"Why Bogleheads "Stay the Course"

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Taylor Larimore
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"Why Bogleheads "Stay the Course"

Post by Taylor Larimore »

Bogleheads:

Everytime we get a significent decline in stocks we receive posts by investors who contimplate selling or reducing their stock allocation. The same thing is true of bond investors during negative bond returns.

Below is a post I made in December, 2015 when the S&P 500 was 2059. Today it is over 4000.

viewtopic.php?f=10&t=179876&newpost=2726012

Lesson learned: Pick a stock bond ratio that you can stick with -- then STAY THE COURSE.

Best wishes.
Taylor
Jack Bogle's Words of WIsdom: "I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
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Re: "Why Bogleheads "Stay the Course"

Post by Normchad »

Thanks Taylor!

For myself, I stay the course because it maximizes my chances of success. Basically, I’m greedy. And this is the surest way I know of to get rich.

There are other ways to get rich of course. But this is the most certain path.

I appreciate all you’ve done over the years for all of us! Your words of wisdom are very soothing in stressful times.
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Re: "Why Bogleheads "Stay the Course"

Post by AerialWombat »

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Re: "Why Bogleheads "Stay the Course"

Post by Call_Me_Op »

As our namesake said, "Invest you must."
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Re: "Why Bogleheads "Stay the Course"

Post by lostcoast »

All I know about stocks is what I learned from Forrest Gump about investing is some fruit company named Apple.
So many posts on this forum show spreadsheets and graphs which mean nothing to me.
I hardly understand what a PE ratio, spreads, margins, calls, options, splits, moving average, etc. is.
So I invest in very few funds...total stock, total international stock, total bond and a few other I have had too long to ever sell.
Thanks to you Taylor and all the other BH's preaching the mantra....Stay The Course...it is the only thing that has worked for me since I left an advisor way back in '06.
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Re: "Why Bogleheads "Stay the Course"

Post by Normchad »

lostcoast wrote: Sun May 08, 2022 3:57 pm All I know about stocks is what I learned from Forrest Gump about investing is some fruit company named Apple.
So many posts on this forum show spreadsheets and graphs which mean nothing to me.
I hardly understand what a PE ratio, spreads, margins, calls, options, splits, moving average, etc. is.
So I invest in very few funds...total stock, total international stock, total bond and a few other I have had too long to ever sell.
Thanks to you Taylor and all the other BH's preaching the mantra....Stay The Course...it is the only thing that has worked for me since I left an advisor way back in '06.
I do the same as you. As it turns out though, we both should have bought Apple.
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Re: "Why Bogleheads "Stay the Course"

Post by sleepy06 »

Thank you, Taylor, and others for lessons on staying the course. This has helped us greatly. I have learned it applies to many but not all aspects of life.

I tried to "stay the course" by putting $100 in a pool for fantasy football, making the picks, and letting everything ride until the end of the season a few years ago. That did not work out well :D
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Re: "Why Bogleheads "Stay the Course"

Post by BradJ »

See this is where I try to explain to people being born stupid is a blessing. I stay the course because I’m too dumb to think of another plan that makes logical sense. Whoops, I meant cents.
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Re: "Why Bogleheads "Stay the Course"

Post by Normchad »

BradJ wrote: Sun May 08, 2022 8:26 pm See this is where I try to explain to people being born stupid is a blessing. I stay the course because I’m too dumb to think of another plan that makes logical sense. Whoops, I meant cents.
Ignorance is bliss. And I’m living in paradise.
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Re: "Why Bogleheads "Stay the Course"

Post by abuss368 »

Taylor Larimore wrote: Sun May 08, 2022 3:11 pm Bogleheads:

Everytime we get a significent decline in stocks we receive posts by investors who contimplate selling or reducing their stock allocation. The same thing is true of bond investors during negative bond returns.

Below is a post I made in December, 2015 when the S&P 500 was 2059. Today it is over 4000.

viewtopic.php?f=10&t=179876&newpost=2726012

Lesson learned: Pick a stock bond ratio that you can stick with -- then STAY THE COURSE.

Best wishes.
Taylor
Jack Bogle's Words of WIsdom: "I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
Hi Taylor -

I would expect for investors who are now second guessing their risk assessment with this current pullback, may not have allocated enough to bonds and cash in their portfolios.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: "Why Bogleheads "Stay the Course"

Post by Triple digit golfer »

Thank you, Taylor. I stay the course because I know it's the best chance of success. I feel incredibly fortunate to have gained this knowledge, thanks to this forum.
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Re: "Why Bogleheads "Stay the Course"

Post by andypanda »

"I stay the course because I’m too dumb to think of another plan that makes logical sense."

I'm doubly blessed, dumb and lazy.
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Re: "Why Bogleheads "Stay the Course"

Post by windaar »

abuss368 wrote: Sun May 08, 2022 8:36 pmI would expect for investors who are now second guessing their risk assessment with this current pullback, may not have allocated enough to bonds and cash in their portfolios.
Yes. When times are good the dominant sentiment on this board is to maximize equities and beat your chest about it. During corrections I see posters selling all the way down because their equities exposures didn't match their risk tolerance. Happens every time. Realistic risk assessment and a matching AA helps one to "stay the course" and not make bad moves when times are bad.
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Re: "Why Bogleheads "Stay the Course"

Post by ApeAttack »

lostcoast wrote: Sun May 08, 2022 3:57 pm All I know about stocks is what I learned from Forrest Gump about investing is some fruit company named Apple.
So many posts on this forum show spreadsheets and graphs which mean nothing to me.
I hardly understand what a PE ratio, spreads, margins, calls, options, splits, moving average, etc. is.
So I invest in very few funds...total stock, total international stock, total bond and a few other I have had too long to ever sell.
Thanks to you Taylor and all the other BH's preaching the mantra....Stay The Course...it is the only thing that has worked for me since I left an advisor way back in '06.
Investing is one of the few areas of life where one can be very successful with minimal effort and minimal intelligence. The amount of money earned per hour of work is truly incredible.

The only reason I visit this forum nowadays is to see how others react to turbulent times and occasionally chime in on a topic I know something about. I'm very comfortable in my investment strategy and only spend a couple hours per year on basic maintenance (verifying money was transferred to my 403b properly, maintaining my AA, etc.).

I feel blessed to have found this forum.
Just another lazy index investor.
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Re: "Why Bogleheads "Stay the Course"

Post by Munir »

"Stay The Course" has been the conventional wisdom for investors in equities with a time horizon of at least five to ten years. I did not hear that said often for bond funds because they were considered "safe"- i.e. not too volatile if they are short or mid-term funds. Are bond funds now moving towards the same requirements as equity funds because they have demonstrated that volatility applies to them too?
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Re: "Why Bogleheads "Stay the Course"

Post by 000 »

Sadly I am not sure many bogleheads, at least forum participants, stay the course. International, SCV, TIPS, Plan B come to mind.

On another note I frankly wonder if both "stay the course" and "buy the dip" memes exist to keep retails in to the bitter end.
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Re: "Why Bogleheads "Stay the Course"

Post by lostcoast »

Munir wrote: Sun May 08, 2022 10:26 pm "Stay The Course" has been the conventional wisdom for investors in equities with a time horizon of at least five to ten years. I did not hear that said often for bond funds because they were considered "safe"- i.e. not too volatile if they are short or mid-term funds. Are bond funds now moving towards the same requirements as equity funds because they have demonstrated that volatility applies to them too?
I believe the change in direction in bond interest rates was long overdue and once this 'correction' is complete then bonds will settle back down to the boring position they are known for. This volatility is unusual and I doubt will ever match equities in the long run, both in risk and reward.
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Re: "Why Bogleheads "Stay the Course"

Post by 7eight9 »

000 wrote: Sun May 08, 2022 10:32 pm Sadly I am not sure many bogleheads, at least forum participants, stay the course. International, SCV, TIPS, Plan B come to mind.

On another note I frankly wonder if both "stay the course" and "buy the dip" memes exist to keep retails in to the bitter end.
"Maximum Tolerable Loss" -- Not just a fear factor (aka Plan B).
viewtopic.php?t=30085

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Re: "Why Bogleheads "Stay the Course"

Post by abc132 »

I say the course because all my accounts have 2-7x what I put into them, and they should have 30-40 more years to grow.

It's difficult to imagine that jumping in and out of the market, or trying to actionably predict what will happen is necessary or prudent.

Simplifying investing to the point where you have control of decision regret is probably the post powerful thing you can do to accumulate wealth through investing, so I encourage readers to really read and value Taylor's words.
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Re: "Why Bogleheads "Stay the Course"

Post by Marseille07 »

000 wrote: Sun May 08, 2022 10:32 pm Sadly I am not sure many bogleheads, at least forum participants, stay the course. International, SCV, TIPS, Plan B come to mind.
Carrying unorthodox instruments doesn't mean they aren't staying the course.

This is a tricky situation for the bondholders though, as they might not break even until 2025.
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Re: "Why Bogleheads "Stay the Course"

Post by 000 »

Marseille07 wrote: Mon May 09, 2022 12:09 am Carrying unorthodox instruments doesn't mean they aren't staying the course.

This is a tricky situation for the bondholders though, as they might not break even until 2025.
Perhaps there has been a misunderstanding. Many forum members committed to the buy & hold way used to hold such investments as international, SCV, and TIPS, in some cases even writing books about them, only to remove them later on.
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Re: "Why Bogleheads "Stay the Course"

Post by abc132 »

000 wrote: Mon May 09, 2022 12:11 am Perhaps there has been a misunderstanding. Many forum members committed to the buy & hold way used to hold such investments as international, SCV, and TIPS, in some cases even writing books about them, only to remove them later on.
I use these and more and plan to simplify my portfolio later in life.

I can still stay fully invested, maintain or change AA over time, and still follow a "good enough" plan.

I think the misunderstanding may be the false idea that timing what the market is the same thing as making any change to AA or asset allocation that are not based on predicting what the market will do. That would be a major false equivalency.
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Re: "Why Bogleheads "Stay the Course"

Post by secondopinion »

abc132 wrote: Mon May 09, 2022 12:24 am
000 wrote: Mon May 09, 2022 12:11 am Perhaps there has been a misunderstanding. Many forum members committed to the buy & hold way used to hold such investments as international, SCV, and TIPS, in some cases even writing books about them, only to remove them later on.
I use these and more and plan to simplify my portfolio later in life.

I can still stay fully invested, maintain or change AA over time, and still follow a "good enough" plan.

I think the misunderstanding may be the false idea that timing what the market is the same thing as making any change to AA or asset allocation that are not based on predicting what the market will do. That would be a major false equivalency.
Agreed. The allocation is a function of time, portfolio value, and tax considerations (mostly the first two). When the variables change, so does the allocation. Maybe a bull market might be a good time to sell for an investor as to permanently cut risk since their portfolio value might be much larger than expected. Or maybe an investor sells some stocks at a loss because the time horizon is drawing to a close; the risk was taken and they lost.

Perspective is very important here to draw the line between investing and some forms of speculating versus market timing.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: "Why Bogleheads "Stay the Course"

Post by rossington »

Marseille07 wrote: Mon May 09, 2022 12:09 am
000 wrote: Sun May 08, 2022 10:32 pm Sadly I am not sure many bogleheads, at least forum participants, stay the course. International, SCV, TIPS, Plan B come to mind.
Carrying unorthodox instruments doesn't mean they aren't staying the course.

This is a tricky situation for the bondholders though, as they might not break even until 2025.
That's where cash comes in until then.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Re: "Why Bogleheads "Stay the Course"

Post by Marseille07 »

rossington wrote: Mon May 09, 2022 2:59 am That's where cash comes in until then.
I agree, but:

a) lots of posters here bash cash and they don't have much.
b) tweaking your fixed income allocation is not staying the course.
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Re: "Why Bogleheads "Stay the Course"

Post by Kepe »

Thank you for you advice. I will stay the course! :happy
Time to reread the classics.
In Homer’s Odyssey, Book XII, the Greek hero Odysseus, advised by the sorceress Circe, escaped the danger of their song by stopping the ears of his crew with wax so that they were deaf to the Sirens. Odysseus himself wanted to hear their song but had himself tied to the mast so that he would not be able to steer the ship off its course...
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Re: "Why Bogleheads "Stay the Course"

Post by tvubpwcisla »

Thank you for this post. Definitely bummed out with how the year has started. Eventually things will come back, just not sure how long it will take. Staying the course if the absolute best thing to do...and maybe don't look at your account for a while. Although, that is difficult as well.
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Re: "Why Bogleheads "Stay the Course"

Post by 000 »

abc132 wrote: Mon May 09, 2022 12:24 am
000 wrote: Mon May 09, 2022 12:11 am Perhaps there has been a misunderstanding. Many forum members committed to the buy & hold way used to hold such investments as international, SCV, and TIPS, in some cases even writing books about them, only to remove them later on.
I use these and more and plan to simplify my portfolio later in life.

I can still stay fully invested, maintain or change AA over time, and still follow a "good enough" plan.

I think the misunderstanding may be the false idea that timing what the market is the same thing as making any change to AA or asset allocation that are not based on predicting what the market will do. That would be a major false equivalency.
Many dropped international and SCV due to recent underperformance and TIPS due to recent (well, until recently) low inflation, not as part of staying the course on a planned guidepath.
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Re: "Why Bogleheads "Stay the Course"

Post by tennisplyr »

Thanks Taylor. This is a great learning experience for those unable to decide what their risk tolerance is. “The sun will come up tomorrow “
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Re: "Why Bogleheads "Stay the Course"

Post by nydoc »

I stay away from deals. If I see something that sounds like a deal to me I run away from that. I can guarantee it will backfire for me. Therefor I stay the course in investment by remaining passive.
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Re: "Why Bogleheads "Stay the Course"

Post by abc132 »

000 wrote: Mon May 09, 2022 4:07 pm Many dropped international and SCV due to recent underperformance and TIPS due to recent (well, until recently) low inflation, not as part of staying the course on a planned guidepath.
Bogleheads will cumulatively have taken any action, and the philosophy allows many different portfolio selections. There is no law that says one must hold or not hold SCV or TIPS. You are expressing a view of Bogleheads that is so narrow that you believe Bogleheads contradict their own philosophy, but the problem is on your end and not that of Bogleheads contradicting themselves.

The time to alter a plan is not while in a panicked state due to recent performance. Stay the course is a reminder of the reasoning that went into forming a plan, and that the best action can often be to do nothing, particularly for those at a high risk of behavioral error when making decisions based on recent performance. Plans can be course corrected, but this is best done when people are at low risk of behavioral error, and based on realized outcomes or changing life circumstances (health, portfolio size, inheritance, etc).

If you want to argue for behavioral decision-making based on recent performance, sure take offense at the idea of staying the course and try to muddy the message. I really can't see the purpose of doing so other than trying to rationalize ones own behavior, but I'll leave it to you if you would like to comment on your motivation here.
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Re: "Why Bogleheads "Stay the Course"

Post by VTI »

Mr. Larimore, for each of your posts, you always find the perfect quote from Jack Bogle.

How do you find these quotes? Do you keep a list handy?
Last edited by VTI on Mon May 09, 2022 6:58 pm, edited 1 time in total.
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Re: "Why Bogleheads "Stay the Course"

Post by Fallible »

windaar wrote: Sun May 08, 2022 9:36 pm
abuss368 wrote: Sun May 08, 2022 8:36 pmI would expect for investors who are now second guessing their risk assessment with this current pullback, may not have allocated enough to bonds and cash in their portfolios.
Yes. When times are good the dominant sentiment on this board is to maximize equities and beat your chest about it. During corrections I see posters selling all the way down because their equities exposures didn't match their risk tolerance. Happens every time. Realistic risk assessment and a matching AA helps one to "stay the course" and not make bad moves when times are bad.
Right. And as Taylor said, “Pick a stock bond ratio that you can stick with -- then STAY THE COURSE.” Too many investors pick a course they can’t stick with because it exceeds their personal risk tolerance.
"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: "Why Bogleheads "Stay the Course"

Post by 000 »

abc132 wrote: Mon May 09, 2022 6:28 pm Bogleheads will cumulatively have taken any action, and the philosophy allows many different portfolio selections. There is no law that says one must hold or not hold SCV or TIPS. You are expressing a view of Bogleheads that is so narrow that you believe Bogleheads contradict their own philosophy, but the problem is on your end and not that of Bogleheads contradicting themselves.

The time to alter a plan is not while in a panicked state due to recent performance. Stay the course is a reminder of the reasoning that went into forming a plan, and that the best action can often be to do nothing, particularly for those at a high risk of behavioral error when making decisions based on recent performance. Plans can be course corrected, but this is best done when people are at low risk of behavioral error, and based on realized outcomes or changing life circumstances (health, portfolio size, inheritance, etc).

If you want to argue for behavioral decision-making based on recent performance, sure take offense at the idea of staying the course and try to muddy the message. I really can't see the purpose of doing so other than trying to rationalize ones own behavior, but I'll leave it to you if you would like to comment on your motivation here.
Ah I see now. I'm talking about things that No True Boglehead would do. Carry on. :D
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Re: "Why Bogleheads "Stay the Course"

Post by calmaniac »

000 wrote: Mon May 09, 2022 4:07 pm Many dropped international and SCV due to recent underperformance and TIPS due to recent (well, until recently) low inflation, not as part of staying the course on a planned guidepath.
Please provide the source for the above definitive statement. Is it based on data or your personal assessment? Thanks.
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Re: "Why Bogleheads "Stay the Course"

Post by 000 »

calmaniac wrote: Mon May 09, 2022 7:01 pm
000 wrote: Mon May 09, 2022 4:07 pm Many dropped international and SCV due to recent underperformance and TIPS due to recent (well, until recently) low inflation, not as part of staying the course on a planned guidepath.
Please provide the source for the above definitive statement. Is it based on data or your personal assessment? Thanks.
The entire forum archive is the source.
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Re: "Why Bogleheads "Stay the Course"

Post by Taylor Larimore »

VTI wrote: Mon May 09, 2022 6:39 pm Mr. Larimore, for each of your posts, you always find the perfect quote from Jack Bogle.

How do you find these quotes? Do you keep a list handy?
VTI:

I am pleased that you notice Mr. Bogle's quotes after each of my posts. I started using Jack's quotes on the first anniversary of his death. He was my friend. They are my tribute to him.

I began saving Jack's quotes for my Investment Gems in 1993. I believe these Bogle quotes are the largest collection anywhere.

I often spend more time looking for a suitable quote than I spend on my message. Also, Jack's quotes are usually better than my replies.

Again, thanks for noticing.

Best wishes
Taylor
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Re: "Why Bogleheads "Stay the Course"

Post by baconavocado »

This is a helpful and timely reminder.
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Re: "Why Bogleheads "Stay the Course"

Post by LadyGeek »

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Re: "Why Bogleheads "Stay the Course"

Post by MIretired »

Nice post!
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Re: "Why Bogleheads "Stay the Course"

Post by abc132 »

000 wrote: Mon May 09, 2022 6:57 pm
abc132 wrote: Mon May 09, 2022 6:28 pm Bogleheads will cumulatively have taken any action, and the philosophy allows many different portfolio selections. There is no law that says one must hold or not hold SCV or TIPS. You are expressing a view of Bogleheads that is so narrow that you believe Bogleheads contradict their own philosophy, but the problem is on your end and not that of Bogleheads contradicting themselves.

The time to alter a plan is not while in a panicked state due to recent performance. Stay the course is a reminder of the reasoning that went into forming a plan, and that the best action can often be to do nothing, particularly for those at a high risk of behavioral error when making decisions based on recent performance. Plans can be course corrected, but this is best done when people are at low risk of behavioral error, and based on realized outcomes or changing life circumstances (health, portfolio size, inheritance, etc).

If you want to argue for behavioral decision-making based on recent performance, sure take offense at the idea of staying the course and try to muddy the message. I really can't see the purpose of doing so other than trying to rationalize ones own behavior, but I'll leave it to you if you would like to comment on your motivation here.
Ah I see now. I'm talking about things that No True Boglehead would do. Carry on. :D
I thought the sentence that Boglehead's will have cumulatively taken any action was all-inclusive, but apparently you read that much differently. You could define your vision of a "True Boglehead", and I think we could then look at the wiki and see where you are going wrong. Your vision seems in contrast with the actual things expressed on the wiki. It's not some puritanical cult, it's people making low cost, good enough plans, with some simple recommendations to give a great chance of success. It includes people making behavioral errors, very normal and flawed human beings who try to learn from their mistakes. There are many here with great wisdom, available for those willing to listen.
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Re: "Why Bogleheads "Stay the Course"

Post by slowandsteadywins »

TL,

As always, appreciate your posts and perspective - and the “Taylored” Bogle quotes! :beer
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Re: "Why Bogleheads "Stay the Course"

Post by inv123 »

I'm posting this in the same thread as Taylor's stay the course message which he repeats from time to time to keep us Bogleheads on the straight and narrow path.

Like many who have had no experience with early the 70s inflation, I too have been trying to digest the avalanche of recent articles about buying I-bonds, TIPS, etc.

My philosophy: Wanna keep everything simple and manageable because a) I'm lazy, and b) KISS principle

Portfolio

Vanguard Taxable : $600K (VTSAX + VTIAX)

Vanguard Roth (me + spouse) : $300K (VTSAX)

Fidelity 401k (spouse) : $400K (Total Stock + Total Bond)

TSP (me) : $400K (G-Fund)

Cash : $50K

Mortgage outstanding: $300K, 15 years @ 2.5%

Me 20 years to retirement; spouse 25 years.


So, here are my questions:

As in the 70s, inflation will be slain one day by the Federal Reserve and (this is an educated guess:) we won't have to wait a decade for that. So why do I need to load up on TIPS or I-bonds for the post-inflation era?

Unlike many other members, who have been buying TIPS or I-bonds for over two decades, we have tried to stick to TBM style funds for the bond portion of our portfolio and over time have built up a substantial position on them. At this late stage, I don't see a compelling case to open a Treasury account for a paltry $20K of I-bonds per year. Also one can't buy TIPS from 401k or TSP.

So the question is - what are we losing out by staying the "3 Fund Portfolio" course as shown in the above portfolio? In the short term (as well as in the long run), what's the problem with TBM and G-Fund especially when they are merely acting as a volatility cushion?

In other words, I'm seeking reassurance that our pre-inflation portfolio will also help us ride out the current inflationary surge.
Last edited by inv123 on Mon May 16, 2022 8:15 am, edited 1 time in total.
alluringreality
Posts: 713
Joined: Tue Nov 12, 2019 10:59 am

Re: "Why Bogleheads "Stay the Course"

Post by alluringreality »

inv123 wrote: Fri May 13, 2022 2:15 pm As in the 70s, inflation will be slain one day by the Federal Reserve and (this is an educated guess:) we won't have to wait a decade for that. So why do I need to load up on TIPS or I-bonds for the post-inflation era?
Need is basically subjective, and you may not necessarily have a need for any particular action. Personally I would tend to presume that cash and bills may pay less than inflation or the cost of the mortgage, but I'm not familiar with relative G fund rates. After one year I bonds are basically cash-equivalents, and if inflation remains high they might compare favorably to the loan. On the other hand, if deflation happens I bonds could pay zero for 6 month periods. TIPS are usually compared to nominal bonds, and whichever pays more generally depends if future inflation ends up higher or lower than the breakeven rate, so at purchase it's indeterminate if nominal bonds or TIPS might pay more. TIPS and I bonds are not guaranteed to pay more than alternatives in an unknown future, so inclusion is potentially subjective.
In other words, I'm seeking reassurance that our pre-inflation portfolio will also help us ride out the current inflationary surge.
Historically short-term Treasury bills did well in inflation compared to nominal bonds. It's always possible such things could happen again, especially since the G fund pays above market rates. Personally I tend to expect for cash and bills to underperform inflation, because that seems like intended policy since 2009, so I started moving my cash-equivalents to savings bonds a few years ago. It's probably questionable to exit nominal bond funds at this time, since their prices have dipped with rising rates, in order to avoid what David Swensen called whipsaws. I'm not familiar with the TSP or G fund, because I do not have those options. Currently I figure most cash-like holdings purchased today could amount to zero or negative real returns after tax, including I bonds and the G fund, but of course it could always comparatively pay off down the road. It's always difficult to say where inflation and rates might end up going in the future, so understanding tradeoffs of choices and being comfortable committing to personal decisions is probably a decent plan for an unknown future.
Last edited by alluringreality on Sat May 14, 2022 11:06 am, edited 2 times in total.
30% Savings Bonds, 45% US Indexes, 25% Ex-US Indexes
Robot Monster
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Re: "Why Bogleheads "Stay the Course"

Post by Robot Monster »

inv123 wrote: Fri May 13, 2022 2:15 pm As in the 70s, inflation will be slain one day by the Federal Reserve and (this is an educated guess:) we won't have to wait a decade for that. So why do I need to load up on TIPS or I-bonds for the post-inflation era?
I don't know if TIPS makes sense for you, but as far as inflation goes, maybe it will be brought down from today's levels, but settle down higher than in recent times, maybe 3% to 4%, as at least one economist (below) predicts. The 10yr, 20yr, 30yr TIPS all pay positive real yields, and perhaps people might be happy to own these if, let's say, inflation averages 3.5%, and yields average 2%, making for -1.5% real.
Mr. Goodhart reasoned that a seismic shift was under way in the world economy, one that fiscal stimulus and the post-pandemic recovery would only hasten. A long glut of inexpensive labor that had kept prices and wages down for decades, he said, was giving way to an era of worker shortages, and hence higher prices.

“The coronavirus pandemic will mark the dividing line between the deflationary forces of the last 30 to 40 years and the resurgent inflation of the next two decades,” said the 85-year-old economist in an interview. He predicted that inflation in advanced economies will settle at 3% to 4% around the end of 2022 and remain at that level for decades, compared with about 1.5% in the decade before the pandemic.
-- from "Will Inflation Stay High for Decades? One Influential Economist Says Yes" WSJ link
"You can cut all the flowers, but you can't stop the spring from coming." Pablo Neruda
er999
Posts: 227
Joined: Wed Nov 05, 2008 11:00 am

Re: "Why Bogleheads "Stay the Course"

Post by er999 »

lostcoast wrote: Sun May 08, 2022 3:57 pm All I know about stocks is what I learned from Forrest Gump about investing is some fruit company named Apple.
So many posts on this forum show spreadsheets and graphs which mean nothing to me.
Too bad you didn’t actually rely on Forrest Gump for your investing advice. Forrest Gump was released in 1994, and $10,000 invested in Apple in 1994 would be worth 7.2 million now! You would have to have held on after losing half your investment when it dropped over 50% to $4,600 in 1997 though.
novicemoney
Posts: 307
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Re: "Why Bogleheads "Stay the Course"

Post by novicemoney »

Normchad wrote: Sun May 08, 2022 8:28 pm
BradJ wrote: Sun May 08, 2022 8:26 pm See this is where I try to explain to people being born stupid is a blessing. I stay the course because I’m too dumb to think of another plan that makes logical sense. Whoops, I meant cents.
Ignorance is bliss. And I’m living in paradise.
When I read about the pros and cons of staying the course, I think of Churchill's quote on democracy and apply it to investment philosophy, "Democracy(Staying the course) is the worst form of government(investment style)-except for all the others that have been tried." This at least applies to me whenever I try to make sense of the state of our economy or try to evaluate individual stocks. No doubt there are others who can succeed following another course, but the beauty of simplicity seems right to me. Plus I am pretty ignorant :happy
inv123
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Re: "Why Bogleheads "Stay the Course"

Post by inv123 »

I came across this Morningstar article from Nov, 2020 (long before inflation hit 8%) posted by Taylor on another thread (Inflation-Protected Bonds vs. Total Bond Market Index Fnd, viewtopic.php?p=6429829)


Traditional Investments Can Weather Inflation
Alex Bryan, CFA
Nov 13, 2020


Here's the key recommendation:


Keep It Simple

It’s tough to completely protect against inflation in the short term, but that’s OK because inflation usually isn’t a big problem in the short term. Over the long term, the erosion of purchasing power can become significant.

The best option to manage this risk is probably the simplest: sticking to broad, market-value-weighted stock and bond portfolios, like Vanguard Total Stock Market ETF (VTI), which has a Morningstar Analyst Rating of Gold, and Vanguard Total Bond Market ETF (BND), which is rated Gold. Over the long term, these have tended to preserve and grow purchasing power better than instruments commonly used as inflation hedges, like short-term TIPS, commodity futures, and gold.

https://www.morningstar.com/articles/10 ... -inflation


This 2020 Morningstar article pretty much addresses all my concerns (with the usual caveats that past doesn't predict the future, etc.)

But I'm curious to find out how many on this forum disagree with this prescription.
Booglie
Posts: 138
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Re: "Why Bogleheads "Stay the Course"

Post by Booglie »

inv123 wrote: Mon May 16, 2022 8:15 am

The best option to manage this risk is probably the simplest: sticking to broad, market-value-weighted stock and bond portfolios, like Vanguard Total Stock Market ETF (VTI), which has a Morningstar Analyst Rating of Gold, and Vanguard Total Bond Market ETF (BND), which is rated Gold. Over the long term, these have tended to preserve and grow purchasing power better than instruments commonly used as inflation hedges, like short-term TIPS, commodity futures, and gold.
No. No, no. no.

Different goals require different strategies.
The purpose of a stock portfolio is to MULTIPLY capital, not to protect it against inflation.
Yes, stocks TEND to rise above inflation over time. But just because they TEND to, it doesn't mean they will from now on.
They weren't DESIGNED to track inflation.

If you want to protect money against inflation because you will need it in a particular time frame, investing in stocks could give you a nasty surprise.
If you want to protect yourself against INFLATION, then you must invest in something that is designed to track it and restore your purchasing power – and if there are not many options to protect yourself against it (as it is the case in today's market), then you pick the instrument that will give you the closest protection.
DoNuffin
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Re: "Why Bogleheads "Stay the Course"

Post by DoNuffin »

Staying the course and keeping it simple has served me well over the years. People over complicate things, just stick to the basics.
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