The Bottom Line: Just sit there.

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Taylor Larimore
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The Bottom Line: Just sit there.

Post by Taylor Larimore »

Hi Bogleheads:

I subscribe to The Hulbert Financial Digest which has been tracking newsletter portfolios since 1980. In the November, 2011 Issue, Mr. Hulbert closely analyzed the returns of over 500 newsletter portfolios from 1/1/2011 though 10/31/2011.
"The Bottom Line: The inescapable conclusion is that the average transaction that an (newsletter) adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.

Best wishes.
Taylor

Edit in red for clarity
"Simplicity is the master key to financial success." -- Jack Bogle
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GregLee
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Re: The Bottom Line: Just sit there.

Post by GregLee »

Taylor Larimore wrote:Hi Bogleheads:
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.
Is it really confirmation? "Staying the course" requires rebalancing, doesn't it?, and that requires transactions. Since you're giving financial advice on making investment transactions, chances are, according to Hulbert, your advice is mistaken.
Greg, retired 8/10.
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lj3jim
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Re: The Bottom Line: Just sit there.

Post by lj3jim »

Thank you, Taylor. I discovered Boglehead investing just 3 years ago, and my wife and I both retired one year ago. "Staying the course" has been the hardest part of our Boglehead journey. Our minds tend to play the "what if" game far too often!

I appreciate the reminders from you and the rest of the folks on this forum that a simple, easy-to-manage portfolio is indeed the key to our successful retirement.

Regards, Jim
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Re: The Bottom Line: Just sit there.

Post by Qtman »

Taylor Larimore wrote:Hi Bogleheads:

I subscribe to The Hulbert Financial Digest which has been tracking newsletter portfolios since 1980. In the November, 2011 Issue, Mr. Hulbert closely analyzed the returns of over 500 newsletter portfolios from 1/1/2011 though 10/31/2011.
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.

Best wishes.
Taylor
Thanks Taylor, another confirmation of reversion to the mean from my perspective. I will say that the "investment industry noise" makes it nigh impossible to ignore the promise of beating the indexes.
Don’t wear yourself out trying to get rich; be wise enough to control yourself. | Wealth can vanish in the wink of an eye. It can seem to grow wings and fly away | like an eagle. - King Solomon
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CABob
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Re: The Bottom Line: Just sit there.

Post by CABob »

Thanks for posting. This sounds as if it might be referring to the same as the Finance Buff discussed regarding a Dalbar study.
Bob
LynnC
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Re: The Bottom Line: Just sit there.

Post by LynnC »

Thanks Taylor. I never considered your post to be "investing advice", just reminding us of the Boglehead Philosophy.

LynnC
taurabora
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Re: The Bottom Line: Just sit there.

Post by taurabora »

How about: "Get up once per year, otherwise: sit there" ?
AgnosticInvestor
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Re: The Bottom Line: Just sit there.

Post by AgnosticInvestor »

Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
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Re: The Bottom Line: Just sit there.

Post by NAVigator »

Thanks for posting further evidence that what many of us do is better than most. I am carefully following the three fund portfolio thread which would involve some action toward greater simplicity.

Jerry
"I was born with nothing and I have most of it left."
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dratkinson
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Re: The Bottom Line: Just sit there.

Post by dratkinson »

GregLee wrote:
Taylor Larimore wrote:Hi Bogleheads:
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.
Is it really confirmation? "Staying the course" requires rebalancing, doesn't it?, and that requires transactions. Since you're giving financial advice on making investment transactions, chances are, according to Hulbert, your advice is mistaken.
As a former Louis Rukuyser newsletter subscriber, I agree, it is a confirmation. Why? Because investment newsletter(s) encourages you to change your course/tact--trade in and out of investment positions--to take advantage of anticipated most favorable market winds.

BH rebalancing is not a change to a new tact, but a correction back to the original tact. By definition, it is staying the course.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
edge
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Re: The Bottom Line: Just sit there.

Post by edge »

GregLee wrote:
Taylor Larimore wrote:Hi Bogleheads:
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.
Is it really confirmation? "Staying the course" requires rebalancing, doesn't it?, and that requires transactions. Since you're giving financial advice on making investment transactions, chances are, according to Hulbert, your advice is mistaken.

Um, Taylor's post is in the context of investing newsletters. You seem to have never seen one of those before. Before commenting as you did you might want to check one out.

The 'transactions' being discussed on this thread have nothing to do with rebalancing.
ClaireTN
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Re: The Bottom Line: Just sit there.

Post by ClaireTN »

AgnosticInvestor wrote:Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
I am struggling with exactly this urge right now. I'm thinking about a small change to our portfolio and can't make up my mind whether I should "do something" or "just sit there." Maybe I should implement a Larimore rule: when in doubt, just sit there!
cessna210
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Re: The Bottom Line: Just sit there.

Post by cessna210 »

At the BH 10 conference, I heard John Bogle say this for the first time (for me):
"Don't do something, Just sit there"
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GregLee
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Re: The Bottom Line: Just sit there.

Post by GregLee »

edge wrote:The 'transactions' being discussed on this thread have nothing to do with rebalancing.
Don't financial advisers advise on buying and selling securities? Doesn't rebalancing involve buying and selling securities? What other sorts of "transactions" were being referred to?
Greg, retired 8/10.
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Taylor Larimore
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Edited OP for clarity

Post by Taylor Larimore »

Hi Greg:

I edited Hulbert's quote for clarity.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
555
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Re: The Bottom Line: Just sit there.

Post by 555 »

GregLee wrote:
Taylor Larimore wrote:Hi Bogleheads:
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.
Is it really confirmation? "Staying the course" requires rebalancing, doesn't it?, and that requires transactions. Since you're giving financial advice on making investment transactions, chances are, according to Hulbert, your advice is mistaken.
Just use some basic logic. Just because the average transaction is a mistake, doesn't mean that you should do zero transactions.
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Toons
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Re: The Bottom Line: Just sit there.

Post by Toons »

ClaireTN wrote:
AgnosticInvestor wrote:Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
I am struggling with exactly this urge right now. I'm thinking about a small change to our portfolio and can't make up my mind whether I should "do something" or "just sit there." Maybe I should implement a Larimore rule: when in doubt, just sit there!
"I am struggling with exactly this urge right now":

A couple thoughts,over the many years I have been investing ,experience(which is just applied failure)has taught me that most of the time when I would get the "urge" to make changes to portfolio,if done, it turned out to be a "move' that would create more loss than gain for my portfolio .
Having said that,now when I get the urge to "do something" with my portfolio , I usually give it another year or so of "thought",minimum :)

The Prussian General Karl von Clausewitz said, "The greatest enemy of a good plan is the dream of a perfect plan."
Last edited by Toons on Sun Jan 08, 2012 11:20 pm, edited 3 times in total.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Noobvestor
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Re: The Bottom Line: Just sit there.

Post by Noobvestor »

555 wrote:
GregLee wrote:
Taylor Larimore wrote:Hi Bogleheads:
"The Bottom Line: The inescapable conclusion is that the average transaction that an adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.
Is it really confirmation? "Staying the course" requires rebalancing, doesn't it?, and that requires transactions. Since you're giving financial advice on making investment transactions, chances are, according to Hulbert, your advice is mistaken.
Just use some basic logic. Just because the average transaction is a mistake, doesn't mean that you should do zero transactions.
Damnit, and I've been sitting here not cashing work-related checks thinking that was staying the course :lol:
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
edge
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Re: The Bottom Line: Just sit there.

Post by edge »

GregLee wrote:
edge wrote:The 'transactions' being discussed on this thread have nothing to do with rebalancing.
Don't financial advisers advise on buying and selling securities? Doesn't rebalancing involve buying and selling securities? What other sorts of "transactions" were being referred to?
1) I don't actually understand your first question since we are not talking about financial advisers in this thread as far as I can tell.
2) Yes, so?
3) Um, the kinds of transactions advocated in newsletters?

Did you actually read _anything_ before commenting?
Puzzled
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Re: The Bottom Line: Just sit there.

Post by Puzzled »

Taylor Larimore wrote:Hi Bogleheads:

I subscribe to The Hulbert Financial Digest which has been tracking newsletter portfolios since 1980. In the November, 2011 Issue, Mr. Hulbert closely analyzed the returns of over 500 newsletter portfolios from 1/1/2011 though 10/31/2011.
"The Bottom Line: The inescapable conclusion is that the average transaction that an (newsletter) adviser does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place. -- Chances are that just sitting on our hands would be a better idea."
This is more confirmation that our Boglehead Philosophy of structuring a diversified, low-cost, tax-efficient portfolio, and then staying the course, is a winning strategy.

Best wishes.
Taylor

Edit in red for clarity
I'm a newbie here but have previously read magazine articles & looked through several books & tried to pickup some basic information.

Low-cost seems fairly easy to do. Buy some Vanguard funds.
Tax-efficient is a bit more difficult for me to figure out, but I might be able to work it out.
Diversified is very difficult for me because I see so many suggested portfolios that I don't know which way to go.

I would like to keep it simple & conservative because I'm retired. From what I understand i should be about 60% in bonds and/or TIPS. But if these are at a high point does it make sense to get that heavy into either of them? And I don't want to go 60% into stocks because I feel they are risky, especially for retired people. And buying some CDs & getting a 2% return does not seem the way to go either.

Is there a consensus of opinion if bond funds or TIPS are still a good investment? Interest rates cannot get any lower & my concern is what happens if & when the rates go up. I sort of feel like I would be buying high and it would take many years to recoup any losses?

And comments would be appreciated.
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Re: The Bottom Line: Just sit there.

Post by gofigure »

Thanks Taylor...
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Re: The Bottom Line: Just sit there.

Post by SpringMan »

One has to credit The Hulbert Financial Digest for being honest. They are essentially saying one doesn't need newsletters. If that is true, then one doesn't need The Hulbert Financial Digest which advises on newsletters. There is nothing wrong with subscribing to The Hulbert Financial Digest, I am a little surprised it comes out and confirms Boglehead philosophy.
Best Wishes, SpringMan
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Re: The Bottom Line: Just sit there.

Post by jimkinny »

Thanks for the post.

I heard John Bogle in an interview last fall recommending just standing there instead of doing something at the height of the Euro zone's impact on our consciousness.

This advice made more since to me than any other financial advice I had ever read except for taking risk based upon need, willingness and ability.

So Taylor, thanks for the post and your recent post regarding a 3 fund portfolio.

Jim
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Re: The Bottom Line: Just sit there.

Post by DartThrower »

It would also be interesting to look at a histogram depicting the consequences of the transactions on the typical portfolio. If this could be done in some objective way, we could get some insight as to whether any of the newsletter writers had any skill at all. The existence of skill would cause the histogram to tend to have fatter tails than those that would result if all the calls were pure guesses.

I suspect there might be a vanishingly small number of skilled newsletter writers, but identifying them beforehand would be like finding the proverbial needle in the haystack. The best approach then is to save on the expense, time and effort and simply stay the course.
Our patience will achieve more than our force. -Edmund Burke
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Re: The Bottom Line: Just sit there.

Post by Midpack »

AgnosticInvestor wrote:Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
Many of us do, but we've learned to refrain and sleep well every night. An essential part of Boglehead investing includes having the discipline to understand 'perfect is the enemy of good.' Most people seem to search for perfect and way too many end up with NOT good. Those I've known are still working and will be for years, I was fortunate enough to retire early without a pension. We've done better than we've ever hoped by accepting (very) good in the long run thanks to Mr Bogle & Dr Bernstein.
You only live once...
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Re: The Bottom Line: Just sit there.

Post by pkcrafter »

SpringMan wrote:One has to credit The Hulbert Financial Digest for being honest. They are essentially saying one doesn't need newsletters. If that is true, then one doesn't need The Hulbert Financial Digest which advises on newsletters. There is nothing wrong with subscribing to The Hulbert Financial Digest, I am a little surprised it comes out and confirms Boglehead philosophy.
Funny, but there is zero chance that Hulbert will ever run out of investors who want to get the latest hot scoop.

Paul
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Re: The Bottom Line: Just sit there.

Post by ofcmetz »

Thanks Taylor for the helpful reminder.
Never underestimate the power of the force of low cost index funds.
AgnosticInvestor
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Re: The Bottom Line: Just sit there.

Post by AgnosticInvestor »

Toons wrote:
ClaireTN wrote:
AgnosticInvestor wrote:Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
I am struggling with exactly this urge right now. I'm thinking about a small change to our portfolio and can't make up my mind whether I should "do something" or "just sit there." Maybe I should implement a Larimore rule: when in doubt, just sit there!
"I am struggling with exactly this urge right now":

A couple thoughts,over the many years I have been investing ,experience(which is just applied failure)has taught me that most of the time when I would get the "urge" to make changes to portfolio,if done, it turned out to be a "move' that would create more loss than gain for my portfolio .
Having said that,now when I get the urge to "do something" with my portfolio , I usually give it another year or so of "thought",minimum :)

The Prussian General Karl von Clausewitz said, "The greatest enemy of a good plan is the dream of a perfect plan."
Excellent Clausewitz quotation. Thanks.
AgnosticInvestor
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Re: The Bottom Line: Just sit there.

Post by AgnosticInvestor »

Midpack wrote:
AgnosticInvestor wrote:Could not agree more. I struggle, mightily, against the urge to fashion a 'perfect' portfolio. Posts like this keep me from acting on those urges.
Many of us do, but we've learned to refrain and sleep well every night. An essential part of Boglehead investing includes having the discipline to understand 'perfect is the enemy of good.' Most people seem to search for perfect and way too many end up with NOT good. Those I've known are still working and will be for years, I was fortunate enough to retire early without a pension. We've done better than we've ever hoped by accepting (very) good in the long run thanks to Mr Bogle & Dr Bernstein.
Agreed! My reptilian brain still contrives against my financial well being, though. Ugh. Must be on guard against that.
VennData
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Re: The Bottom Line: Just sit there.

Post by VennData »

GregLee wrote:Don't financial advisers advise on buying and selling securities? Doesn't rebalancing involve buying and selling securities? What other sorts of "transactions" were being referred to?
Most rebalancing involves selling your stocks and buying some bonds. That will lead to lower returns, which can be a "mistake" since you will get lower returns, most likely... HOWEVER... rebalancing transactions are about risk control. Not maximizing returns.

The newsletter guys want to make stock calls to maximize returns. They are not the same as rebalancing.
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Re: The Bottom Line: Just sit there.

Post by GregLee »

VennData wrote:The newsletter guys want to make stock calls to maximize returns. They are not the same as rebalancing.
Of course they're not the same. We're dealing with two different, competing theories of investing, one of which you (and many others here) disagree with. I'm just making the point that it's the investing theories that are in conflict, and so that conflict is the proper subject of conversation -- not whether or not securities transactions are going to take place (because they are, in any case), and not whether financial advice is being given (because it is going to be, whichever investing theory you follow). If there is a problem with investing by trying to beat the market, the problem is not caused by reading financial newsletters. It's caused by trying to beat the market.
Greg, retired 8/10.
maj
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Re: The Bottom Line: Just sit there.

Post by maj »

Though Taylor and other good bogleheads disagree for tax reasons, this discussion is precisely why I believe so strongly in balanced index funds--and am willing to pay more taxes when necessary. I am speaking of investors who do not want to watch market gyrations and make annual rebalances with the paper work involved.

In addition to the Target Date Funds, the LifeStrategy Funds are now allocated in the simplist possible manner: Total USA Stock Market Index, Total International Stock Market Index and Total USA Bond Market Index--and the managers efficiently rebalance to the static allocations every day with new monies and reinvested dividends, and when necessary to sell, they sell highest cost securities first--and all for about 15-20 basis points.

My family and friends "just sit there."

It seems that the recently appointed CEO is seriously shareholder sensitive and is responding to years of solid suggestions from longtime investors.

Could there be better funds from Vanguard? I think yes.

For the wealthy, the use of a Tax Free Bond Index Fund in lieu of the taxable Total Bond Market Index Fund in the Target Date and LifeStrategy Funds would be a boon--though requiring new sets of funds.

The taxable Total Bond Market Index Fund is not "total," and the expansion of that bond fund to include all debt instruments--yes, even junk bonds--would be welcomed by some investors.

The new Total International Bond Market Index Fund would seem to fit nicely into the fixed income portions of the Target Date and LifeStrategy Funds, much like the inclusion of the Total International Stock Market Index Fund as 30% of the equity allocations.

I am at times irritated at the pace with which Vanguard rethinks balanced index fund strategies; still, when the management decides, it is with prudence and with the investors' best interests in mind.

I have addressed a narrow portion of this discussion and would appreciate any thoughts. pro or con.

peace
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