What we don't know

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Topic Author
Johm221122
Posts: 6372
Joined: Fri May 13, 2011 6:27 pm

What we don't know

Post by Johm221122 »

We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
bigred77
Posts: 2049
Joined: Sat Jun 11, 2011 4:53 pm

Re: What we don't know

Post by bigred77 »

We know to save as much as possible, invest in low cost funds, pick an appropriate asset allocation, keep debt reasonable, and stay the course.

It’s not that hard.
livesoft
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Re: What we don't know

Post by livesoft »

I think we definitely know the commissions that we pay and the expense ratios of the investments that we buy. We should also know the taxes that we pay on our investments each year. If we pay an advisor, we should definitely know what those costs are as well.

I suspect that many people do not know the things I just mentioned.
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KlangFool
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Re: What we don't know

Post by KlangFool »

Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Johm221122,

1) <<Harry Markowitz called diversification "the only free lunch in finance." >>

We need to protect ourselves from our own ignorance.

2) Saving rate matters.

3) Pick an AA from 70/30 to 30/70. Buy, hold, and rebalance. A good enough AA that you are willing and able to commit to is better than the perfect AA.

4) Let time and compounding do its thing.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Johm221122
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Re: What we don't know

Post by Johm221122 »

bigred77 wrote: Sat Nov 18, 2017 8:50 pm We know to save as much as possible,
am i save too much and missing life today

invest in low cost funds,
But something like Bitcoin makes me think is stocks and bonds best

pick an appropriate asset allocation,
exactly what is best

keep debt reasonable

Ok I can go with that or use debt sparingly

, and stay the course.
Should I not jump on Bitcoin bandwagon



It’s not that hard.
It just seems everyday,I think we really don't know(I do plan on staying the course)
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Sandtrap
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Re: What we don't know

Post by Sandtrap »

We know what we know and what others know through discussions.
We know we are wary, cautious, deliberate, methodical, and learned . . . and deservedly fearful.
And so, we know . . . we don't know.
And so knowledge and experience is shared to reinforce: "stay the course". :D
Wiki Bogleheads Wiki: Everything You Need to Know
KlangFool
Posts: 31427
Joined: Sat Oct 11, 2008 12:35 pm

Re: What we don't know

Post by KlangFool »

Johm221122 wrote: Sat Nov 18, 2017 8:58 pm
bigred77 wrote: Sat Nov 18, 2017 8:50 pm We know to save as much as possible,
am i save too much and missing life today

invest in low cost funds,
But something like Bitcoin makes me think is stocks and bonds best

pick an appropriate asset allocation,
exactly what is best

keep debt reasonable

Ok I can go with that or use debt sparingly

, and stay the course.
Should I not jump on Bitcoin bandwagon



It’s not that hard.
It just seems everyday,I think we really don't know(I do plan on staying the course)
Johm221122,

1) What has spending got anything to do with missing out in life? It does not.

2) What do you need a "best" plan? You don't. You can get there with a good plan.

KlangFool
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Topic Author
Johm221122
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Joined: Fri May 13, 2011 6:27 pm

Re: What we don't know

Post by Johm221122 »

KlangFool wrote: Sat Nov 18, 2017 8:54 pm
Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Johm221122,

1) <<Harry Markowitz called diversification "the only free lunch in finance." >>

We need to protect ourselves from our own ignorance.

2) Saving rate matters.

3) Pick an AA from 70/30 to 30/70. Buy, hold, and rebalance. A good enough AA that you are willing and able to commit to is better than the perfect AA.

4) Let time and compounding do its thing.

KlangFool
1.i agree
2. It matters but what I invest it in means more
3.but someone who picks one good investment will do better
4.I agree but it goes back to three,if I just pick right investment it would be faster more profitable


Don't get me wrong I'm not even considering changing my plan,it just makes me think we do know little or nothing .We are just playing"averages",we will do better than most
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JoMoney
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Re: What we don't know

Post by JoMoney »

John C. Bogle wrote: http://johncbogle.com/speeches/JCB_NE_Pension_4-00.pdf
Four Key Elements of Investing: Reward, Risk, Time, and Cost
...for all of the projections and assumptions we make (and almost take for granted), there is one element of investing we cannot control: Reward. For future stock market returns are completely unpredictable in the short-run and—unless we know more about the world 25-years from now then we do about the world today—may prove even less predictable over the long-run. But we can control the other three primary determinants of investing: Risk, time, and cost, and we should focus on them...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Topic Author
Johm221122
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Re: What we don't know

Post by Johm221122 »

Sandtrap wrote: Sat Nov 18, 2017 9:00 pm We know what we know and what others know through discussions.
We know we are wary, cautious, deliberate, methodical, and learned . . . and deservedly fearful.
And so, we know . . . we don't know.
And so knowledge and experience is shared to reinforce: "stay the course". :D
+1
KlangFool
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Re: What we don't know

Post by KlangFool »

Johm221122 wrote: Sat Nov 18, 2017 9:06 pm
KlangFool wrote: Sat Nov 18, 2017 8:54 pm
Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Johm221122,

1) <<Harry Markowitz called diversification "the only free lunch in finance." >>

We need to protect ourselves from our own ignorance.

2) Saving rate matters.

3) Pick an AA from 70/30 to 30/70. Buy, hold, and rebalance. A good enough AA that you are willing and able to commit to is better than the perfect AA.

4) Let time and compounding do its thing.

KlangFool
1.i agree
2. It matters but what I invest it in means more
3.but someone who picks one good investment will do better
4.I agree but it goes back to three,if I just pick right investment it would be faster more profitable


Don't get me wrong I'm not even considering changing my plan,it just makes me think we do know little or nothing .We are just playing"averages",we will do better than most
Johm221122,

<<3.but someone who picks one good investment will do better>>

Really? If you insist on making yourself unhappy, go right ahead.

I believe in "enough".

KlangFool
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Tycoon
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Re: What we don't know

Post by Tycoon »

I know that investing has been really easy. By far the most effortless thing I've ever done to earn money.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.
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Sandtrap
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Re: What we don't know

Post by Sandtrap »

KlangFool wrote: Sat Nov 18, 2017 9:11 pm
Johm221122 wrote: Sat Nov 18, 2017 9:06 pm
KlangFool wrote: Sat Nov 18, 2017 8:54 pm
Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Johm221122,

1) <<Harry Markowitz called diversification "the only free lunch in finance." >>

We need to protect ourselves from our own ignorance.

2) Saving rate matters.

3) Pick an AA from 70/30 to 30/70. Buy, hold, and rebalance. A good enough AA that you are willing and able to commit to is better than the perfect AA.

4) Let time and compounding do its thing.

KlangFool
1.i agree
2. It matters but what I invest it in means more
3.but someone who picks one good investment will do better
4.I agree but it goes back to three,if I just pick right investment it would be faster more profitable


Don't get me wrong I'm not even considering changing my plan,it just makes me think we do know little or nothing .We are just playing"averages",we will do better than most
Johm221122,

<<3.but someone who picks one good investment will do better>>

Really? If you insist on making yourself unhappy, go right ahead.

I believe in "enough".

KlangFool
I have lost out on a number of excellent R/E deals over the decades because my timing was perfect but I wanted to "get it right" instead of "pretty good".
The same goes for investment finance. I realize now that whether one picks "Balanced Index", "Life Strategy", or a "3 fund", he/she will be "better than most" in the long run.
Would I be wrong in thinking: The most awkward "Boglehead" is still ahead of 99% of the larger investment finance pack?
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Topic Author
Johm221122
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Re: What we don't know

Post by Johm221122 »

KlangFool wrote: Sat Nov 18, 2017 9:11 pm
Johm221122 wrote: Sat Nov 18, 2017 9:06 pm
KlangFool wrote: Sat Nov 18, 2017 8:54 pm
Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Johm221122,

1) <<Harry Markowitz called diversification "the only free lunch in finance." >>

We need to protect ourselves from our own ignorance.

2) Saving rate matters.

3) Pick an AA from 70/30 to 30/70. Buy, hold, and rebalance. A good enough AA that you are willing and able to commit to is better than the perfect AA.

4) Let time and compounding do its thing.

KlangFool
1.i agree
2. It matters but what I invest it in means more
3.but someone who picks one good investment will do better
4.I agree but it goes back to three,if I just pick right investment it would be faster more profitable


Don't get me wrong I'm not even considering changing my plan,it just makes me think we do know little or nothing .We are just playing"averages",we will do better than most
Johm221122,

<<3.but someone who picks one good investment will do better>>

Really? If you insist on making yourself unhappy, go right ahead.

I believe in "enough".

KlangFool
I agree 100% with you, I'm definitely not unhappy with my choices in investments
I just realize everyday that we (Bogleheads)don't know anything in are plans are definitely the best course of action,but more just rationale choice just to be "average".But in long term being average will be better than most
Topic Author
Johm221122
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Re: What we don't know

Post by Johm221122 »

Tycoon wrote: Sat Nov 18, 2017 9:13 pm I know that investing has been really easy. By far the most effortless thing I've ever done to earn money.
This is a definite,investing in a Boglehead way is easier than working
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TheTimeLord
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Re: What we don't know

Post by TheTimeLord »

Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
That control is an illusional which human beings struggle with all their might to maintain.
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arcticpineapplecorp.
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Re: What we don't know

Post by arcticpineapplecorp. »

Johm221122 wrote: Sat Nov 18, 2017 8:58 pm
bigred77 wrote: Sat Nov 18, 2017 8:50 pm We know to save as much as possible,
am i save too much and missing life today

invest in low cost funds,
But something like Bitcoin makes me think is stocks and bonds best

pick an appropriate asset allocation,
exactly what is best

keep debt reasonable

Ok I can go with that or use debt sparingly

, and stay the course.
Should I not jump on Bitcoin bandwagon



It’s not that hard.
It just seems everyday,I think we really don't know(I do plan on staying the course)
since you've brought up buttcoin, er....sh-tcoin, er...bitcoin three times now (twice above and once in the original post) you obviously are suffering from FOMO (that's "fear of missing out" for those not in the know). Well, I find it interesting you used the word "bandwagon" with regards to Bitcoin in the post above. It made me wonder where the origin of the word "bandwagon" came from so I looked it up:
The word bandwagon was coined in the USA in the mid 19th century, simply as the name for the wagon that carried a circus band. Phineas T. Barnum, the great showman and circus owner, used the term in 1855 in his unambiguously named autobiography The Life of P.T. Barnum, Written by Himself, 1855:

"At Vicksburg we sold all our land conveyances excepting four horses and the 'band wagon'."

Barnum didn't coin 'jump on the bandwagon', which came later, but he did have a hand in some other additions to the language.

source: https://www.phrases.org.uk/meanings/jum ... wagon.html
See the irony here? If not, let me point it out. P.T. Barnum, of Barnum and Bailey Circus, which eventually merged with Ringling Bros. to become Ringling Bros. and Barnum and Bailey Circus. They closed down earlier this year (source: http://www.cnn.com/2017/01/14/entertain ... index.html). That means no more circus. Which means no more bandwagon. See the irony? Want more:
[Phinaeus T. Barnum] was nothing if not a publicist and, even though there is no definitive evidence of his inventing any new word or phrase, he certainly can be said to have made several of them popular. Firstly, there are a couple of celebrated quotations:

"There's a sucker born every minute." and
"You may fool all the people some of the time; you can even fool some of the people all the time; but you can't fool all of the people all the time."

source: https://www.phrases.org.uk/meanings/jum ... wagon.html
See the irony? If not, apply the above two phrases to bitcoin. Sometimes we should pay heed to the words we use. Their origins can help us understand all we need to know.
Last edited by arcticpineapplecorp. on Sat Nov 18, 2017 9:42 pm, edited 2 times in total.
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AlohaJoe
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Re: What we don't know

Post by AlohaJoe »

Yes, we play the averages. Just like, on average, your spouse won't cheat on you but how do you definitively know? And your children won't turn out to be murdering cannibals. And your car won't explore in a fireball of death tomorrow because Central American narco-terrorists mistook you for an investigative reporter with a similar name. And your company won't shut down tomorrow due to uncovering financial fraud. And....

Life is uncertainty. Even most sciences don't have the certainty you seem to be looking for.
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Johm221122
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Re: What we don't know

Post by Johm221122 »

AlohaJoe wrote: Sat Nov 18, 2017 9:42 pm Yes, we play the averages. Just like, on average, your spouse won't cheat on you but how do you definitively know? And your children won't turn out to be murdering cannibals. And your car won't explore in a fireball of death tomorrow because Central American narco-terrorists mistook you for an investigative reporter with a similar name. And your company won't shut down tomorrow due to uncovering financial fraud. And....

Life is uncertainty. Even most sciences don't have the certainty you seem to be looking for.
Good point,but this question was more about investing theory than changing my plans
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Peter Foley
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Re: What we don't know

Post by Peter Foley »

Quoting Taylor, and many others I am sure, "there are many roads to Dublin."

We also know that some of the routes are well tread and that many of those who have arrived have shared their experience with us.

First you need to start out -live below your means - and you have to manage risk and stay the course. Others may arrive faster, but that is not the goal, arriving is.
AlohaJoe
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Re: What we don't know

Post by AlohaJoe »

If we don't have certainty anywhere else in life, why should it exist in investing theory....a subject that has been around for maybe 40-50 years max?
Topic Author
Johm221122
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Re: What we don't know

Post by Johm221122 »

arcticpineapplecorp. wrote: Sat Nov 18, 2017 9:40 pm
Johm221122 wrote: Sat Nov 18, 2017 8:58 pm
bigred77 wrote: Sat Nov 18, 2017 8:50 pm We know to save as much as possible,
am i save too much and missing life today

invest in low cost funds,
But something like Bitcoin makes me think is stocks and bonds best

pick an appropriate asset allocation,
exactly what is best

keep debt reasonable

Ok I can go with that or use debt sparingly

, and stay the course.
Should I not jump on Bitcoin bandwagon



It’s not that hard.
It just seems everyday,I think we really don't know(I do plan on staying the course)
since you've brought up buttcoin, er....sh-tcoin, er...bitcoin three times now (twice above and once in the original post) you obviously are suffering from FOMO (that's "fear of missing out" for those not in the know). Well, I find it interesting you used the word "bandwagon" with regards to Bitcoin in the post above. It made me wonder where the origin of the word "bandwagon" came from so I looked it up:
The word bandwagon was coined in the USA in the mid 19th century, simply as the name for the wagon that carried a circus band. Phineas T. Barnum, the great showman and circus owner, used the term in 1855 in his unambiguously named autobiography The Life of P.T. Barnum, Written by Himself, 1855:

"At Vicksburg we sold all our land conveyances excepting four horses and the 'band wagon'."

Barnum didn't coin 'jump on the bandwagon', which came later, but he did have a hand in some other additions to the language.

source: https://www.phrases.org.uk/meanings/jum ... wagon.html
See the irony here? If not, let me point it out. P.T. Barnum, of Barnum and Bailey Circus, which eventually merged with Ringling Bros. to become Ringling Bros. and Barnum and Bailey Circus. They closed down earlier this year (source: http://www.cnn.com/2017/01/14/entertain ... index.html). That means no more circus. Which means no more bandwagon. See the irony? Want more:
[Phinaeus T. Barnum] was nothing if not a publicist and, even though there is no definitive evidence of his inventing any new word or phrase, he certainly can be said to have made several of them popular. Firstly, there are a couple of celebrated quotations:

"There's a sucker born every minute." and
"You may fool all the people some of the time; you can even fool some of the people all the time; but you can't fool all of the people all the time."

source: https://www.phrases.org.uk/meanings/jum ... wagon.html
See the irony? If not, apply the above two phrases to bitcoin. Sometimes we should pay heed to the words we use. Their origins can help us understand all we need to know.
While I would have liked to had returns of bitcoin,I feel there currently more like ponzi scheme

It is every decision I make in investing seems to be debatable(bonds,savings rate,AA,etc..)There are little things that are clear cut
noco-hawkeye
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Re: What we don't know

Post by noco-hawkeye »

Maybe view it like this -

On average, a casino comes out ahead. Every once in a while, someone gets lucky and really takes them to the cleaners (maybe that is bitcoin right now, maybe not?).

Investing in low cost index funds is like choosing to be the casino. Choosing ala carte stocks or high priced funds is like siding with the individual gambler. Over a 30 year period, and looking at 100 gamblers - which side do you think wins? Maybe you will be the gambler that walks into a casino on day one, and walks out with 10M $ - I'm not planning on this though.

It's not about knowing everything, or even knowing very much. It's more embracing that we don't know much, and letting the market work itself out in the long run.
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dwickenh
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Re: What we don't know

Post by dwickenh »

noco-hawkeye wrote: Sat Nov 18, 2017 9:57 pm Maybe view it like this -

On average, a casino comes out ahead. Every once in a while, someone gets lucky and really takes them to the cleaners (maybe that is bitcoin right now, maybe not?).

Investing in low cost index funds is like choosing to be the casino. Choosing ala carte stocks or high priced funds is like siding with the individual gambler. Over a 30 year period, and looking at 100 gamblers - which side do you think wins? Maybe you will be the gambler that walks into a casino on day one, and walks out with 10M $ - I'm not planning on this though.

It's not about knowing everything, or even knowing very much. It's more embracing that we don't know much, and letting the market work itself out in the long run.
+1 I love that last sentence!
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett
software
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Re: What we don't know

Post by software »

Surprised that I don’t think anyone has mentioned this yet, but we know with 100% certainty that we have no clue what will happen tomorrow with 100% (or anywhere even close) certainty.

Would you have been better off investing in Apple 30 years ago than the S&P 500? Obviously... However there was no way of knowing that ahead of time and Apple could have just as easily gone bankrupt. What are the chances of the 500 most valuable companies going bankrupt at the same time? Very low (albeit not 0, but then we have bigger problems than retirement).

So in short, realize you know for sure that you nothing, diversify as much as you can, and maximize your chances of a great (but maybe not exceptional) result.
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Watty
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Re: What we don't know

Post by Watty »

Johm221122 wrote: Sat Nov 18, 2017 8:35 pm So exactly what do we we definitely know?
Diversification works.

You will have some exposure to whatever is best and not too much exposure to the things that don't work.

This is not just for stocks and bonds but also things like Roth vs Traditional and Now vs Later decisions.
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Johm221122
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Re: What we don't know

Post by Johm221122 »

Watty wrote: Sat Nov 18, 2017 11:37 pm
Johm221122 wrote: Sat Nov 18, 2017 8:35 pm So exactly what do we we definitely know?
Diversification works.

You will have some exposure to whatever is best and not too much exposure to the things that don't work.

This is not just for stocks and bonds but also things like Roth vs Traditional and Now vs Later decisions.
Yes that is what looking for
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Johm221122
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Re: What we don't know

Post by Johm221122 »

AlohaJoe wrote: Sat Nov 18, 2017 9:54 pm If we don't have certainty anywhere else in life, why should it exist in investing theory....a subject that has been around for maybe 40-50 years max?
That's a real good point,investing as we know it ,is not a field that's been around real long.Index funds,401 plans,the internet are fairly recent ideas
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Johm221122
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Re: What we don't know

Post by Johm221122 »

Here is another way to look at,
We all would agree that a doctor,lawyer, electrician etc..would know more about their field than us,but when it comes to investing giving your personal circumstances,how many feel a professional advisor could do better than your current investment policy(plan)?
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Johm221122
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Re: What we don't know

Post by Johm221122 »

JoMoney wrote: Sat Nov 18, 2017 9:06 pm
John C. Bogle wrote: http://johncbogle.com/speeches/JCB_NE_Pension_4-00.pdf
Four Key Elements of Investing: Reward, Risk, Time, and Cost
...for all of the projections and assumptions we make (and almost take for granted), there is one element of investing we cannot control: Reward. For future stock market returns are completely unpredictable in the short-run and—unless we know more about the world 25-years from now then we do about the world today—may prove even less predictable over the long-run. But we can control the other three primary determinants of investing: Risk, time, and cost, and we should focus on them...
This is good
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22twain
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Re: What we don't know

Post by 22twain »

It seems to me that much of the stuff that people argue about here amounts to "tweaking around the edges" in an attempt to attain maximum performance (according to whatever criterion you use for "performance"), rather than being satisfied with a plan that is simple and "good enough."

Someone here or on a Morningstar forum (I don't remember where I saw this first) calls this the difference between being a "maximizer" and a "satisficer."

To me, the basic ingredients of a plan that is "good enough" are:

1. Keep your lifestyle in check and save a lot. If you can't save a large fraction of your pay at the beginning of your career, start with whatever you can save, and increase it steadily. That's what I did, starting at about 10% and escalating to around 40% near the end of my career. My wife and I live pretty much the same way we did when we got married almost 30 years ago and were near the beginning of our careers.

2. Keep fees and ER's low. Because of using a TIAA 403b plan with limited options, I had to make do with CREF Stock which currently has 0.43% ER rather than Vanguard's index funds at less than 0.1%, but it was nevertheless better than a lot of 403b/401k plans offer.

3. Diversify as much as possible. CREF Stock isn't an index fund, but it's pretty well diversified, with both domestic and international stock. In recent years it's closely tracked a 70/30 mix of Vanguard Total Stock Market and Total International Stock Market

4. Resist the urge to tinker, or jump in or out according to market conditions. I always split my contributions 50/50 between CREF Stock and the TIAA Traditional stable-value account, without even rebalancing.

In retrospect, I could have ended up with a higher portfolio balance by using, say, a 75/25 allocation. Or by rebalancing occasionally. Nevertheless, as I start retirement, I have enough to maintain my lifestyle, and even boost it a bit to fill the newly-gained free time. So I don't beat myself over the head about what could have been.
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
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Johm221122
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Re: What we don't know

Post by Johm221122 »

22twain wrote: Sun Nov 19, 2017 7:59 am It seems to me that much of the stuff that people argue about here amounts to "tweaking around the edges" in an attempt to attain maximum performance (according to whatever criterion you use for "performance"), rather than being satisfied with a plan that is simple and "good enough."

Someone here or on a Morningstar forum (I don't remember where I saw this first) calls this the difference between being a "maximizer" and a "satisficer."

To me, the basic ingredients of a plan that is "good enough" are:

1. Keep your lifestyle in check and save a lot. If you can't save a large fraction of your pay at the beginning of your career, start with whatever you can save, and increase it steadily. That's what I did, starting at about 10% and escalating to around 40% near the end of my career. My wife and I live pretty much the same way we did when we got married almost 30 years ago and were near the beginning of our careers.

2. Keep fees and ER's low. Because of using a TIAA 403b plan with limited options, I had to make do with CREF Stock which currently has 0.43% ER rather than Vanguard's index funds at less than 0.1%, but it was nevertheless better than a lot of 403b/401k plans offer.

3. Diversify as much as possible. CREF Stock isn't an index fund, but it's pretty well diversified, with both domestic and international stock. In recent years it's closely tracked a 70/30 mix of Vanguard Total Stock Market and Total International Stock Market

4. Resist the urge to tinker, or jump in or out according to market conditions. I always split my contributions 50/50 between CREF Stock and the TIAA Traditional stable-value account, without even rebalancing.

In retrospect, I could have ended up with a higher portfolio balance by using, say, a 75/25 allocation. Or by rebalancing occasionally. Nevertheless, as I start retirement, I have enough to maintain my lifestyle, and even boost it a bit to fill the newly-gained free time. So I don't beat myself over the head about what could have been.
Your 4 points are good,definitely things we know to be true
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oldcomputerguy
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Re: What we don't know

Post by oldcomputerguy »

Johm221122 wrote: Sat Nov 18, 2017 8:58 pm
bigred77 wrote: Sat Nov 18, 2017 8:50 pm We know to save as much as possible,
am i save too much and missing life today
Seeking balance is worthwhile. Only thing is, don't let today's wants distract your attention from attaining your long-term goal.
invest in low cost funds,
But something like Bitcoin makes me think is stocks and bonds best
Bitcoin is an incredibly volatile, alluring gamble. It is not an investment. The only "return" Bitcoin pays is appreciation due to people who, like you, see the past meteoric rise in price and think it will continue, thereby bidding the price up and causing the price to run wild. Every person who ever saw a "hot stock" and sunk their life savings into it only to be destroyed by reversion to the mean thought exactly as you do right now.

Look at it this way... assuming for the sake of argument that Bitcoin was a "legitimate" (i.e. government-sanctioned) currency, that would put it on the same footing as the United States dollar, the Swiss franc, the French franc, the Euro, or the Mexican peso. Ask yourself if you feel the same enthusiasm for sinking money into any of those currencies, and if not, ask yourself why not.
pick an appropriate asset allocation,
exactly what is best
Only you can answer that. Figure out what your goal is. Then figure out how much you will need to meet that goal and what your timeframe is. Consult one of the online investment calculators to figure out what rate of return you will need to meet that amount. Finally, look for guidance on what asset allocation will be the minimum risk you'll need to meet that return. This should give you an idea of how much risk you need. You shouldn't carry more risk than that.
keep debt reasonable

Ok I can go with that or use debt sparingly
Also pay attention to "good" debt versus "bad" debt. An example of "bad" debt would be carrying a lot of high-interest-rate credit card debt to fund luxuries you can do without. An example of "good" debt would be lower-rate student loans to invest in your future earnings potential.
, and stay the course.
Should I not jump on Bitcoin bandwagon
You'll see folks here post about having some Bitcoin in their portfolios. I don't know of anyone that carries it as a serious part of their investment strategy, but if you want to put some "play money" into it, I don't see why not. Just be prepared to lose the entire amount.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
2015
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Re: What we don't know

Post by 2015 »

I know enough to know that I should never stop learning, and that reading non-fiction business books outside of the fields of economics, investing, and personal finance provides much more clarity and can be much more actionable than when I niche down. I know that overconfidence is probably my greatest enemy in just about every area of life.

[Edited to add: I also agree with every point 22twain made above.]
longinvest
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Re: What we don't know

Post by longinvest »

Johm221122 wrote: Sat Nov 18, 2017 8:35 pm
So exactly what do we we definitely know?
We do know the following for sure:
...
If "active" and "passive" management styles are defined in sensible ways, it must be the case that
  1. before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and
  2. after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar
These assertions will hold for any time period. Moreover, they depend only on the laws of addition, subtraction, multiplication and division. Nothing else is required.
...
The complete proof was written by Prof. Willam Sharpe, a Nobel Laureate. Here's a link to it: This theorem is the fundamental idea behind cap-weighted indexing advocated by our mentor, and creator of the first publicly available index fund, John Bogle. Anybody can read it and understand why it works because it doesn't rely on complex mathematical formulas; it only requires some minimal understanding of basic arithmetic.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
DrGoogle2017
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Re: What we don't know

Post by DrGoogle2017 »

I’m 100% certain we know nothing. Just try to do our best to avoid stupid mistakes.
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triceratop
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Re: What we don't know

Post by triceratop »

livesoft wrote: Sat Nov 18, 2017 8:52 pm I think we definitely know the commissions that we pay and the expense ratios of the investments that we buy. We should also know the taxes that we pay on our investments each year. If we pay an advisor, we should definitely know what those costs are as well.

I suspect that many people do not know the things I just mentioned.
The truth of this statement is proved by the fact we have far fewer threads about tax costs than we do about expense ratios, far fewer in my opinion than the proportional number of investors with taxable holdings. That statement is just an opinion based upon my eyeballing the threads. There is enormous interest in Fidelity charging half a bp less in expense, but we can't even convince everyone that high-dividends are a bad strategy in taxable or that we can be more precise than general rules for where to place international, bonds, etc.

It's my BH pet peeve. Hopefully people who read my posts do not think I am a broken record.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
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randomizer
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Re: What we don't know

Post by randomizer »

Bitcoin may make you rich but it is speculation, not investment.
87.5:12.5, EM tilt — HODL the course!
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nedsaid
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Re: What we don't know

Post by nedsaid »

Johm221122 wrote: Sat Nov 18, 2017 8:35 pm We really don't know anything when it comes to investing,do we?Almost daily I see posts on Bogleheads that make me feel this way

Which is better a CD ladder or bond fund,with interest rates this low?
Which is better index funds or a low cost managed fund
(Wellington,Wesley,Primecap...)?
Am I saving too much or too little?
Should I use more Roth or Traditional?
Were should I put my bonds in taxable or tax advantaged?
Is my account safe?
Should I buy Bitcoin?
Etc.....

So exactly what do we we definitely know?
Sadly, not as much as we think. This is why humility serves investors well. Markets have a way of finding a chink in the armor, doing the very thing we didn't expect. When the markets are doing well, I am just utterly brilliant. When the markets are doing poorly, I wonder what the heck I was thinking.
A fool and his money are good for business.
DrGoogle2017
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Re: What we don't know

Post by DrGoogle2017 »

randomizer wrote: Sun Nov 19, 2017 4:17 pm Bitcoin may make you rich but it is speculation, not investment.
Does it matter?
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randomizer
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Re: What we don't know

Post by randomizer »

DrGoogle2017 wrote: Sun Nov 19, 2017 5:40 pm
randomizer wrote: Sun Nov 19, 2017 4:17 pm Bitcoin may make you rich but it is speculation, not investment.
Does it matter?
Absolutely. There isn't much that's Bogleheadish about speculation.
87.5:12.5, EM tilt — HODL the course!
venkman
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Re: What we don't know

Post by venkman »

I think if you had to sum up in one sentence what we "know" on these forums, this quote from Jack Bogle nails it:
"While an index-driven strategy may not be the best investment strategy ever devised, the number of investment strategies that are worse is infinite.”
flyingaway
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Re: What we don't know

Post by flyingaway »

I have no intention to optimize my investment. I am happy with OK performance.
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