couple of years later bet his new company on the idea.

We discuss the evolution of Vanguard and index investing, along with several other topics including dividend-paying stocks, factor investing, sustainable withdrawal rates in retirement, risk-parity investing, ESG, and much more.

This is an episode you don't want to miss...

Episode 023: Dr. Burton Malkiel, host Rick Ferri

Rick Ferri
Your Host

This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. "Bogleheads" is a registered trademark of the Center.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

Blue456
Posts: 823
Joined: Tue Jun 04, 2019 5:46 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Blue456 » Fri Jul 03, 2020 1:59 pm

I was looking forward to this podcast.

User avatar
ClevrChico
Posts: 1706
Joined: Tue Apr 03, 2012 8:24 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by ClevrChico » Fri Jul 03, 2020 2:24 pm

I was ready for a new episode! This sounds very interesting, thanks!

zwzhang
Posts: 72
Joined: Thu Jul 25, 2013 10:43 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by zwzhang » Fri Jul 03, 2020 2:37 pm

Thanks for doing these interviews. Will listen to this one tonight.

User avatar
CyclingDuo
Posts: 3369
Joined: Fri Jan 06, 2017 9:07 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by CyclingDuo » Fri Jul 03, 2020 2:55 pm

Rick Ferri wrote:
Fri Jul 03, 2020 1:37 pm
In 1973, a newly tenured Princeton economics professor named Burton Malkiel published a book titled, A Random Walk Down Wall Street. His call for the creation of an index fund that tracked hundreds of stocks on the market with minimum turnover and cost was an inspiration to Jack Bogle, who a couple of years later bet his new company on the idea.

We discuss the evolution of Vanguard and index investing, along with several other topics including dividend-paying stocks, factor investing, sustainable withdrawal rates in retirement, risk-parity investing, ESG, and much more.

This is an episode you don't want to miss...

Episode 023: Dr. Burton Malkiel, host Rick Ferri

Rick Ferri
Your Host

This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. "Bogleheads" is a registered trademark of the Center.
Great job and great guest! Burton speaks with such clarity of thought, it was a pleasure to listen to him field your questions. I could have listened to another hour of you two! It was nice to hear his current thoughts as well as the history he has with Jack and Vanguard.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

User avatar
JPH
Posts: 1031
Joined: Mon Jun 27, 2011 8:56 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by JPH » Fri Jul 03, 2020 4:00 pm

A good one. Thanks.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

petulant
Posts: 1536
Joined: Thu Sep 22, 2016 1:09 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by petulant » Fri Jul 03, 2020 5:30 pm

It was a great interview. You were totally right to push back on his openness to direct indexing for step-up basis, pointing out that a 35-year-old investor is in a very different position from an 80-year-old investor. (Who do you think receives the most marketing from Wealthfront?)


User avatar
Clever_Username
Posts: 1697
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Clever_Username » Fri Jul 03, 2020 5:54 pm

I have a bit of a drive on Sunday, will listen to it then. Thanks!
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

bck63
Posts: 1242
Joined: Fri Sep 28, 2018 4:59 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by bck63 » Fri Jul 03, 2020 5:59 pm

I enjoy every one of your podcasts and will listen to it tomorrow on my early morning walk. Thank you.

TravelforFun
Posts: 2119
Joined: Tue Dec 04, 2012 11:05 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by TravelforFun » Fri Jul 03, 2020 6:02 pm

Just listened to it while working in the yard. Great podcast! Thanks Rick.

TravelforFun

austin757
Posts: 92
Joined: Wed Jun 06, 2018 11:48 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by austin757 » Fri Jul 03, 2020 6:36 pm

Interesting to hear him to say that a 4% SWR is too high for the current market. He sounds pessimistic on the economy overall.

typical.investor
Posts: 2080
Joined: Mon Jun 11, 2018 3:17 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by typical.investor » Fri Jul 03, 2020 7:29 pm

Best interview I have heard!

ETFs

Thank you Dr. Malkiel for advocating that long term mutual fund investors would be hurt by traders trading index mutual funds, and that having ETFs would help avoid that.

And also, the ability of the ETF dual share class at Vanguard has reduced the tax risk if there were large outflows and realization of the considerable amount of unrealized capital appreciation in those mutual funds. By selling the low basis stocks in the ETF shares, the risk to mutual fund holders of an adverse event is reduced.

Factor Investing:

* reason for interest in dividends is the tough situation for individual investors following advice to hold bonds for income and stability. Blue chip funds paying well protected dividends seem a good substitute for bond yield.

* somewhat suspicious about being a one factor investor when there is a history of value being better than growth (despite value being terrible recently).

* a multi-factor model may give index factor performance with possibly less volatility than an index fund. Not by buying a value, small cap or volatility fund - there will be long periods of underperformance, but they tend to be uncorrelated. He says I don't think you will do better than an index fund but it's possible to get a bit less volatility and bit higher sharp ratio (return/volatility).

* total return is same as dividend investing but just more of a hassle to sell shares

Risk Parity

* risk parity - safe assets may yield more than they should. Empirical irregularity in track betting - if you bet on every horse, you will have a winning ticket but lose 20%. If you bet on every favorite - lose 5-6%. Bet on long shot - lose 40-50%. Safe assets actually yield more than they should. Safe assets yield more than they should if this were simply on an expected value basis. If that's true, and there is some long run evidence, then maybe the best thing to do is leverage safe assets to same volatility as risky assets. Has worked but if inflation hits, might not continue.

Fed Intervention

* are uncomfortable side effects of Fed invention- explosion of corporate debt etc.

* side effect of monetary policy is that safe withdrawal rate has dropped. Ferri's clients use 3% and Malkiel agrees it's better than 4%.

* increased stock allocation and reduced bond recommendations

ESG

* ESG funds could have lower returns if institutions avoid particular companies and industries. Ratings are really inconsistent. Should you feel good about holding Facebook and twitter? Sure there is low carbon output from them?

Direct Indexing

* surest way to obtain alpha is via tax loss harvesting via direct index. Unless step up basis is changed, it generally makes sense. Benefit of deferred taxation

China

* China - not done well due to state owned enterprises. Funds with private companies only are better.

garlandwhizzer
Posts: 2902
Joined: Fri Aug 06, 2010 3:42 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by garlandwhizzer » Fri Jul 03, 2020 8:12 pm

Thanks, Rick for offering this to interview to Bogleheads, and thanks, typical.investor, for summarizing. The Forum is an unbelievably great resource for learning the ins and outs of investing. All points of view well presented. Thanks, Taylor, and others for supporting it. We investors are lucky to have such resources at our fingertips free of charge.

Garland Whizzer

OffGridder
Posts: 90
Joined: Thu Jul 23, 2015 8:03 am
Location: Eastern WA.

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by OffGridder » Fri Jul 03, 2020 8:39 pm

Great interview and podcast. Thanks Rick. Also good synopsis above by Typical Investor.

I tend to agree that withdrawal rate less than 4% is prudent. Something closer to 3% as Rick generally recommends to his clients and Makeiel seems to think is ok.

I do not buy into the recommendation for retirees to increase allocations to stock and use high dividend stocks in place of bonds to juice yield and withdraw rates . I keep hearing more and more "gurus" advocating higher stock allocations to sustain higher withdrawals during retirement. I believe the vast majority of retirees do not have the personal risk tolerance to deal with high volatility asset allocations. If you believe you need the high stock allocations as advocated by the gurus to achieve the retirement lifestyle you desire, a better solution is to buck up and save more.
"Goodness is the only investment that never fails." | H.D. Thoreau

User avatar
Eagle33
Posts: 773
Joined: Wed Aug 30, 2017 3:20 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Eagle33 » Fri Jul 03, 2020 9:44 pm

OffGridder wrote:
Fri Jul 03, 2020 8:39 pm
Great interview and podcast. Thanks Rick. Also good synopsis above by Typical Investor.

I tend to agree that withdrawal rate less than 4% is prudent. Something closer to 3% as Rick generally recommends to his clients and Makeiel seems to think is ok.

I do not buy into the recommendation for retirees to increase allocations to stock and use high dividend stocks in place of bonds to juice yield and withdraw rates . I keep hearing more and more "gurus" advocating higher stock allocations to sustain higher withdrawals during retirement. I believe the vast majority of retirees do not have the personal risk tolerance to deal with high volatility asset allocations. If you believe you need the high stock allocations as advocated by the gurus to achieve the retirement lifestyle you desire, a better solution is to buck up and save more.
Great point!
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

User avatar
whodidntante
Posts: 8600
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by whodidntante » Fri Jul 03, 2020 9:54 pm

Will listen on my next hike in the woods. That's right, I'll take a hike.

Deighve
Posts: 48
Joined: Sat Nov 18, 2017 10:30 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Deighve » Fri Jul 03, 2020 9:55 pm

Fantastic podcast.

Rick, thank you for these podcasts and all that you contribute on the forum. The work is greatly appreciated!

Eowyn
Posts: 18
Joined: Tue Nov 19, 2019 2:23 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Eowyn » Fri Jul 03, 2020 10:00 pm

Terrific - Thank you.

Mickey7
Posts: 164
Joined: Tue Jun 20, 2017 1:52 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Mickey7 » Fri Jul 03, 2020 10:58 pm

I always look forward to these podcasts.

Thank you

User avatar
Ricchan
Posts: 268
Joined: Wed Jan 27, 2016 12:26 am
Location: Firestone D Floor

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Ricchan » Fri Jul 03, 2020 11:23 pm

Just finished listening, thank you for creating and sharing this excellent podcast.

I'm curious to hear what others think about the EMQQ fund mentioned by Malkiel at the end. A quick search on the forums turns up a couple threads from years ago where the opinions voiced were not too favorable.

The fund has a fairly high ER (0.86%), tracks a relatively obscure index, and currently only has about 750 Mil in assets. Still, the idea behind the index sounds interesting, even if it runs counter to the idea of broad diversification through owning the entire market. Perhaps it could be an option for those who need to rebalance into the EM / ex-US portions of their portfolio but are tired of the traditional candidates?

TigerNest
Posts: 355
Joined: Mon May 10, 2010 12:58 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by TigerNest » Fri Jul 03, 2020 11:33 pm

Burton Malkiel is the reason I became a boglehead. He was my professor for Intro to Finance, and he taught us the importance of investing early and the benefits of index investing. His class was also the first time I heard about Vanguard. It's fair to say his course changed my life!

grok87
Posts: 9138
Joined: Tue Feb 27, 2007 9:00 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by grok87 » Sat Jul 04, 2020 6:28 am

Ricchan wrote:
Fri Jul 03, 2020 11:23 pm
Just finished listening, thank you for creating and sharing this excellent podcast.

I'm curious to hear what others think about the EMQQ fund mentioned by Malkiel at the end. A quick search on the forums turns up a couple threads from years ago where the opinions voiced were not too favorable.

The fund has a fairly high ER (0.86%), tracks a relatively obscure index, and currently only has about 750 Mil in assets. Still, the idea behind the index sounds interesting, even if it runs counter to the idea of broad diversification through owning the entire market. Perhaps it could be an option for those who need to rebalance into the EM / ex-US portions of their portfolio but are tired of the traditional candidates?
if you look at the fund's fact sheet you will see Malkiel listed as a paid advisor. therefore i would say to take his recommendation with a grain of salt as he is a not an independent disinterested party.
RIP Mr. Bogle.

User avatar
happyisland
Posts: 546
Joined: Thu Oct 03, 2013 1:36 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by happyisland » Sat Jul 04, 2020 7:57 am

Just want to chime in with my thanks for a great podcast. :sharebeer

User avatar
Topic Author
Rick Ferri
Posts: 9153
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Rick Ferri » Sat Jul 04, 2020 8:11 am

grok87 wrote:
Sat Jul 04, 2020 6:28 am
Ricchan wrote:
Fri Jul 03, 2020 11:23 pm
Just finished listening, thank you for creating and sharing this excellent podcast.

I'm curious to hear what others think about the EMQQ fund mentioned by Malkiel at the end. A quick search on the forums turns up a couple threads from years ago where the opinions voiced were not too favorable.

The fund has a fairly high ER (0.86%), tracks a relatively obscure index, and currently only has about 750 Mil in assets. Still, the idea behind the index sounds interesting, even if it runs counter to the idea of broad diversification through owning the entire market. Perhaps it could be an option for those who need to rebalance into the EM / ex-US portions of their portfolio but are tired of the traditional candidates?
if you look at the fund's fact sheet you will see Malkiel listed as a paid advisor. therefore i would say to take his recommendation with a grain of salt as he is a not an independent disinterested party.
Full disclosure: Dr. Malkiel serves as an Advisor to the EMQQ Index Committee. https://emqqetf.com/team/home.html

In other news:

Morningstar confirms Dr. Malkiel's view that there is no return benefit from ESG investing.

How Does Investing in ESG Companies Affect Returns?

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

Dave55
Posts: 738
Joined: Tue Sep 03, 2013 2:51 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Dave55 » Sat Jul 04, 2020 8:41 am

Thanks Rick, great interview, and lots of food for thought.

Dave

PSM
Posts: 33
Joined: Thu Aug 16, 2018 9:52 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by PSM » Sat Jul 04, 2020 9:14 am

Did I hear correctly that BM said (in his book) and on this podcast that retirees in their 60's might still need 60%+ in stocks, and if he were writing his recommendations today, it might be more?

Surely it will not take that much risk in a portfolio to pay one's annual expenses. If so, how could anyone retire without being afraid of a 50% market meltdown that might last a few years, with a big sequence of return risk. Of course, each household has its own unique situation, and its asset allocation will be based on several factors: risk profile, total assets available, projected annual expenses, taxes, etc.

One resource I use, not claiming to know the future, does a monthly forward-looking analysis, and currently suggests that a simple static portfolio of 40% VT (Vanguard Total World ETF) and 60% BND (Vanguard Total Bond Market) has a current expected 10 year annual return of 4%, with a range of probability from 2.7 - 5.0%, maximum drawdown of -23.6% and recovery average of 13 months. And, In a given year, such a portfolio might be adapted by rebalancing for risk (not timing), using alternative funds to break out domestic and international (VTI, VXUS) or other sectors like REITS. (Such a portfolio would naturally have a cash component just to pay expenses.)

So, before anyone rushes out to possibly increase his/her risk because BM says that's what he would recommend, it might not actually be necessary. You can possibly pay your expenses with 40% or less in equities. Any higher risk level would be for the purpose of taking a chance on growing your assets to leave a big(ger) inheritance or insuring against a worst case scenario re long term care (if you don't have LTC insurance).
Last edited by PSM on Tue Jul 07, 2020 10:21 am, edited 1 time in total.

User avatar
WoodSpinner
Posts: 1560
Joined: Mon Feb 27, 2017 1:15 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by WoodSpinner » Sat Jul 04, 2020 9:30 am

Rick,

Another great Podcast, will have to listen a few times to make sure I get the nuances.

I was a bit perplexed about his answer to the question around the 4% rule. He mentioned that it would be dangerous for endowments to use 4% and still expect principle to remain (I think this is close but paraphrasing from memory).

From my perspective this makes no sense and I was hoping you were going to follow up on it. The 4% rule is NOT designed for endowments and a Safe Withdrawal Rate is not the same as a Perpetual Withdrawal Rate.

His advice to move to Dividend Paying Funds and reduce Fixed Income is also puzzling. In one part of the answer he mentions dividends from Blue Chip companies while a short time later he is discussing High Dividend Yield Funds. While there may be some overlap, they are very different investments from a risk perspective. More importantly, I would have loved to hear his response to using a Total Return Approach for the portfolio versus trying to live off the income from Bond Interest. Especially today with ETFs and no transaction fees, it is very easy to simply sell shares for the income you need versus using interest from Bonds. I think this is an area where the current system is much more efficient than it was years ago.

I must be missing something and would love to understand these points more fully.

Lastly, I never realized the US Army had a Finance Corp!

WoodSpinner

Call_Me_Op
Posts: 7910
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Call_Me_Op » Sat Jul 04, 2020 9:34 am

Good podcast - although I refuse accept the idea that dividend-paying stocks are a good substitute for bonds. Stocks are stocks - and bonds are bonds. The best way to address today's low interest rates is to save more and/or spend less.

Dr. Malkiel appears to look at investing strictly through the lens of financial metrics, ignoring investor behavior - the biggest factor of all for the typical investor. If I were an automaton, I would invest very differently.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Leesbro63
Posts: 6644
Joined: Mon Nov 08, 2010 4:36 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Leesbro63 » Sat Jul 04, 2020 10:01 am

It was an excellent podcast and at 87 Malkiel was very sharp. That being said, as others have noted there were a few things that rubbed me the wrong way:

1. I don't think Malkiel understands 4% "SWR" in the same way we do. To be fair, he isn't directly part of the Boglehead world and the world of younger (than him!) investors who have focused on "SWR" since the 1994 Bengen work. He chuckled at Rick's suggestion about a 3% SWR being "much better" than 4%. That's a no brainer but I don't think he really understands that "SWR" means it's OK to deplete your nest egg, over 30 years, if you have to.

2. The idea of replacing dividend paying stocks instead of bonds seems to have gained popularity. Jeremy Siegel also has discussed this. My gut tells me that someday this is going to blow up and it's not good advice for the long haul. Even a zero percent bond (generally) provides return OF your money (nominally), whereas stocks do not. And if we do get the nasty inflation that some are predicting, it's not clear that bonds won't "do less bad" than even dividend paying stocks.

3. The idea of buying individual stocks to create your own index and selling the losers for tax losses strikes me as risky. You end up with a portfolio of highly appreciated stocks that might or might not outperform the index that you started out trying to mimic. And this is very complicated and you can only take a net of $3000 in tax losses per year. And if you start selling winners to offset your losers you've become a stock picker. Good luck with that.

Much of the negatives I think can be attributed to age. Bogle never really "got it" regarding international funds and ETFs. I think both were set in their ways and it was/is an age thing. Not to undermine all the good both (Bogle and Malkiel) have brought for investors. This was a very good podcast overall and Malkiel, like Jack Bogle to the end, is still worth listening to despite not 100% grasping some nuances of current investing generation.
Last edited by Leesbro63 on Sat Jul 04, 2020 10:34 am, edited 2 times in total.

User avatar
abuss368
Posts: 20400
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by abuss368 » Sat Jul 04, 2020 10:23 am

I am looking forward to this.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
nedsaid
Posts: 13556
Joined: Fri Nov 23, 2012 12:33 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by nedsaid » Sat Jul 04, 2020 11:14 am

Again, thanks Rick for your excellent work on these podcasts.
A fool and his money are good for business.

User avatar
abuss368
Posts: 20400
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by abuss368 » Sat Jul 04, 2020 11:44 am

Does anyone know what the latest portfolio with allocations are for “A Random Walk Down Wall Street”?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

N.Y.Cab
Posts: 52
Joined: Wed Feb 07, 2018 8:46 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by N.Y.Cab » Sat Jul 04, 2020 12:25 pm

His asset allocation for Aging Baby Boomers is 80:20 with 12.5% fixed income replaced by Dividend Growth Stock Fund.

User avatar
TechGuy365
Posts: 168
Joined: Mon Dec 30, 2019 10:57 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by TechGuy365 » Sat Jul 04, 2020 12:25 pm

Great podcast Rick. I like the idea of "blue chip companies that pay well-protected dividend" instead of bond, and it coming from an economist who inspired and served with Jack Bogle for 30-some years gave it a lot of credibility.

User avatar
whodidntante
Posts: 8600
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by whodidntante » Sat Jul 04, 2020 12:55 pm

You'll be happy to know I just took a hike.

Brief summary of the points made:
- A retelling of Bogle's courage to offer a passive investment in a world were active was ingrained.
- ETFs allow a fund to shed low basis shares and increase access to high-quality funds for the investor and the advisor.
- It makes sense to favor a higher stock allocation now than in the past.
- Fed actions seemed beneficial in the short term but corporate debt levels and amount of money in the system are concerning.
- High-quality high dividend stocks are now a sensible alternative to high-quality bonds.
- Doesn't like single factor funds due to opportunity for years of a single factor trailing other factors.
- Multi-factor funds may offer similar returns with lower volatility than TSM.
- SWR now lower. He never said how much lower, but he said he likes 3% a lot better than 4%.
- In the bond market, there is evidence that leveraging a safer asset has had higher returns than owning a riskier asset. However, he's concerned about how much money is in the system and a possible return of inflation leading to losses with this strategy.
- ESG investing has significant inconsistencies and conflicting ideas about what is "better." and is unlikely to improve returns.
- Investing in hated industries will lead to higher expected returns.
- Leadership in China has continued to emphasize SOEs, private companies have done better, prefer China investments ex-SOEs.*
- Direct indexing is beneficial and worth the costs and complexity.*

*In my opinion, Dr. Malkiel has a potential conflict of interest in this recommendation.

User avatar
sergeant
Posts: 1567
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by sergeant » Sat Jul 04, 2020 2:33 pm

Interesting interview. I enjoyed it but will echo those who have pointed out the inconsistency of his SWR statements. I wonder if the Army still uses the accounting tools he implemented when he served?
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.

DetroitRick
Posts: 820
Joined: Wed Mar 23, 2016 9:28 am
Location: SE Michigan

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by DetroitRick » Sat Jul 04, 2020 2:58 pm

Thanks for doing the podcast. For me, it was extremely well done and was much appreciated. He's got me thinking deeper on several topics presented, and to me that is the point. Since I had read and re-read the 8th edition, I wasn't going to bother with the 12th. Based on what I heard on the podcast, I just started on the new edition.

I guess what I like so much about Malkiel is the way he sticks to economic and financial foundations, but is willing to embrace a changing world with new tactics at times. And I think he does so in a thoughtful and balanced way. In the podcast itself, even on some subjects where I don't fully agree with him, he's got me thinking. The podcast also taught me that I had been pronouncing his name somewhat incorrectly all these years :oops: .

Again, that podcast was stellar.

BogleBuddy12
Posts: 347
Joined: Mon May 18, 2015 4:42 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by BogleBuddy12 » Sat Jul 04, 2020 3:35 pm

abuss368 wrote:
Sat Jul 04, 2020 11:44 am
Does anyone know what the latest portfolio with allocations are for “A Random Walk Down Wall Street”?
2007 to 2020: The changing advice of "A Random Walk Down Wall Street”
viewtopic.php?t=314295

User avatar
abuss368
Posts: 20400
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by abuss368 » Sat Jul 04, 2020 3:38 pm

BogleBuddy12 wrote:
Sat Jul 04, 2020 3:35 pm
abuss368 wrote:
Sat Jul 04, 2020 11:44 am
Does anyone know what the latest portfolio with allocations are for “A Random Walk Down Wall Street”?
2007 to 2020: The changing advice of "A Random Walk Down Wall Street”
viewtopic.php?t=314295
Many thanks as I was curious. It feels like it has changed much (and in some respects keeps changing) over the years.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
gasman
Posts: 787
Joined: Mon Jul 30, 2007 6:13 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by gasman » Sat Jul 04, 2020 3:43 pm

Rick Ferri wrote:
Sat Jul 04, 2020 8:11 am
grok87 wrote:
Sat Jul 04, 2020 6:28 am
Ricchan wrote:
Fri Jul 03, 2020 11:23 pm
Just finished listening, thank you for creating and sharing this excellent podcast.

I'm curious to hear what others think about the EMQQ fund mentioned by Malkiel at the end. A quick search on the forums turns up a couple threads from years ago where the opinions voiced were not too favorable.

The fund has a fairly high ER (0.86%), tracks a relatively obscure index, and currently only has about 750 Mil in assets. Still, the idea behind the index sounds interesting, even if it runs counter to the idea of broad diversification through owning the entire market. Perhaps it could be an option for those who need to rebalance into the EM / ex-US portions of their portfolio but are tired of the traditional candidates?
if you look at the fund's fact sheet you will see Malkiel listed as a paid advisor. therefore i would say to take his recommendation with a grain of salt as he is a not an independent disinterested party.
Full disclosure: Dr. Malkiel serves as an Advisor to the EMQQ Index Committee. https://emqqetf.com/team/home.html

In other news:

Morningstar confirms Dr. Malkiel's view that there is no return benefit from ESG investing.

How Does Investing in ESG Companies Affect Returns?

Rick Ferri

Rick, I would appreciate it if you would comment on emerging markets in general - does their valuations merit an overweight and Dr. Malkiel's specific comment about leaning towards non state owned enterprises.

BogleBuddy12
Posts: 347
Joined: Mon May 18, 2015 4:42 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by BogleBuddy12 » Sat Jul 04, 2020 3:50 pm

abuss368 wrote:
Sat Jul 04, 2020 3:38 pm
BogleBuddy12 wrote:
Sat Jul 04, 2020 3:35 pm
abuss368 wrote:
Sat Jul 04, 2020 11:44 am
Does anyone know what the latest portfolio with allocations are for “A Random Walk Down Wall Street”?
2007 to 2020: The changing advice of "A Random Walk Down Wall Street”
viewtopic.php?t=314295
Many thanks as I was curious. It feels like it has changed much (and in some respects keeps changing) over the years.
It has continued to evolve and as a huge fan of his advice, it is very hard to keep up. He is a bit too “active” for my tastes.

User avatar
abuss368
Posts: 20400
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by abuss368 » Sat Jul 04, 2020 3:55 pm

BogleBuddy12 wrote:
Sat Jul 04, 2020 3:50 pm
abuss368 wrote:
Sat Jul 04, 2020 3:38 pm
BogleBuddy12 wrote:
Sat Jul 04, 2020 3:35 pm
abuss368 wrote:
Sat Jul 04, 2020 11:44 am
Does anyone know what the latest portfolio with allocations are for “A Random Walk Down Wall Street”?
2007 to 2020: The changing advice of "A Random Walk Down Wall Street”
viewtopic.php?t=314295
Many thanks as I was curious. It feels like it has changed much (and in some respects keeps changing) over the years.
It has continued to evolve and as a huge fan of his advice, it is very hard to keep up. He is a bit too “active” for my tastes.
It is surprising considering his relationship and history with Vanguard. I feel like yield is being traced a little here.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
abuss368
Posts: 20400
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by abuss368 » Sat Jul 04, 2020 3:56 pm

gasman wrote:
Sat Jul 04, 2020 3:43 pm
Rick Ferri wrote:
Sat Jul 04, 2020 8:11 am
grok87 wrote:
Sat Jul 04, 2020 6:28 am
Ricchan wrote:
Fri Jul 03, 2020 11:23 pm
Just finished listening, thank you for creating and sharing this excellent podcast.

I'm curious to hear what others think about the EMQQ fund mentioned by Malkiel at the end. A quick search on the forums turns up a couple threads from years ago where the opinions voiced were not too favorable.

The fund has a fairly high ER (0.86%), tracks a relatively obscure index, and currently only has about 750 Mil in assets. Still, the idea behind the index sounds interesting, even if it runs counter to the idea of broad diversification through owning the entire market. Perhaps it could be an option for those who need to rebalance into the EM / ex-US portions of their portfolio but are tired of the traditional candidates?
if you look at the fund's fact sheet you will see Malkiel listed as a paid advisor. therefore i would say to take his recommendation with a grain of salt as he is a not an independent disinterested party.
Full disclosure: Dr. Malkiel serves as an Advisor to the EMQQ Index Committee. https://emqqetf.com/team/home.html

In other news:

Morningstar confirms Dr. Malkiel's view that there is no return benefit from ESG investing.

How Does Investing in ESG Companies Affect Returns?

Rick Ferri

Rick, I would appreciate it if you would comment on emerging markets in general - does their valuations merit an overweight and Dr. Malkiel's specific comment about leaning towards non state owned enterprises.
Why not simply invest in Total International Stock and combine the two funds? The allocation to Emerging would be approximately 25% of the fund however.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

pascalwager
Posts: 1823
Joined: Mon Oct 31, 2011 8:36 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by pascalwager » Sat Jul 04, 2020 4:37 pm

I got the impression that he's not against bonds for someone who's willing to take a total return approach (creating your own dividends) for redemptions as opposed to the traditional approach of depending on bonds interest for living expenses.

mbt863
Posts: 14
Joined: Sat Aug 31, 2019 6:02 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by mbt863 » Sat Jul 04, 2020 4:38 pm

I was very surprised to hear (from 46:18-47:17) the opinion of Dr. Malkiel that retires should hold the following amounts of stock in the following age ranges (he actually said he would increase the recommended percentages of stocks if he was writing the 13th Edition now):

--60s (60-80% stocks)
--70s (40-60% stocks)
--80s (30-50% stocks)

I can understand the stock allocation in your 70s and 80s but really surprised at the high stock recommendation for your 60s (and Rick Ferri's advice is (or was as of the date of this article) on the other end of the spectrum--"I propose the center of gravity for those who have accumulated enough for retirement to be 30% stocks and 70% bonds." https://www.etf.com/sections/index-inve ... nopaging=1).

I know personal finance is personal and I'm a believer that nobody knows nothing but this part of the podcast left me more confused than anything else. I obviously understand experts can have different views but respect both of these people and they are not in the same ballpark. :confused

I say this as a 51 year old who was 100% stock until a couple of years ago (always stayed the course so could probably (?)--we will see how I feel after the accumulation phase is over (I might be fooling myself here)--deal with that high of a stock allocation in my 60s). After reading all the BH threads on willingness, ability and need to take risk, red zone risks before retirement, risks on sequence of returns I dialed my allocation back last fall to 70-30% and have thought I'd probably be closer to 50-50 when I enter retirement in the next 5-6 years).

Rick, if you are reviewing this thread I'd appreciate how a BH should consider Dr. Malkiel's advice on stock allocation in retirement. If others have thoughts on this point please feel free to chime in as well. Thanks.

User avatar
Topic Author
Rick Ferri
Posts: 9153
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Rick Ferri » Sat Jul 04, 2020 6:55 pm

gasman wrote:
Sat Jul 04, 2020 3:43 pm
Rick, I would appreciate it if you would comment on emerging markets in general - does their valuations merit an overweight and Dr. Malkiel's specific comment about leaning towards non state owned enterprises.
Does EM valuations merit an overweight?
No.

Is Dr. Malkiel's correct that non-state owned enterprises have performed better?
Yes.

Should you do anything about that?
No.

The simplest solution is to buy a total international stock index fund like VTIAX and fuggedaboutit.

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

User avatar
Topic Author
Rick Ferri
Posts: 9153
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Rick Ferri » Sat Jul 04, 2020 6:59 pm

mbt863 wrote:
Sat Jul 04, 2020 4:38 pm
Rick, if you are reviewing this thread I'd appreciate how a BH should consider Dr. Malkiel's advice on stock allocation in retirement. If others have thoughts on this point please feel free to chime in as well. Thanks.
When we write and speak to the public about asset allocation in retirement, we're addressing the "average investor" in retirement. The problem is this, no two investors are the same. Are you and I are different. We have different needs, different assets, different everything. I'm not average. Are you average? No. There is no such thing as an average investor or an average retiree.

These decisions cannot come from a generic model like your age in bonds, or your age minus 10 in bonds, or Dr. Malkiel's book, or my book.

It's all about you.

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

User avatar
2pedals
Posts: 1180
Joined: Wed Dec 31, 2014 12:31 pm

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by 2pedals » Sat Jul 04, 2020 7:07 pm

Thank you, Rick. I loved your podcast with Dr Burton Malkiel.

Peanutsandme
Posts: 4
Joined: Sat Jul 04, 2020 7:42 am

Re: A Must Listen! Dr. Burton Malkiel is my guest on the "Bogleheads on Investing" podcast.

Post by Peanutsandme » Sat Jul 04, 2020 7:26 pm

Rick -

I loved your podcast with Dr Burton Malkiel.

It caused me anxiety when he suggested need for higher % stock. I get his point though. :annoyed

Thank you for you excellent work

Post Reply