Investors Were Warned.

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000
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Re: Investors Were Warned.

Post by 000 »

willthrill81 wrote: Mon Aug 31, 2020 9:22 pm
000 wrote: Mon Aug 31, 2020 9:06 pm Investors were also warned, by none other than Jack Bogle, about valuations prior to the dot com crash.

Should they have taken some action in regard to that warning?
Mr. Bogle was not nearly as dogmatic as many here with regard to the BH principles. For him, they were much more akin to 'strong guidelines' than 'strict rules'.

He timed the market at least once (quite successfully, though he later said that he didn't know any successful market timers).

He told investors to 'buy the haystack' as long as that 'haystack' was U.S. stock.

He was the father of index investing but was open to active investing if the costs were low (e.g. his stake in Wellington).

He eschewed value investing but had a significant holding in a fund with a decided value tilt (i.e. Wellington).

He eschewed gold and commodities but once recommended a 5% allocation to gold for an endowment fund.

None of that makes lessens his contributions or anything else. Quite the contrary, I admire that he was not closed minded to new or different ways to approach investing or to truly unique market opportunities.
Add to your list that Bogle suggested 15-20 individual blue chip growth stocks diversified across industry was adequate stock diversification (in the context of an investor eschewing mutual funds for tax reasons). This is from Common Sense on Mutual Funds, 10th edition, p. 393.

I will slightly quibble with the market timing assertion. I believe Bogle said he didn't know any repeatedly successful market timers.
iamlucky13
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Re: Investors Were Warned.

Post by iamlucky13 »

I read all of the quotes. Two of them I find useful. The rest I have mixed feelings about, and some of them don't amount to much more than a "No it won't!" reaction to the "Yes it will!" back and forth arguments over whether SCV will revert to some hypothetically higher mean.

Here's the two that make good sense to me.
10-04-2003 Rick Ferri: "By overweighting to small-value, you are also adding risk above and beyond stock market risk."
4-09-2006 by Taylor: "My own feeling is that you can't go wrong (especially in taxable accounts) owning Total Stock Market Index Fund which owns nearly all growth, blend, and value stocks."
Indeed, it's hard to go wrong owning a total stock market fund.

I'm still curious to see how small and value do from here. I've been debating a moderate tilt to small value for a couple years. With a moderate tilt, the risk should be modest, and even though the upside also should be modest, it would satisfy the temptation to meddle without getting carried away.

It turns out my procrastination has so far been fortuitious. It still makes some sense to me that there could be a risk premium there, but if I'm going to be fully diligent, it also makes sense to try to more clearly define what level of risk I want to hold and the best way to achieve it. So no changes yet on my part.

I'm also resisting the urge to tilt to small value based solely on perception of it being good timing to catch a hypothetical reversion to the mean.
protagonist
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Re: Investors Were Warned.

Post by protagonist »

Taylor is, and has been, well aware that limited past data (and really, anything from the past 100 years or so..i.e. all the reliable data available.... is statistically very limited) is pretty much useless in deciding where the next few decades are headed.

In addition, when looking through the retrospectoscope, it is very easy to theorize "why" what happened in the past happened and come out with a coherent story that may even be non-falsifiable. If you have any doubts about that, just look at how internally consistent so many conspiracy theories are.

Sadly, in a highly complex non-linear system wish so many unpredictable and even unknowable variables such as the financial markets, making predictions beforehand based on a particular "theory" falls into this trap, which is why most investors do not beat the market in the long run. (And I am not sure I have heard a financial prediction theory yet that is not based on some rationale of why something happened in a cherry-picked past).

But human nature being what it is, they will keep trying, and yes, some will inevitably succeed while most will fail.

And none of the theories that people generate are ultimately testable, because it would take too long to get enough data going forward to generate statistically meaningful results (that can be separated from noise) during our life times, and once enough time has passed, the world may be a very different place than it is today. For those Douglas Adams fans, it reminds me of the story of "Deep Thought" and "42.".

I think of these theories more like religion than science. Some people have faith that they will work. They believe in them. They have coherent explanations of why they believe in them. Maybe some of them are right. I am not a believer, because I am skeptical by nature. I have no way to judge because of all that I have heard to date, there is not enough available information to judge.
Last edited by protagonist on Mon Aug 31, 2020 11:10 pm, edited 3 times in total.
XacTactX
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Re: Investors Were Warned.

Post by XacTactX »

From 1928 to 2019 the value premium was 4.54%. Right now it's having a bad stretch just like the 1930s, and then it rebounded. I think it's premature to say that value (and size) are not going to be rewarded at some point. As long as small and cheap companies are more risky than large and expensive ones I don't think that will change.

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rascott
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Re: Investors Were Warned.

Post by rascott »

This just seems like a trolling post at this point. Pretty shameful, honestly.


12-18-99 by Taylor: "Before you rely on past returns "proving" Small Company Growth funds to be the worst performers, consider this from John Waggoner in USA today 12-17-99: "Small-Company growth funds soard 372% the past 10 years, vs. 183% for small-company value.


Since this fateful post, SCV has outperformed TSM by a full 2% CAGR.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Lesson learned: listening to rigid, dogmatic advice can leave you with less money. You were warned.
Last edited by rascott on Mon Aug 31, 2020 11:02 pm, edited 1 time in total.
protagonist
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Re: Investors Were Warned.

Post by protagonist »

XacTactX wrote: Mon Aug 31, 2020 10:46 pm From 1928 to 2019 the value premium was 4.54%. Right now it's having a bad stretch just like the 1930s, and then it rebounded. I think it's premature to say that value (and size) are not going to be rewarded at some point. As long as small and cheap companies are more risky than large and expensive ones I don't think that will change.

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Wow, that one year during The Great Depression when it outperformed by nearly 80% is interesting.

I'm mentioning that more out of curiosity than anything else, because regardless, I still think that 91 years of data is statistically meaningless when it comes to, say, predicting the next thirty (thinking about the investment lifetime of, say, a recent retiree...this is even more true for those with a longer investment horizon).

Saying that there will likely be a "value premium" between 2020 and 2050 based on what it did in the 91 years from 1928-2019 is the statistical equivalent of using the stock returns (or, if you prefer, the "value premium") on Monday, Tuesday and Wednesday to predict what the market will do on Thursday.

If something that simple worked, we would all beat the market just by investing for a day every time the market was, on average, up for the preceding three. We'd be rich in no time.
Last edited by protagonist on Mon Aug 31, 2020 11:21 pm, edited 5 times in total.
absolute zero
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Re: Investors Were Warned.

Post by absolute zero »

rascott wrote: Mon Aug 31, 2020 10:52 pm This just seems like a trolling post at this point. Pretty shameful, honestly.


12-18-99 by Taylor: "Before you rely on past returns "proving" Small Company Growth funds to be the worst performers, consider this from John Waggoner in USA today 12-17-99: "Small-Company growth funds soard 372% the past 10 years, vs. 183% for small-company value.


Since this fateful post, SCV has outperformed TSM by a full 2% CAGR.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Lesson learned: listening to rigid, dogmatic advice can leave you with less money. You were warned.
+1

The OP fits the very definition of a troll post.
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mrspock
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Re: Investors Were Warned.

Post by mrspock »

rascott wrote: Mon Aug 31, 2020 10:52 pm This just seems like a trolling post at this point. Pretty shameful, honestly.
...
Shameful? I think that's a bit much, he's one of the long time Bogleheads who's contributed to this forum in community in more ways than most of us ever will.

Trolling posts don't include a well researched, nearly decades long list, from a variety of sources warning of the dangers of tilting/out smarting basic index investing.

Nobody is saying people can't tilt themselves into shaving off time working, adding few extra years, untold riches or financial oblivion. Investing after all is one of the pursuits where we have to compromise with nobody. It's your retirement, and it's your money. People like Taylor are just trying to help, and he's making an important point by recapping some history.

Again, perhaps the risk premium is there, but from where I sit, the frequency between collecting on the premium appears to be so large, it borders on generational and thus useless to anything but a dynasty trust.
loukycpa
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Re: Investors Were Warned.

Post by loukycpa »

Their is a whole industry of "helpers" who "help" by making a 9 box grid (large mid small, value blend growth), dividing the universe of stocks into those 9 boxes, then making sure you have the right number of chips on each box. Sell this as "advice". I am sure many think they are changing the world and making it a better place. Personally I wouldn't touch a fund with the label "small cap growth" and "mid cap value" with a ten foot pool.

Stocks are a minority interest in a business. A claim on the future earnings of the business. If we it were known in advance what those future earnings were going to be ("growth") and assuming capital would then be allocated rationally, investors would know exactly what to pay for each stock ("value").

There is no such thing as a "growth" stock and no such thing as a "value" stock. It's a ridiculous distinction. Growth is how much the current earnings of a company will grow over time, and value is about not overpaying for the earnings stream you are buying.

Outside the industry of the "helpers" the distinction is completely meaningless and never even discussed. In the private market where investors or firms purchase closely held businesses, do they ever bother to make sure they have the right mix of "value" and "growth" businesses?

Silliness.
absolute zero
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Re: Investors Were Warned.

Post by absolute zero »

mrspock wrote: Mon Aug 31, 2020 11:14 pm
rascott wrote: Mon Aug 31, 2020 10:52 pm This just seems like a trolling post at this point. Pretty shameful, honestly.
...
Trolling posts don't include a well researched, nearly decades long list, from a variety of sources warning of the dangers of tilting/out smarting basic index investing.
A variety of sources? Nearly 1/3 of the “sources” are the OP’s own posts. Many of the others are just random old BH forum posts of different people stating their “feelings” or “opinions” on the topic.
typical.investor
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Re: Investors Were Warned.

Post by typical.investor »

whodidntante wrote: Mon Aug 31, 2020 9:35 pm
yules wrote: Mon Aug 31, 2020 8:40 pm Looks like Taylor was bored today, lol
We don't have to guess. He told us so in the first sentence of his post.
Taylor’s contributions are priceless!

As a value investor, I understand the risks and are willing to take them.

There is a contingent here on Bogleheads who would have you believe that factor investing is actually less risky and that you are inadequately diversified by holding only TSM (Total Market funds).

In any given time period though, I think the risks can shown up and Taylor is doing a service to remind us of that.
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UpsetRaptor
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Re: Investors Were Warned.

Post by UpsetRaptor »

willthrill81 wrote: Mon Aug 31, 2020 9:22 pm
000 wrote: Mon Aug 31, 2020 9:06 pm Investors were also warned, by none other than Jack Bogle, about valuations prior to the dot com crash.

Should they have taken some action in regard to that warning?
Mr. Bogle was not nearly as dogmatic as many here with regard to the BH principles. For him, they were much more akin to 'strong guidelines' than 'strict rules'.

He timed the market at least once (quite successfully, though he later said that he didn't know any successful market timers).

He told investors to 'buy the haystack' as long as that 'haystack' was U.S. stock.

He was the father of index investing but was open to active investing if the costs were low (e.g. his stake in Wellington).

He eschewed value investing but had a significant holding in a fund with a decided value tilt (i.e. Wellington).

He eschewed gold and commodities but once recommended a 5% allocation to gold for an endowment fund.

None of that makes lessens his contributions or anything else. Quite the contrary, I admire that he was not closed minded to new or different ways to approach investing or to truly unique market opportunities.
+1 to all of this.

Taylor's really of the same ilk, regarding dogmatism to BH principles, or lack thereof. Nowadays he's more of a Master Yoda, just hits the broad themes with zen-like quality. But if you look back at his posts 10-15 years ago when he was doing the yeoman's work of posting in almost every thread helping out newbies, it's quite refreshing in his common sense and lack of...dogma, especially for the guy that basically invented the 3-fund portfolio. Once someone got to a point where they had a sufficient level of diversity, simplicity, low-cost, with an AA roughly appropriate for their age, he'd congratulate them on having a good portfolio that will beat most others' out there, and then point out that they have more time to spend elsewhere. It's quite refreshing to go back and see his common sense and the lack of quibbling over minutia-type things beyond those which are known to likely to make a significant difference.

One example, I'm sure nowhere near the best, just first I came to in 10 secs of searching:
viewtopic.php?f=1&t=3160
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Munir
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Re: Investors Were Warned.

Post by Munir »

Am I reading this right? Are some posters trashing Taylor Larimore on the Boglehead Forum? Give me a break! You may disagree with some of his views but we usually treat Taylor with sensitivity and respect for the numerous services he has performed for many members of this forum- including me. Maybe I am misinterpreting some of the language I see.
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UpsetRaptor
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Re: Investors Were Warned.

Post by UpsetRaptor »

Munir wrote: Tue Sep 01, 2020 12:06 am Am I reading this right? Are some posters trashing Taylor Larimore on the Boglehead Forum? Give me a break! You may disagree with some of his views but we usually treat Taylor with sensitivity and respect for the numerous services he has performed for many members of this forum- including me. Maybe I am misinterpreting some of the language I see.
If that's directed at me, I was praising, not trashing. The guy's a gift to humanity.
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Munir
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Re: Investors Were Warned.

Post by Munir »

UpsetRaptor wrote: Tue Sep 01, 2020 12:07 am
Munir wrote: Tue Sep 01, 2020 12:06 am Am I reading this right? Are some posters trashing Taylor Larimore on the Boglehead Forum? Give me a break! You may disagree with some of his views but we usually treat Taylor with sensitivity and respect for the numerous services he has performed for many members of this forum- including me. Maybe I am misinterpreting some of the language I see.
If that's directed at me, I was praising, not trashing.
This was referring to earlier posts that seemed condescending or dismissive of Taylor. I am supporting what you said,UpsetRaptor.
MostlyABogleHead
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Re: Investors Were Warned.

Post by MostlyABogleHead »

I had a related question. Are there any material to understand the value premium and why it exists in a more understandable form? And more importantly why does it exist now even after this is well known for a long time now (ie., why has this not priced in the cost of the funds and hence raising the cost of these stocks?)
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Re: Investors Were Warned.

Post by Trader Joe »

Thank you Taylor. Those are great quotes.
XacTactX
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Re: Investors Were Warned.

Post by XacTactX »

MostlyABogleHead wrote: Tue Sep 01, 2020 12:22 am I had a related question. Are there any material to understand the value premium and why it exists in a more understandable form? And more importantly why does it exist now even after this is well known for a long time now (ie., why has this not priced in the cost of the funds and hence raising the cost of these stocks?)
The most thorough and accessible source I've found is Your Complete Guide to Factor-Based Investing by Larry Swedroe and Andrew Berkin. They have a chapter for value and they talk about risk-based explanations (value stocks have more unstable earnings, more fixed assets that can't be scaled down in bad times, and more debt) and behavior-based explanations (growth stocks are popular, people bid the prices up because they think sales and earnings will grow at an unrealistic rate, stock analysts do the same thing). The value premium should continue because of the risk-based explanations, but the behavior-based explanations can disappear if enough people realize there is a pricing error.

Here's a link to the book, it's one of my favorites. Your Complete Guide to Factor-Based Investing.
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rascott
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Re: Investors Were Warned.

Post by rascott »

mrspock wrote: Mon Aug 31, 2020 11:14 pm
rascott wrote: Mon Aug 31, 2020 10:52 pm This just seems like a trolling post at this point. Pretty shameful, honestly.
...
Shameful? I think that's a bit much, he's one of the long time Bogleheads who's contributed to this forum in community in more ways than most of us ever will.

Trolling posts don't include a well researched, nearly decades long list, from a variety of sources warning of the dangers of tilting/out smarting basic index investing.

Nobody is saying people can't tilt themselves into shaving off time working, adding few extra years, untold riches or financial oblivion. Investing after all is one of the pursuits where we have to compromise with nobody. It's your retirement, and it's your money. People like Taylor are just trying to help, and he's making an important point by recapping some history.

Again, perhaps the risk premium is there, but from where I sit, the frequency between collecting on the premium appears to be so large, it borders on generational and thus useless to anything but a dynasty trust.
Perhaps you can't use links? His very first quote was from Dec 1999. Look what SCV did compared with TSM since that time.


And yet his post was "investors were warned". Warned of what, exactly? Does he often warn people that TSM/Mega cap equities can go through a decade+ long period of massive underperformance compared with other equity classes?

I think we all know the answer to that.
columbia
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Re: Investors Were Warned.

Post by columbia »

Trader Joe wrote: Tue Sep 01, 2020 1:19 am Thank you Taylor. Those are great quotes.
+1000

Buy one or two total market/large cap funds and get on with the serious of enjoying life and hand wringing over your bond fund choices. :)
rascott
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Re: Investors Were Warned.

Post by rascott »

willthrill81 wrote: Mon Aug 31, 2020 9:22 pm
000 wrote: Mon Aug 31, 2020 9:06 pm Investors were also warned, by none other than Jack Bogle, about valuations prior to the dot com crash.

Should they have taken some action in regard to that warning?
Mr. Bogle was not nearly as dogmatic as many here with regard to the BH principles. For him, they were much more akin to 'strong guidelines' than 'strict rules'.

He timed the market at least once (quite successfully, though he later said that he didn't know any successful market timers).

He told investors to 'buy the haystack' as long as that 'haystack' was U.S. stock.

He was the father of index investing but was open to active investing if the costs were low (e.g. his stake in Wellington).

He eschewed value investing but had a significant holding in a fund with a decided value tilt (i.e. Wellington).

He eschewed gold and commodities but once recommended a 5% allocation to gold for an endowment fund.

None of that makes lessens his contributions or anything else. Quite the contrary, I admire that he was not closed minded to new or different ways to approach investing or to truly unique market opportunities.

Bogle's main consistency across his works were that fees matter..... he may have not had much of a belief in factor investing..... but he never wrote harshly about the subject. He typically thought that if held for long periods, that it wouldn't really much matter. That different equity asset classes would randomly outperform over time..... which is much of what we've seen over the last 25 years.

But paying high fees to managers was something that was guaranteed to cost you.... and was the one thing Bogle was dogmatic about avoiding.

Merriman discussed meeting with Bogle regarding factor investing.... and it wasn't that Bogle had any huge issue with it..... but 1) felt it made things too complicated for the average investor, and 2) tracking error makes it difficult for an average investor to stick with during periods like we've seen over the last 2 years.
whereskyle
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Re: Investors Were Warned.

Post by whereskyle »

Just amazing to me how many tilters are upset that Taylor is recommending yet again a simple total-market portfolio.

Dear tilters,

The advice to buy and hold a single total-market fund is the single best piece of investing advice one can possibly give and one can possibly receive.

Period.

You may tilt all you like, but please do not pretend that advising people to tilt in any direction, with all the behavioral risks involved, is better than advising them to simply buy and hold the market. Absolutely not. Tilting is a game you can play for yourself, with experience, and with appropriate appreciation for the risks involved. But tilting is idiosyncratic, should remain as such, and is poor default advice for new investors.

Buying the market and holding it, however, is indispituably good advice for virtually every investor. Just ask Fama and French.

Please don't bash Taylor for criticizing tilters and advising people to hold the market. Such bashing to me is simply disingenuous, even if you tilt.
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burritoLover
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Re: Investors Were Warned.

Post by burritoLover »

mrspock wrote: Mon Aug 31, 2020 8:19 pm
burritoLover wrote: Mon Aug 31, 2020 5:06 pm
mrspock wrote: Mon Aug 31, 2020 5:01 pm
rob wrote: Mon Aug 31, 2020 4:51 pm I'm sorry but what's the end state of this post? I think we all have to be careful about dogma....
The current best theory is that small cap value derives it's alpha from the additional risk an investor takes on. To which I say, if investing were that easy, people would just go find the equities with the highest volatility, create an ETF and just sit and collect the profits. Tons of books easily disprove this approach -- it just doesn't work.
So, you're saying there's also no risk premium for equities over bonds then. Since you could just sit on an ETF of 100% equities and "collect the profits" over bonds and that doesn't make sense to you.
What I'm saying is "risk premium" is just a model to understand how investors value different asset classes. But just that.... it's a model. By the very definition of a model it's prone to being over simplified, have input/output problems (i.e. garbage in, garbage out) or may simply not work if you sufficiently change the context in which it is applied (i.e. all of equities to specific groups of equities, time interval). It's pretty clear you cannot arbitrarily apply the idea of "risk premium" and go blindly applying it to every permutation of financial instruments under the sun.
You are ignoring evidence-based peer-reviewed research because it just doesn't make sense to you? Have you actually read the research? If so, what specifically are you refuting and what evidence-based reason are you doing so?
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Re: Investors Were Warned.

Post by vineviz »

Munir wrote: Tue Sep 01, 2020 12:06 am Am I reading this right? Are some posters trashing Taylor Larimore on the Boglehead Forum? Give me a break! You may disagree with some of his views but we usually treat Taylor with sensitivity and respect for the numerous services he has performed for many members of this forum- including me. Maybe I am misinterpreting some of the language I see.
It’s always hard to read motivation in someone’s posted words.

I have an immense respect for Taylor and his contributions to investors over the many years I’ve been reading his posts, but he’s not immune to the same sorts of cognitive and behavioral errors that all investors are prone to. And this thread exemplifies many of those.

When Bogle was wrong about something, we say so kindly. Taylor has earned the same level of respect, IMHO.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
columbia
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Re: Investors Were Warned.

Post by columbia »

Maybe too many of you are chasing the same perceived future premium.
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vineviz
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Re: Investors Were Warned.

Post by vineviz »

columbia wrote: Tue Sep 01, 2020 6:42 am Maybe too many of you are chasing the same perceived future premium.
We should all go to 100% Treasury bonds, you think?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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nedsaid
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Re: Investors Were Warned.

Post by nedsaid »

willthrill81 wrote: Mon Aug 31, 2020 9:22 pm
000 wrote: Mon Aug 31, 2020 9:06 pm Investors were also warned, by none other than Jack Bogle, about valuations prior to the dot com crash.

Should they have taken some action in regard to that warning?
Mr. Bogle was not nearly as dogmatic as many here with regard to the BH principles. For him, they were much more akin to 'strong guidelines' than 'strict rules'.

He timed the market at least once (quite successfully, though he later said that he didn't know any successful market timers).

He told investors to 'buy the haystack' as long as that 'haystack' was U.S. stock.

He was the father of index investing but was open to active investing if the costs were low (e.g. his stake in Wellington).

He eschewed value investing but had a significant holding in a fund with a decided value tilt (i.e. Wellington).

He eschewed gold and commodities but once recommended a 5% allocation to gold for an endowment fund.

None of that makes lessens his contributions or anything else. Quite the contrary, I admire that he was not closed minded to new or different ways to approach investing or to truly unique market opportunities.
This is a good summary of the surprising things that Jack Bogle said or did. And there are more. He was not as rigid or doctrinaire in real life as he is often portrayed.
A fool and his money are good for business.
columbia
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Re: Investors Were Warned.

Post by columbia »

vineviz wrote: Tue Sep 01, 2020 7:52 am
columbia wrote: Tue Sep 01, 2020 6:42 am Maybe too many of you are chasing the same perceived future premium.
We should all go to 100% Treasury bonds, you think?
This thread is about small cap and small cap value.
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jason2459
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Re: Investors Were Warned.

Post by jason2459 »

nedsaid wrote: Tue Sep 01, 2020 8:07 am
willthrill81 wrote: Mon Aug 31, 2020 9:22 pm
000 wrote: Mon Aug 31, 2020 9:06 pm Investors were also warned, by none other than Jack Bogle, about valuations prior to the dot com crash.

Should they have taken some action in regard to that warning?
Mr. Bogle was not nearly as dogmatic as many here with regard to the BH principles. For him, they were much more akin to 'strong guidelines' than 'strict rules'.

He timed the market at least once (quite successfully, though he later said that he didn't know any successful market timers).

He told investors to 'buy the haystack' as long as that 'haystack' was U.S. stock.

He was the father of index investing but was open to active investing if the costs were low (e.g. his stake in Wellington).

He eschewed value investing but had a significant holding in a fund with a decided value tilt (i.e. Wellington).

He eschewed gold and commodities but once recommended a 5% allocation to gold for an endowment fund.

None of that makes lessens his contributions or anything else. Quite the contrary, I admire that he was not closed minded to new or different ways to approach investing or to truly unique market opportunities.
This is a good summary of the surprising things that Jack Bogle said or did. And there are more. He was not as rigid or doctrinaire in real life as he is often portrayed.
My understanding is he more or less wanted to stress the importance of staying the course, simplify where you can, and keep costs low. If you go with SCV then do so as simply, as cost effective as possible, and stay the course through ups and downs forever basically.

I know he's said that in an interview regarding SCV as well. I'd have to search for the video I saw it in. Not that he suggested SCV but if someone did it for a good reason then by all means do it and stick to it.

Same with gold. He says he had a small allocation to it himself though doesn't believe in it as an investment or suggest anyone else do it. But if you do it then do it for the long hall.

The basic all US total market and total US bond indexes are the core and recommendation for everyone. As Mr. Ferri puts it the rest is how you decorate your cake if you want to.

Even Dr. Fama who is constantly researching the factors says most everyone could or should just sit on the total market by market cap.

To each their own. :sharebeer
Last edited by jason2459 on Tue Sep 01, 2020 8:34 am, edited 1 time in total.
burritoLover
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Re: Investors Were Warned.

Post by burritoLover »

Taylor doesn't believe in holding the total market in equities - he recommends a significant tilt to U.S. stocks rather than the global market weight. So there's plenty of tilting to go around in this forum. The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
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Re: Investors Were Warned.

Post by PicassoSparks »

vineviz wrote: Tue Sep 01, 2020 7:52 am
columbia wrote: Tue Sep 01, 2020 6:42 am Maybe too many of you are chasing the same perceived future premium.
We should all go to 100% Treasury bonds, you think?
I was recently on the phone with my retired father who spent a lot of time trying to understand the stock market and invest prudently. My parents saved aggressively, live frugally, and so were able to retire early and are doing OK. He advised me that I shouldn't get into stocks at all, and that a ladder of GICs (he's Canadian) was the best investment they'd ended up making. I chalked that up to some mistakes he might have made chasing returns along the way and so on, having thoroughly absorbed the advice of Bogleheads and others about the long term expected returns of stocks.

A little later, I was reading this interesting Portfolio Charts article about cash. My jaw dropped when I came to this line:
here’s a real mind-bender for US-centric investors — in Canada since 1970, the safe withdrawal rates for all retirement lengths up to 40 years with a 100% cash portfolio have been equal or superior to one with 100% stocks!
I think we ought to be more respectful of how wide a dispersion our results can have when we take on the risk of the market.
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Re: Investors Were Warned.

Post by vineviz »

columbia wrote: Tue Sep 01, 2020 8:11 am
vineviz wrote: Tue Sep 01, 2020 7:52 am
columbia wrote: Tue Sep 01, 2020 6:42 am Maybe too many of you are chasing the same perceived future premium.
We should all go to 100% Treasury bonds, you think?
This thread is about small cap and small cap value.
Is it? Or is it about selective memory and cognitive dissonance?

Anyone investing in ANY stocks is "chasing a perceived future premium", regardless of WHICH kind of stocks they own. The only way to avoid "chasing a perceived future premium" is to buy only risk-free assets, like US Treasuries.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
columbia
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Re: Investors Were Warned.

Post by columbia »

vineviz wrote: Tue Sep 01, 2020 8:39 am
Is it? Or is it about selective memory and cognitive dissonance?
If you want to accuse Mr. Larimore of having selective memory and cognitive dissonance, maybe just him a message.
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Re: Investors Were Warned.

Post by Whakamole »

whereskyle wrote: Tue Sep 01, 2020 6:29 am The advice to buy and hold a single total-market fund is the single best piece of investing advice one can possibly give and one can possibly receive.

Period.
So... VTSAX? No internationally-traded companies? Vanguard recommends international weighted to market capitalization; Taylor has (at times) said 20% because of two quotes.

Or do you mean VTWAX? That includes international stocks, but at a higher level than Taylor has recommended with his two quotes. But it also has no bonds...
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Re: Investors Were Warned.

Post by jason2459 »

Whakamole wrote: Tue Sep 01, 2020 8:46 am
whereskyle wrote: Tue Sep 01, 2020 6:29 am The advice to buy and hold a single total-market fund is the single best piece of investing advice one can possibly give and one can possibly receive.

Period.
So... VTSAX? No internationally-traded companies? Vanguard recommends international weighted to market capitalization; Taylor has (at times) said 20% because of two quotes.

Or do you mean VTWAX? That includes international stocks, but at a higher level than Taylor has recommended with his two quotes. But it also has no bonds...
If you want to get as close to what someone like Dr. Fama says "Total Market" or just the market then VT (VTWAX) and BNDW (no MF) would give a close approximate of the world of tradable securities.
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Re: Investors Were Warned.

Post by rkhusky »

burritoLover wrote: Tue Sep 01, 2020 8:32 am The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
No. It is the idea that small value is guaranteed to outperform the market that is foolish. Same as the idea that the US is guaranteed to outperform the global market. (Also the idea that either has a higher probability of outperforming)

Both are preferences that one needs to stick with long term in order to achieve any premium, if a premium happens to show up.
Last edited by rkhusky on Tue Sep 01, 2020 9:03 am, edited 1 time in total.
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Re: Investors Were Warned.

Post by Whakamole »

jason2459 wrote: Tue Sep 01, 2020 8:51 am
Whakamole wrote: Tue Sep 01, 2020 8:46 am
whereskyle wrote: Tue Sep 01, 2020 6:29 am The advice to buy and hold a single total-market fund is the single best piece of investing advice one can possibly give and one can possibly receive.

Period.
So... VTSAX? No internationally-traded companies? Vanguard recommends international weighted to market capitalization; Taylor has (at times) said 20% because of two quotes.

Or do you mean VTWAX? That includes international stocks, but at a higher level than Taylor has recommended with his two quotes. But it also has no bonds...
If you want to get as close to what someone like Dr. Fama says "Total Market" or just the market then VT (VTWAX) and BNDW (no MF) would give a close approximate of the world of tradable securities.
Except that's not a "single total-market fund." That's two funds.

Then you've got the allocation - 80% stocks/20% bonds? 60/40? 50/50? Age in bonds? (Age-10) in bonds?

And then there's investor psychology. There's no end of threads - including one by myself - that are looking at low returns for a sizeable amount of money in bonds. Certainly there was much more enthusiasm towards a sizeable bond holding when they were paying 10%.
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Re: Investors Were Warned.

Post by vineviz »

columbia wrote: Tue Sep 01, 2020 8:44 am
vineviz wrote: Tue Sep 01, 2020 8:39 am
Is it? Or is it about selective memory and cognitive dissonance?
If you want to accuse Mr. Larimore of having selective memory and cognitive dissonance, maybe just him a message.
It’s not an “accusation”: being human isn’t a crime. Plus, I wasn’t referring specifically to Taylor.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Investors Were Warned.

Post by vineviz »

rkhusky wrote: Tue Sep 01, 2020 8:57 am
burritoLover wrote: Tue Sep 01, 2020 8:32 am The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
No. It is the idea that small value is guaranteed to outperform the market that is foolish. Same as the idea that the US is guaranteed to outperform the global market.

Both are preferences that one needs to stick with long term in order to achieve any premium, if a premium happens to show up.
I’ve never encountered a SCV investor who thought that “small value is guaranteed to outperform the market”.

My sense is that people who DON’T invest in SCV are afraid that other people think this, even though virtually no one does.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Investors Were Warned.

Post by rkhusky »

vineviz wrote: Tue Sep 01, 2020 9:03 am
rkhusky wrote: Tue Sep 01, 2020 8:57 am
burritoLover wrote: Tue Sep 01, 2020 8:32 am The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
No. It is the idea that small value is guaranteed to outperform the market that is foolish. Same as the idea that the US is guaranteed to outperform the global market.

Both are preferences that one needs to stick with long term in order to achieve any premium, if a premium happens to show up.
I’ve never encountered a SCV investor who thought that “small value is guaranteed to outperform the market”.

My sense is that people who DON’T invest in SCV are afraid that other people think this, even though virtually no one does.
Or that SCV has a higher probability of outperforming the market. The market does not have a probability distribution, at least not a static distribution.
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Re: Investors Were Warned.

Post by jason2459 »

Whakamole wrote: Tue Sep 01, 2020 8:59 am
jason2459 wrote: Tue Sep 01, 2020 8:51 am
Whakamole wrote: Tue Sep 01, 2020 8:46 am
whereskyle wrote: Tue Sep 01, 2020 6:29 am The advice to buy and hold a single total-market fund is the single best piece of investing advice one can possibly give and one can possibly receive.

Period.
So... VTSAX? No internationally-traded companies? Vanguard recommends international weighted to market capitalization; Taylor has (at times) said 20% because of two quotes.

Or do you mean VTWAX? That includes international stocks, but at a higher level than Taylor has recommended with his two quotes. But it also has no bonds...
If you want to get as close to what someone like Dr. Fama says "Total Market" or just the market then VT (VTWAX) and BNDW (no MF) would give a close approximate of the world of tradable securities.
Except that's not a "single total-market fund." That's two funds.

Then you've got the allocation - 80% stocks/20% bonds? 60/40? 50/50? Age in bonds? (Age-10) in bonds?

And then there's investor psychology. There's no end of threads - including one by myself - that are looking at low returns for a sizeable amount of money in bonds. Certainly there was much more enthusiasm towards a sizeable bond holding when they were paying 10%.
Hence the word approximate.
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Re: Investors Were Warned.

Post by silent_john »

rascott wrote: Mon Aug 31, 2020 10:52 pm This just seems like a trolling post at this point. Pretty shameful, honestly.
While I respect TL's often contradicting opinion, this is the first thing I thought when I saw the thread. TL's opinion and advice is well known since it's repeated, ad nauseum, in every single SCV thread on here.
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Re: Investors Were Warned.

Post by Ramjet »

Can't believe you all took the bait with this thread...again :oops:
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Re: Investors Were Warned.

Post by Ryzen »

I am staying the course.

With a small- and mid- value tilt :mrgreen: :sharebeer
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Re: Investors Were Warned.

Post by vineviz »

rkhusky wrote: Tue Sep 01, 2020 9:05 am Or that SCV has a higher probability of outperforming the market. The market does not have a probability distribution, at least not a static distribution.
“Higher probability” than what?

I think it’s safe to say that most people who are overweight in SCV think that the probability of “outperforming the market” is greater than zero. Beyond that, I don’t see much room to generalize.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Investors Were Warned.

Post by nedsaid »

vineviz wrote: Tue Sep 01, 2020 6:40 am
Munir wrote: Tue Sep 01, 2020 12:06 am Am I reading this right? Are some posters trashing Taylor Larimore on the Boglehead Forum? Give me a break! You may disagree with some of his views but we usually treat Taylor with sensitivity and respect for the numerous services he has performed for many members of this forum- including me. Maybe I am misinterpreting some of the language I see.
It’s always hard to read motivation in someone’s posted words.

I have an immense respect for Taylor and his contributions to investors over the many years I’ve been reading his posts, but he’s not immune to the same sorts of cognitive and behavioral errors that all investors are prone to. And this thread exemplifies many of those.

When Bogle was wrong about something, we say so kindly. Taylor has earned the same level of respect, IMHO.
My advice to investors has been about the same since I started posting here. Pretty much it is hold a simpler portfolio of the "Total" Stock and Bond index funds if you don't believe the academic research and Small/Value tilt your portfolios if you do believe the research. I have consistently said that if you tilt, don't overdo it. The reality is that my tilts are relatively mild.

There used to be a truce here where each side could argue their case, we had spirited and fun discussions here. It wasn't just over Small/Value tilting vs. Three Fund, there were the dividend threads, the Value threads, the US vs International threads, the REIT threads, the TIPS threads, the commodities threads. This truce lasted until a well known poster started discussing Alternative investments and then the tone here changed. It has been less fun since but I have chosen to continue posting.

As far as Taylor, I have great respect for what he has done here and no one disputes that. But there is a thing called overdoing it.

We had an extended period of time where the S&P 500 and the Total Stock Market Index were flat to down, from about March of 2000 through early 2013. No one here was saying that the 3 funders were fools for sticking to their discipline, markets are like that. The US Stock Market has experienced long secular bear markets during its history, from 1929 through about 1948, from 1968 through 1984, and from 2000 through 2012. No one here is saying that because of those long secular bear markets that we should not invest in stocks.

If you post here, you will get feedback and sometimes criticism. I thought Larry Swedroe's views on a few things were overdone. I have teased Rick Ferri about running away from Small Value. The only one who is almost unassailable here is Bill Bernstein, his work is so very good and is almost timeless. His early work still holds up very well. Even Mr. Bogle has been mildly critiqued here.

My own views haven't really changed. What has shifted is that I don't advocate for new investors to factor tilt. There is a lot of nuance to this discussion and it gets to be confusing and overwhelming for somebody new. In fact, I recently discussed the 3 fund portfolio with a family member who was getting enthusiastic about the stock market.

I am maintaining my tilts mainly because I am getting alarmed about what I see as a buying panic in the High Tech/Internet part of the market. There is more concentration at the top than I like to see. I have seen this movie before, while I am not predicting doom, just saying that market leadership does change and the Large Cap Growth/High Tech-Internet/FAANG stocks trend won't last forever.
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Re: Investors Were Warned.

Post by Robot Monster »

vineviz wrote: Tue Sep 01, 2020 8:59 am ...being human isn’t a crime.
You know a thread about small cap, and small cap value, has gone of the rails when this type of thing needs to be clarified.
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Re: Investors Were Warned.

Post by rkhusky »

vineviz wrote: Tue Sep 01, 2020 9:15 am
rkhusky wrote: Tue Sep 01, 2020 9:05 am Or that SCV has a higher probability of outperforming the market. The market does not have a probability distribution, at least not a static distribution.
“Higher probability” than what?

I think it’s safe to say that most people who are overweight in SCV think that the probability of “outperforming the market” is greater than zero. Beyond that, I don’t see much room to generalize.
Higher than SCG, LCG, or LCV. I would say that all 4 have a higher than zero chance of out-performing the market, but can't say which is higher than the other.
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Re: Investors Were Warned.

Post by burritoLover »

rkhusky wrote: Tue Sep 01, 2020 8:57 am
burritoLover wrote: Tue Sep 01, 2020 8:32 am The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
No. It is the idea that small value is guaranteed to outperform the market that is foolish. Same as the idea that the US is guaranteed to outperform the global market. (Also the idea that either has a higher probability of outperforming)

Both are preferences that one needs to stick with long term in order to achieve any premium, if a premium happens to show up.
No one is saying anything is guaranteed with small cap, value or other factors.
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Re: Investors Were Warned.

Post by rkhusky »

burritoLover wrote: Tue Sep 01, 2020 9:31 am
rkhusky wrote: Tue Sep 01, 2020 8:57 am
burritoLover wrote: Tue Sep 01, 2020 8:32 am The difference is the U.S. tilt on this forum is framed as a matter of "personal preference", while anything like small cap value is framed as reckless and stupid.
No. It is the idea that small value is guaranteed to outperform the market that is foolish. Same as the idea that the US is guaranteed to outperform the global market. (Also the idea that either has a higher probability of outperforming)

Both are preferences that one needs to stick with long term in order to achieve any premium, if a premium happens to show up.
No one is saying anything is guaranteed with small cap, value or other factors.
I've seen posts where it seems otherwise. Perhaps they are naive investors that think SCV investing is the path to beating the market.
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