How do Bogleheads cope with not beating the market?

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Chicken Little
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Re: How do Bogleheads cope with not beating the market?

Post by Chicken Little »

I’m going to double-down and ask how much of the activity on here is actually about beating the market?

If I wanted to be reductionist and say the market return is the three fund, then isn’t everything else trying to do better?

That’s small-cap-value, US only, risk-parity, RBDs etc. Sure, you can get lost in semantics of risk-adjusted-return or whatever, but in reality, in this little oasis of indexing, how many of your compatriots are trying to beat your return?
NotWhoYouThink
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Re: How do Bogleheads cope with not beating the market?

Post by NotWhoYouThink »

I don't need to feel like I've beaten the market, but here is something you can do if you feel you are falling behind your friends' investment performance.

Start doing what they do. Lie!
When Amazon shoots up , mention that you just bought some.
When Tesla crashes, express relief that you just sold yours.

Don't tell anyone what you are doing before hand, tell them after the fact that you just did whatever they wish they just did.
aristotelian
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Re: How do Bogleheads cope with not beating the market?

Post by aristotelian »

I would guess most Bogleheads have at one point or another underperformed the market. I certainly have. I just remember that feeling any time I read about TSLA or the next big thing.
GoldenGoose
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Re: How do Bogleheads cope with not beating the market?

Post by GoldenGoose »

NotWhoYouThink wrote: Tue Oct 13, 2020 10:09 am I don't need to feel like I've beaten the market, but here is something you can do if you feel you are falling behind your friends' investment performance.

Start doing what they do. Lie!
When Amazon shoots up , mention that you just bought some.
When Tesla crashes, express relief that you just sold yours.

Don't tell anyone what you are doing before hand, tell them after the fact that you just did whatever they wish they just did.
This is along the same line as keeping saying to yourself I am happy with my index return. Yes there are some people who like to fib but chances are there could be others who tell the truth too. It's not like all lie.
Tattarrattat
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Re: How do Bogleheads cope with not beating the market?

Post by Tattarrattat »

So " beating the market" is a mental construct you have created for yourself. Need to replace it with a new mental construct. For example, set a goal for yourself then map out a realistic path to that goal, setting a bar for yourself, eg, a goal like "retire at age 60 with x dollars assets, will need to save 15% of salary and have it grow at 5% a year," or whatever you come up with. Then just see if you are meeting your goal year by year, using that as a yardstick instead of SPY or QQQ or whatever.
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David Jay
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Re: How do Bogleheads cope with not beating the market?

Post by David Jay »

Are you a golfer? Bogleheads is scratch golf. But it is not simply averaging par, it is par on every hole. No birdies. No bogies. Par every hole.

Which is better than most professionals. You probably "make the cut" on tour most weekends.

I can live with that. But if indexing isn't exciting enough for you, take up wake boarding or extreme skiing.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
HawkeyePierce
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Re: How do Bogleheads cope with not beating the market?

Post by HawkeyePierce »

I don't know of any other field where you can be exactly average by just doing nothing. Normally you have to work up to that.
Broken Man 1999
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Re: How do Bogleheads cope with not beating the market?

Post by Broken Man 1999 »

Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
"..So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?..."

Ah, if only that voice in my head just wanted me to trade!

Sadly, that is not what that voice in my head wants to talk about! :shock:

Usually I do not listen.... :twisted:

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
JS-Elcano
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Re: How do Bogleheads cope with not beating the market?

Post by JS-Elcano »

3funder wrote: Tue Oct 13, 2020 5:56 am My goal is to invest as much money as I can so that my retirement savings will "look like something" one day. Beating the market simply never entered into my thought process. I'm not trying to sound more enlightened than anyone else; I just don't factor superiority of returns relative to the market into my decision making. To me, it is a function of having an appropriate asset allocation for my age/time horizon and risk tolerance, which, at age 36, is approximately 80/20.
+1.

I don't care about beating the market either. I have a goal of when I want to retire and I have a number that I am aiming to reach by then. I have yearly goals that I need to meet in order to have a reasonable chance to get to this number in this time - that's all I care about: Am I on track? If I am falling behind I will consider saving more (hasn't happened yet). My yearly goals are based on fairly reasonable assumptions about the performance of my portfolio, certainly below historic averages of market performance. So, as long as I hit my annual target I don't care about whether I beat the market or not :beer
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RootSki
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Re: How do Bogleheads cope with not beating the market?

Post by RootSki »

It’s pretty simple. I do not allow my emotions to influence my portfolio. When in doubt, I refer to my IPS for re-validation.
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jakehefty17
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Re: How do Bogleheads cope with not beating the market?

Post by jakehefty17 »

I don't care to beat the market my friend... I AM THE MARKET.

Seriously though, it's hard to beat the market but easy to be the market. Call me a type B personality but it's just a logical fallacy.

Another way to look at it... think of blackjack. Blackjack has an optimal play style (suggested hit/stay for every scenario). If you're going to play the game play to the odds. You never know what card is buried or what card will come next, but you can rest assured that you made a logical choice.

Would agree that other hobbies and priorities would be healthy... :P
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski
Normchad
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Re: How do Bogleheads cope with not beating the market?

Post by Normchad »

I would have to be pretty full of myself to even think that I could beat the market.

I am confident, based on studies, that I have beat 85% of all investors over the last ten years. But that is really meaningless to me.

The only money that I can spend is the money that I have. Whatever everybody else has doesn’t have any impact on me.

Luckily, if I get even modest returns, then I will win my game, I will retire early, and I will want for nothing financially in my life.
mptfan
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Re: How do Bogleheads cope with not beating the market?

Post by mptfan »

Register44 wrote: Mon Oct 12, 2020 11:12 pm So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade...?"
I don't have such a voice in my head. I do get the itch every once in a while to do something, but not to actively trade, so I might tweak my AA a little and trade some of my index bond fund for my index stock fund, or I might move some cash to a short term bond fund, but these are minor tweaks that are done every once in a while and I know they make very little difference, but they satisfy my urge to do something.
wolf359
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Re: How do Bogleheads cope with not beating the market?

Post by wolf359 »

Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
It's Prime Day at Amazon today and tomorrow. One of the Prime Day specials is that the Kindle version of John Bogle's "The Little Book of Common Sense Investing" is available for only $5.

In this book, Mr. Bogle illustrates exactly why, "After the deduction of the costs of investing, beating the stock market is a loser's game.

I re-read this book occasionally to keep on track.
acegolfer
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Re: How do Bogleheads cope with not beating the market?

Post by acegolfer »

Register44 wrote: Mon Oct 12, 2020 11:12 pm But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
Read and research reputable articles rather than blogs. You will soon learn that your belief is wrong.
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Doom&Gloom
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Re: How do Bogleheads cope with not beating the market?

Post by Doom&Gloom »

From the knowledge that I always achieve my goal of getting market returns.

I just wish that I had made that my goal earlier.
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Register44
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Re: How do Bogleheads cope with not beating the market?

Post by Register44 »

acegolfer wrote: Tue Oct 13, 2020 2:10 pm
Register44 wrote: Mon Oct 12, 2020 11:12 pm But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
Read and research reputable articles rather than blogs. You will soon learn that your belief is wrong.
Thank you all for the excellent replies! I will bookmark and refer to this in the future :beer

The remaining challenge is similar to the quote above of me not wanting to "give up on trading." I have always been competitive and don't like to give up. But it almost sounds like with investing you have to turn that thinking upside down. Accepting the market and not messing with it and staying the course is not giving up at all. This is enlightening instead of running in and out of stocks trying to time things and losing sleep in the process.

I fight the intrigue from reading about Peter Lynch, Jim Roger, and Buffet as they make it seem that their strategy can be emulated. But from the replies it sounds like that requires a full time dedicated job, lifestyle change, greater IQ, and acceptance that you could still actually lose to the market. Is this the correct take away?

They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.

Then finally I think you guys are right about needing other hobbies. I like finance, and wonder if there are other ways I could work in the field maybe as a side hustle rather than losing money trading?

As someone said if I just go 3 fund set and forget it feels like there is no longer reason for me to read financial news daily. I think I would actually miss that, but maybe I should try it and spend the time elsewhere as suggested.
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GerryL
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Re: How do Bogleheads cope with not beating the market?

Post by GerryL »

I focus on having ENOUGH rather than having MORE.
Do I have or am I on track to have ENOUGH to live the life I want? Yes. John Bogle wrote a little book titled "Enough."

Ironically, by focusing on enough, I ended up with more than enough.
acegolfer
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Re: How do Bogleheads cope with not beating the market?

Post by acegolfer »

Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
mptfan
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Re: How do Bogleheads cope with not beating the market?

Post by mptfan »

Register44 wrote: Tue Oct 13, 2020 2:23 pm As someone said if I just go 3 fund set and forget it feels like there is no longer reason for me to read financial news daily. I think I would actually miss that, but maybe I should try it and spend the time elsewhere as suggested.
Years ago I had cable TV, and I used to watch the various cable news channels, including CNBC, and I remember watching Jim Cramer at 6pm when I would get home from work and I admit it was entertaining to watch him bang on those buttons and yell "sell, sell, sell" or "buy, buy, buy" or various other sound effects. I would also sometimes watch CNBC in the morning (I think it was called Morning Bell). I cancelled cable TV several years ago and at first I did feel like I was missing out on the constant stream of news from the various cable news channels, and I did miss watching Jim Cramer for a short time...but after several weeks I stopped missing it and I came to realize that almost all of it was just noise, not real news, and it was designed to be entertaining or controversial in some way or to make me think that there was "breaking news" happening all the time and I needed to be constantly up to date...but after a while I did not miss it and I feel much more content now. Almost all of it is noise and manufactured controversy and drama and talking heads arguing with each other that adds nothing to my life.

Now, every once in a while I come across cable tv news, like the other day I stayed in a hotel room overnight and I watched some of the cable news channels... boy oh boy am I glad I don't watch that stuff anymore! All of it is biased from one side or the other, and the commercials...don't get me started. How did I watch all of those commercials before?

The point is, pull yourself away from the constant drumbeat of the media, including the financial media, you don't need it, you will be more at peace, and your life will be the better for it.
JS-Elcano
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Re: How do Bogleheads cope with not beating the market?

Post by JS-Elcano »

GerryL wrote: Tue Oct 13, 2020 2:26 pm I focus on having ENOUGH rather than having MORE.
Do I have or am I on track to have ENOUGH to live the life I want? Yes. John Bogle wrote a little book titled "Enough."

Ironically, by focusing on enough, I ended up with more than enough.
+1

My approach too.
Hallman
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Re: How do Bogleheads cope with not beating the market?

Post by Hallman »

I don't feel the need to cope with not beating the market. I feel absurdly lucky that it is possible to beat the vast majority of investors with little finance knowledge and the time required to do so is minimal.
Carol88888
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Re: How do Bogleheads cope with not beating the market?

Post by Carol88888 »

Are you kidding? Most professionals don't beat the market. The market is terribly difficult to beat.

I suspect that most of the people who may have told you they beat the market actually didn't. Remember the Beardstown Ladies? Poor recording keeping and math caused them to think they had beaten the market.
johnegonpdx
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Re: How do Bogleheads cope with not beating the market?

Post by johnegonpdx »

I define my financial goals in terms of increasing financial security for my family in the near and long-term. I measure success not in terms of beating a performance benchmark, but in terms of self-discipline over things I can directly control like:
1. savings rate
2. expenditures
3. debt
4. investment cost
5. investment risk/volatility vs. return balancing
6. the amount of time on this planet I spend on items 1 through 5 above vs. enjoying life.
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2pedals
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Re: How do Bogleheads cope with not beating the market?

Post by 2pedals »

I know I am not going to beat the market. I am already waaay behind the curve and made too many mistakes trying to do that. I thought I was smarter that that but wasn't. :oops: Now I am happy with my piece via shares of total market index and ex-US market index fund investing. I am quite happy now tracking along.
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LilyFleur
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Re: How do Bogleheads cope with not beating the market?

Post by LilyFleur »

mptfan wrote: Tue Oct 13, 2020 2:40 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm As someone said if I just go 3 fund set and forget it feels like there is no longer reason for me to read financial news daily. I think I would actually miss that, but maybe I should try it and spend the time elsewhere as suggested.
Years ago I had cable TV, and I used to watch the various cable news channels, including CNBC, and I remember watching Jim Cramer at 6pm when I would get home from work and I admit it was entertaining to watch him bang on those buttons and yell "sell, sell, sell" or "buy, buy, buy" or various other sound effects. I would also sometimes watch CNBC in the morning (I think it was called Morning Bell). I cancelled cable TV several years ago and at first I did feel like I was missing out on the constant stream of news from the various cable news channels, and I did miss watching Jim Cramer for a short time...but after several weeks I stopped missing it and I came to realize that almost all of it was just noise, not real news, and it was designed to be entertaining or controversial in some way or to make me think that there was "breaking news" happening all the time and I needed to be constantly up to date...but after a while I did not miss it and I feel much more content now. Almost all of it is noise and manufactured controversy and drama and talking heads arguing with each other that adds nothing to my life.

Now, every once in a while I come across cable tv news, like the other day I stayed in a hotel room overnight and I watched some of the cable news channels... boy oh boy am I glad I don't watch that stuff anymore! All of it is biased from one side or the other, and the commercials...don't get me started. How did I watch all of those commercials before?

The point is, pull yourself away from the constant drumbeat of the media, including the financial media, you don't need it, you will be more at peace, and your life will be the better for it.
How did you?
I minored in journalism in college and have never watched TV news. It's just not generally a high-quality news source.
langlands
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Re: How do Bogleheads cope with not beating the market?

Post by langlands »

acegolfer wrote: Tue Oct 13, 2020 2:31 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
Very interesting video, thanks. This idea that newer fund managers reliably outperform older fund managers is something I've never heard before and makes a lot of sense. Expense ratios rarely drop, but AUM reliably increases. And a large part of the video is explaining that there are diminishing returns to skill as scale (AUM) increases. So if one is hell-bent on using active funds, one could probably do a lot worse than finding new funds with low, but rapidly increasing AUM. Then when the fund has become "mainstream" with a large AUM, dump it and find the new up and coming thing. Probably wise to do this in a retirement account to save on taxes.
NotWhoYouThink
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Re: How do Bogleheads cope with not beating the market?

Post by NotWhoYouThink »

Another way to cope is to set challenges for yourself in your career or in other facets of your life. You can compete for a promotion or a new client, or you can have the greenest lawn or nicest workshop.
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Register44
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Re: How do Bogleheads cope with not beating the market?

Post by Register44 »

langlands wrote: Tue Oct 13, 2020 4:22 pm
acegolfer wrote: Tue Oct 13, 2020 2:31 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
Very interesting video, thanks. This idea that newer fund managers reliably outperform older fund managers is something I've never heard before and makes a lot of sense. Expense ratios rarely drop, but AUM reliably increases. And a large part of the video is explaining that there are diminishing returns to skill as scale (AUM) increases. So if one is hell-bent on using active funds, one could probably do a lot worse than finding new funds with low, but rapidly increasing AUM. Then when the fund has become "mainstream" with a large AUM, dump it and find the new up and coming thing. Probably wise to do this in a retirement account to save on taxes.
Yes thank you this was a great discussion. My takeaway is that this could be support to argue that Peter Lynch and Jim Rogers may not be able to return 30% a year in today's market. It seems they have tremendous skill, but operated against weaker competition. I guess this makes sense as we have seen Buffet's out performance slow down in the last decade.

It seems all the big time trading legends are from before the 2,000's. Correct me if I'm wrong, but do we have anyone today other than Ren Tech, which is a blackbox with scientists that I can't begin to understand.
BogleFan510
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Re: How do Bogleheads cope with not beating the market?

Post by BogleFan510 »

Um, I use my higher brain that says data and evidence matter. The data and evidence suggests that without superior information, outperforming the market via trading and stock picking requires accepting uncompensated risk. I dont have superior information in any cases right now, so stay on target with overall market returns as efficiently as possible via the best asset class available for each plan asset type. This means low or no fee, low cost and churn, liquidity/minimum bid ask spread, tracking to indexes of market. That is the information I use.

When I feel I do have superior information, I occasionally speculate, but I am accepting risk consciously and staying diversified, not speculating with any assets my overall portfolio and plans cant afford to lose.
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Re: How do Bogleheads cope with not beating the market?

Post by TomatoTomahto »

NotWhoYouThink wrote: Tue Oct 13, 2020 4:40 pm Another way to cope is to set challenges for yourself in your career or in other facets of your life. You can compete for a promotion or a new client, or you can have the greenest lawn or nicest workshop.
My wife’s career success neutralizes my “average” performance in markets :D

Btw, she is fine with that. Safety trumps swinging for the fences.
I get the FI part but not the RE part of FIRE.
langlands
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Re: How do Bogleheads cope with not beating the market?

Post by langlands »

Register44 wrote: Tue Oct 13, 2020 4:47 pm
langlands wrote: Tue Oct 13, 2020 4:22 pm
acegolfer wrote: Tue Oct 13, 2020 2:31 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
Very interesting video, thanks. This idea that newer fund managers reliably outperform older fund managers is something I've never heard before and makes a lot of sense. Expense ratios rarely drop, but AUM reliably increases. And a large part of the video is explaining that there are diminishing returns to skill as scale (AUM) increases. So if one is hell-bent on using active funds, one could probably do a lot worse than finding new funds with low, but rapidly increasing AUM. Then when the fund has become "mainstream" with a large AUM, dump it and find the new up and coming thing. Probably wise to do this in a retirement account to save on taxes.
Yes thank you this was a great discussion. My takeaway is that this could be support to argue that Peter Lynch and Jim Rogers may not be able to return 30% a year in today's market. It seems they have tremendous skill, but operated against weaker competition. I guess this makes sense as we have seen Buffet's out performance slow down in the last decade.

It seems all the big time trading legends are from before the 2,000's. Correct me if I'm wrong, but do we have anyone today other than Ren Tech, which is a blackbox with scientists that I can't begin to understand.
Yes, Buffett's performance has undoubtedly been hit by greater competition. I think it has also obviously been hit by its massive AUM (the other factor mentioned in the video). Buffett has openly admitted this and tells investors in BRK not to expect more than S&P 500 performance going forward. He's also said that if starting today (I think this was said about 10-15 years ago) with a tiny AUM (of say $100M), he would still handily beat the market.

I think that besides the successful quant funds, there are still quite a few successful discretionary long-short funds that do old fashioned stock picking based on deep dive fundamentals. I think what has really hurt mutual fund performance is that the hedge fund industry has matured substantially starting in the 1980's. All the billionaire finance people are hedge fund managers, not mutual fund managers. You have severe adverse selection where all the most talented people get sucked into hedge funds and away from mutual funds. The reason for this of course is the incentive structure: hedge funds charge based on both AUM and performance whereas mutual funds charge a fee only based on AUM. To be sure, the vast majority of hedge funds play the asset gathering game just like mutual funds, but there are a few that earn their living based primarily on performance. Naturally, those are all closed to outside investors.
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spdoublebass
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Re: How do Bogleheads cope with not beating the market?

Post by spdoublebass »

The real question is how do non Bogleheads cope with underperforming (and not beating) the market.
I'm trying to think, but nothing happens
Fallible
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Re: How do Bogleheads cope with not beating the market?

Post by Fallible »

Register44 wrote: Tue Oct 13, 2020 4:47 pm ... (OP replies to langlands and acegolfer):

My takeaway is that this could be support to argue that Peter Lynch and Jim Rogers may not be able to return 30% a year in today's market. It seems they have tremendous skill, but operated against weaker competition. ...
And it seems competition among the pros is now stronger than ever. In his classic book, "Winning the Loser's Game," 2017 ed., Charlie Ellis writes this in the chapter "Beating The Market":
Ironically, the reason so few investors do better than the market is not because they lack skill or diligence but rather because the markets are dominated by other investing experts, who are very capable, well informed and working all the time.
OP, I think if you are convinced of the futility of going up against top pros who are themselves experiencing the futility of going up against other top pros, it should help you "cope."

Also, it's not really just beating the market that tempts you, but what it means to you, what there is about it that tempts you and why. Understanding that deeply personal process can lead to the self-control that I think you're ultimately looking for, and it may lead to new and challenging interests with greater rewards.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: How do Bogleheads cope with not beating the market?

Post by 6bquick »

reln wrote: Tue Oct 13, 2020 12:14 am
Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I cope with it by setting my expectation to equal the market.
"Expectation is the root of all heartache" - someone, somewhere, once.
FoolMeOnce
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Re: How do Bogleheads cope with not beating the market?

Post by FoolMeOnce »

Bungo wrote: Mon Oct 12, 2020 11:25 pm I know that I won't underperform the market, which is more than most active investors can say long-term. Good enough for me.
I like this. If you need a competitive victory to feel comfortable, you can focus on the notion that while you aren't beating the market, you are beating most market players.
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tetractys
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Re: How do Bogleheads cope with not beating the market?

Post by tetractys »

A good Boglehead should actually beat the market by a small margin. Just cutting out the excess costs works.
BalancedJCB19
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Re: How do Bogleheads cope with not beating the market?

Post by BalancedJCB19 »

The most successful investors are dead people. Don't tweak, set it and look at it once a year to make sure everything is where you want it to be. Know that when you are ready to retire, you will be able to live off 3 to 5% of your portfolio and that will keep your belly full and a roof over your head. That should be good enough for most. Find another hobby.
rockstar
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Re: How do Bogleheads cope with not beating the market?

Post by rockstar »

I use the little book of common sense investing as my guide. Bogle helps me think through expected returns. Then, based on how my portfolio is setup, I determine what I should see in returns. Anything over that is great. That figure isn't always what the S&P 500 returns.

I also like Buffet's recommendation of the Intelligent Investor. Lots of good insights in there as well.

It boils down to having reasonable expectations.
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Re: How do Bogleheads cope with not beating the market?

Post by flaccidsteele »

Register44 wrote: Mon Oct 12, 2020 11:12 pm So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I’ve beaten the market across multiple accounts

The irony is that I’ve beaten the US index by investing in the US index

I just buy more during a bear

Image

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The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
JustinR
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Re: How do Bogleheads cope with not beating the market?

Post by JustinR »

Chicken Little wrote: Tue Oct 13, 2020 9:30 am
JustinR wrote: Tue Oct 13, 2020 2:56 am You deal with it by understanding that it's impossible, other than luck.
This is false.

A lot of people rally around that to be able to subscribe to indexing. The relevant point is not whether anyone can beat the market, or whether it’s possible to beat the market, but the likelihood that you can beat the market. Especially if that’s not even your job.

You can cite all the muckers & grinders who make their living off fees, but it’s silly to pretend there aren’t individuals who outperform. I would be hesitant to conclude that since you don’t know who they are, that they don’t exist.

Let me ask you, if you could beat the market, why would you need to set up a fund?
How is what I said false? I didn't say someone couldn't outperform.

It's obvious that I attribute what you're talking about to the last part of my sentence: "other than luck."
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Register44
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Re: How do Bogleheads cope with not beating the market?

Post by Register44 »

acegolfer wrote: Tue Oct 13, 2020 2:31 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
This video inspired me to look for more on this topic. I found this video by Michael Mauboussin. It was incredible.
https://youtu.be/1JLfqBsX5Lc?t=59

With these two videos and all the wisdom on the board I am feeling much better about things. As Mauboussin says it should feel liberating to accept the role of luck and it really does.

I think I may still need to hold a real small "play" account when I can't help it. But 95% I feel I can stick to the bogleheads approach now and feel good about having the time to try new endeavors and live life. Thank you all again so much. This thread has been amazing! :sharebeer
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Re: How do Bogleheads cope with not beating the market?

Post by flaccidsteele »

It’s almost impossible to lose when investing in the US index since the US market always recovers. Always. It’s never different this time

The baseline return is the market average. And the US market always recovers. The only thing an investor needs to do is NOTHING. How can a person lose?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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cos
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Re: How do Bogleheads cope with not beating the market?

Post by cos »

David Jay wrote: Tue Oct 13, 2020 11:37 am Are you a golfer? Bogleheads is scratch golf. But it is not simply averaging par, it is par on every hole. No birdies. No bogies. Par every hole.

Which is better than most professionals. You probably "make the cut" on tour most weekends.

I can live with that. But if indexing isn't exciting enough for you, take up wake boarding or extreme skiing.
So if Bogleheads indexing is scratch golf, what are wake boarding and extreme skiing?
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cinghiale
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Re: How do Bogleheads cope with not beating the market?

Post by cinghiale »

HawkeyePierce wrote,

I don't know of any other field where you can be exactly average by just doing nothing. Normally you have to work up to that.
It’s better than that. Since so much of active trading is subject to greed and fear, and since such trading incurs transaction costs (both taxes and fees), active management often leads to sub-optimal choices. So a passive index investor actually beats the average, as up to 80% of actively managed mutual funds and ETFs fail to beat their benchmarks over time.

The classic explication of this is found in John Bogle’s speech “The Relentless Rules of Humble Arithmetic.” All investors, but especially those who think there’s a consistent, ongoing way to beat the averages over the long haul, should read this piece and re-read it once a year. It bears repeating and it needs to stay lodged in memory.

https://www.researchgate.net/profile/J ... ion_detail
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell
hunoraut
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Re: How do Bogleheads cope with not beating the market?

Post by hunoraut »

GoldenGoose wrote: Tue Oct 13, 2020 4:12 am Easy for you guys to say to ignore the market and stay the course. You follow the market and see the rally. You look at the individual stocks and see some of them gaining 10% 20%. You read BH forum and see others up YTD 30% 40%. You look at your passive index funds and you see they are up 1% or 2%. No wonder people have anxiety. If you are a firm believer in passive investing, just plow your money in an index fund, turn off the tv, stop reading and posting in the BH forums and resist the urge of checking your returns. Can you do all that?
It's very well established that over the long term, it's nearly impossible for any individual to beat the market.

Compared to that, it's relatively easier to beat one's personal misconceptions, and accept the above truth.

What's my compromise?
(1) A large portion of my retirement fund is passive
(2) A smaller portion of my investment goes long in the flavor-of-the-quarter (currently participating in Tech)
(3) An even smaller portion is fun money, mostly shorting options, to participate in the market on a daily basis

So I get a little taste of each
newguy123
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Re: How do Bogleheads cope with not beating the market?

Post by newguy123 »

Made another thread and was referred to this thread. Wanted to chime in since I beat the market before a few years then took a devastating 30% down year. The problem is consistency, stress, and the market is not rational. Also it’s hard to buy back in once you cash out of the winning positions , the stocks you had before maybe very high or they maybe in a new down trend. Therefore riding the trend of the picked stock only lasts for a finite time. Lastly there is taxes which is paid after every sell order.

My story is I beat the market by a lot , but then I got greedy and tried riskier options which was not a good decision.


I have been doing a lot of reading and came to the conclusion that people who do what I do (go 100% in on positions) eventually go crazy. The one book that opened with my eye was “ Reminiscences of a Stock Operator” , a book about a stock trader who rode trends and outperformed the market drastically , only to lose it all multiple times and then finally burns out , killing himself.
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Re: How do Bogleheads cope with not beating the market?

Post by phantom0308 »

I try as much as possible to find other things to spend my time on.
whereskyle
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Re: How do Bogleheads cope with not beating the market?

Post by whereskyle »

Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
There is nothing to cope with in my view. It seems that I'm like you honestly. The stress of not holding the market is far greater to me than the stress of holding the market, so I do the latter. No telling whether I'll outperform a non-market portfolio, but the odds over the long term are clearly in my favor.

Relax and just keep investing. If you're diversified, there's really nothing to do but put money in. It takes energy and effort to learn about investing and implement your plan. Once you've done that, you might think of it as a hobby, but there is nothing more for you to do. Devote that energy elsewhere. Don't become a tinkerer.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: How do Bogleheads cope with not beating the market?

Post by Vanguard Fan 1367 »

Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I remember my attempt to follow Peter Lynch's advice in his books. I didn't do as well with my basket of stocks as the S & P 500. I did ok, I was better off investing in the market than with money market funds.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
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