If index funds didn't exist, what would you do?

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rgb73
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If index funds didn't exist, what would you do?

Post by rgb73 » Sun Nov 24, 2013 5:27 pm

Hi,

Well thank heavens for Jack Bogle & Vanguard so we don't have to really consider this. But without them, what would you do? Buy the Dow 30 and a bunch of bonds? This was the case back in the 60's and time immemorial before that. Don't forget not all countries have the massive diversification of the US so they still have this exact same issue.

rgb73

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Re: If index funds didn't exist, what would you do?

Post by livesoft » Sun Nov 24, 2013 5:30 pm

I would do what I did when there were not many index funds around: I would buy no-load, low-expense-ratio actively-managed funds. Examples would be CREF stock fund and Vanguard Windsor II. My biggest actively-managed holding is Vangaurd GNMA fund.
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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 5:33 pm

If airplanes didn't exist how would you go to Europe?

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 5:33 pm

If computers did not exist, how would you do spreadsheets?

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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 5:34 pm

If I was smart, I'd invent them.
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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 5:37 pm

If women did not exist ... Oops, a wrong forum.

Victoria
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Re: If index funds didn't exist, what would you do?

Post by Levett » Sun Nov 24, 2013 5:44 pm

"If women did not exist"

I'd be very sorry. :(

Index (or active) funds. Sorry. It doesn't do it for me. :wink:

Lev

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Re: If index funds didn't exist, what would you do?

Post by cheese_breath » Sun Nov 24, 2013 5:48 pm

VictoriaF wrote:If women did not exist ...

Victoria
I wouldn't be here to comment on this forum, But then, neither would you. :twisted:

But if index funds didn't exist I' d probably still be working instead of retired for 14 years, stuffing money into low interest bank accounts and cds, and losing my shirt on expensive financial managers and individual stocks.
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Re: If index funds didn't exist, what would you do?

Post by Blues » Sun Nov 24, 2013 5:51 pm

There's always 7-11's... :twisted:
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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 5:54 pm

VictoriaF wrote:If computers did not exist, how would you do spreadsheets?

Victoria
I'm sure you already know, Victoria, but I think it's an interesting historical question with respect to the proliferation of personal computers so I'll expound a bit. Thanks for giving me the opportunity to, well, not so much listen to myself talk, as watch myself write.

Spreadsheets used to be sheets of paper. You bought pads of them at the office-supply store. There were little ones, medium-sized ones, and very large ones one used on tiltable drafting tables while not actually drafting on them (yes, there used to be people with the job title of drafter, and they used mechanical (!) pencils and rulers and straightedges and templates and compasses and wrote everything in block capital letters - by hand). Probably there were also truly enormous spreadsheet pads for vast projects like, for example, aircraft design, but I never saw those at my local stationary shop. Oh, yes, sorry, stationary used to mean things beyond greeting cards.

People filled in the fields in spreadsheets, and then used calculators to compute the numbers. No, I do not mean pocket calculators, nor even desktop calculators. Calculator used to be a job title, just like drafter. People were employed to do arithmetic. That was their job. Smart employers assumed an average error rate, just like for typists.

Yes. I said typists. People used to have that as a job title.

Anyhow, personal computers were all very good and such, for people who liked to tinker or wanted to play Adventure, but served no good business purpose (other than saving paper and time for typists who could correct errors without retyping an entire sheet of paper) until, wait for it, Lotus 123 came out. It was a virtual spreadsheet. You told it what arithmetic to do, and it did it! Nobody needed calculators anymore (which admittedly, by that time, were pocket calculators). It was the killer app before anybody invented the expression killer app.

Everybody who was anybody needed a personal computer at work for spreadsheets. That's how you could tell they were anybody.

The only personal computer thing I'm aware of which is remotely similar is local area networks. They were implemented on personal computers so businesses could have shared printers, rather than one per user which was kind of expensive. Meh.

Then somebody implemented email for personal computers.

The rest, as they say, is history.

PJW

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Re: If index funds didn't exist, what would you do?

Post by solonseneca » Sun Nov 24, 2013 5:59 pm

I come from an alternate reality where index funds indeed don't exist. There investor returns are diminished by higher fees. On the positive side, there are no SDTs there, so people mess around more. So at least we got that going for us... which is nice

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 6:00 pm

Phineas J. Whoopee wrote:
VictoriaF wrote:If computers did not exist, how would you do spreadsheets?

Victoria
I'm sure you already know, Victoria, but I think it's an interesting historical question with respect to the proliferation of personal computers so I'll expound a bit. Thanks for giving me the opportunity to, well, not so much listen to myself talk, as watch myself write.

...

The rest, as they say, is history.

PJW
Dear Phineas J. Whoopee,

May I call you Phineas? Thank you for the most fascinating delivery of history. I hope you have more occasions to watch yourself write.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 6:04 pm

solonseneca wrote:I come from an alternate reality where index funds indeed don't exist. There investor returns are diminished by higher fees. On the positive side, there are no SDTs there, so people mess around more. So at least we got that going for us... which is nice
Alternate acronyms too, it seems. :D
PJW

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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 6:18 pm

VictoriaF wrote:...
Dear Phineas J. Whoopee,

May I call you Phineas? Thank you for the most fascinating delivery of history. I hope you have more occasions to watch yourself write.

Victoria
Just don't call me late for dinner.
PJW

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 6:27 pm

Phineas J. Whoopee wrote:
VictoriaF wrote:...
Dear Phineas J. Whoopee,

May I call you Phineas? Thank you for the most fascinating delivery of history. I hope you have more occasions to watch yourself write.

Victoria
Just don't call me late for dinner.
PJW
A call is an option. As well as a put.

Victoria
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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 6:30 pm

Eating, on the other hand, is not.
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Re: If index funds didn't exist, what would you do?

Post by bertilak » Sun Nov 24, 2013 6:31 pm

I would do what I'm doing now: Use Wellington and Wellesley.
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Re: If index funds didn't exist, what would you do?

Post by White Coat Investor » Sun Nov 24, 2013 6:40 pm

I agree that low cost active is a better option than individual stocks/bonds.

If no mutual funds, then individual stocks/bonds/real estate etc.
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Re: If index funds didn't exist, what would you do?

Post by Van » Sun Nov 24, 2013 6:43 pm

Wellesley or/and Wellington.

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Re: If index funds didn't exist, what would you do?

Post by Ranger » Sun Nov 24, 2013 6:44 pm

rgb73 wrote:Hi,

Well thank heavens for Jack Bogle & Vanguard so we don't have to really consider this. But without them, what would you do?
rgb73
If you are implying jack bogle or vanguard invented index funds, then you are mistaken. They certainly popularized it. Credit should go to GMO's Grantham

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Re: If index funds didn't exist, what would you do?

Post by lws6772 » Sun Nov 24, 2013 6:49 pm

bertilak wrote:I would do what I'm doing now: Use Wellington and Wellesely.
Good answer. 8-)

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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 6:54 pm

Ranger wrote:
rgb73 wrote:Hi,

Well thank heavens for Jack Bogle & Vanguard so we don't have to really consider this. But without them, what would you do?
rgb73
If you are implying jack bogle or vanguard invented index funds, then you are mistaken. They certainly popularized it. Credit should go to GMO's Grantham
Credit is shared. There was no divine moment of creation of index funds. The idea was developing in the world, and many contributed.

The First Index Mutual Fund

PJW
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Re: If index funds didn't exist, what would you do?

Post by sadie wess » Sun Nov 24, 2013 7:02 pm

VictoriaF wrote:If airplanes didn't exist how would you go to Europe?

Victoria
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Re: If index funds didn't exist, what would you do?

Post by MnD » Sun Nov 24, 2013 7:36 pm

I'd have a lot more shares of Dodge and Cox Stock and International than I do now, and I'd open a big position in Dodge and Cox income.
Royce Total Return or something similar for small value.

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 7:47 pm

If index funds didn't exist, we would need a Bunglehead forum.

Victoria
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Re: If index funds didn't exist, what would you do?

Post by fredflinstone » Sun Nov 24, 2013 7:50 pm

If index funds didn't exist, I would create them (just as Jack Bogle did).

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Re: If index funds didn't exist, what would you do?

Post by Matigas » Sun Nov 24, 2013 7:52 pm

VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women did not exist, all the money in the world would be useless.

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Re: If index funds didn't exist, what would you do?

Post by Leesbro63 » Sun Nov 24, 2013 8:10 pm

I suspect many of us would do what my father-in-law did: buy good dividend-paying blue chip sticks and hold them forever. And perhaps individual municipal bonds. That, pretty much, was what "our types" did before low cost index funds and before the understanding of asset allocation. And it worked pretty well.

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Re: If index funds didn't exist, what would you do?

Post by GerryL » Sun Nov 24, 2013 8:18 pm

When I started investing I didn't know anything about indexing, but I did get a good tutorial on loads and expenses from Consumer Reports. So, as an earlier commenter said, I'd probably have more funds in Dodge & Cox than I have now.

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Re: If index funds didn't exist, what would you do?

Post by investor » Sun Nov 24, 2013 8:29 pm

I have been retired 17 years and have not used index funds. I used/use no load mutual funds: Mutual Shares, Janus funds, Wellington Fund.. all turned out just fine. Except Max Heyne and Michael Price sold their funds and retired. A few other funds and stocks bought and sold over the past 40+ years. Assets have never been higher...

investor

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Re: If index funds didn't exist, what would you do?

Post by Blues » Sun Nov 24, 2013 8:34 pm

investor wrote:I have been retired 17 years and have not used index funds. I used/use no load mutual funds: Mutual Shares, Janus funds, Wellington Fund.. all turned out just fine. Except Max Heyne and Michael Price sold their funds and retired. A few other funds and stocks bought and sold over the past 40+ years. Assets have never been higher...

investor
Mutual Shares was the first fund I ever purchased back about 30 years ago. Classic. :beer

(And I had quite a few of the Janus funds a few years later.)
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Re: If index funds didn't exist, what would you do?

Post by Bungo » Sun Nov 24, 2013 9:15 pm

My 401(k) only offers one index fund, S&P500. To achieve my desired asset allocation, I have to hold a couple of their non-index funds. I use the closest approximation I can find: among the funds with coverage of the desired asset classes, choose the ones with the lowest expense ratios. As a result, I hold some shares of Pimco Total Return as a proxy for the total bond market, and some shares of Fidelity International Discovery as a proxy for a developed markets index. Not optimal but it'll suffice until I change jobs and can roll the 401(k) into an IRA.

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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Sun Nov 24, 2013 9:47 pm

Bungo wrote:My 401(k) only offers one index fund, S&P500. To achieve my desired asset allocation, I have to hold a couple of their non-index funds. I use the closest approximation I can find: among the funds with coverage of the desired asset classes, choose the ones with the lowest expense ratios. As a result, I hold some shares of Pimco Total Return as a proxy for the total bond market, and some shares of Fidelity International Discovery as a proxy for a developed markets index. Not optimal but it'll suffice until I change jobs and can roll the 401(k) into an IRA.
That's a good point, Bungo. I'd like to suggest one's job, over the long run and in a total-return sense, is more important than one's 401(k) options. If you can find a better, by all means take it; but I wouldn't let the 401(k) tail, as we often say here about taxes, wag the employment dog.
PJW

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Re: If index funds didn't exist, what would you do?

Post by staythecourse » Sun Nov 24, 2013 10:12 pm

Personally, I don' think Mr. Bogle's real legacy for investors was creating index funds. That would have happened regardless. Someone would have come around and said "Dow Jones is a pretty cool index around since 1899 we should come up with a way to invest in it". BTW Mr. Bogle did not come up with the first index fund anyways that goes to Rex Sinquefield of future DFA fame.

What Mr. Bogle did was MUCH bigger then just inventing an index fund. He changed the ENTIRE culture of the industry. He took an industry that was used/ accepted they could take advantage of the retail investor and FORCED them to change. Low cost investing was, is, and will always be secondary to Mr. Bogle's enduring legacy. Who would have EVERY guessed Fidelity would have Spartan funds if it wasn't for Mr. Bogle.

Good luck.
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Re: If index funds didn't exist, what would you do?

Post by Calm Man » Sun Nov 24, 2013 10:43 pm

VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women didn't exist I would have not been divorced twice and probably would live several years longer.

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Sun Nov 24, 2013 10:46 pm

Calm Man wrote:
VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women didn't exist I would have not been divorced twice and probably would live several years longer.
Did you index your women, or they were active?

Victoria
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Re: If index funds didn't exist, what would you do?

Post by cheese_breath » Sun Nov 24, 2013 10:57 pm

VictoriaF wrote:
Calm Man wrote:
VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women didn't exist I would have not been divorced twice and probably would live several years longer.
Did you index your women, or they were active?

Victoria
I would bet they had high expense ratios.
The surest way to know the future is when it becomes the past.

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Re: If index funds didn't exist, what would you do?

Post by StormShadow » Mon Nov 25, 2013 1:30 am

Just buy the components of the Dow Jones.

Though some combo of Wellington and Wellesley would work too.

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Re: If index funds didn't exist, what would you do?

Post by investor » Mon Nov 25, 2013 5:16 am

StormShadow wrote:Just buy the components of the Dow Jones.

Though some combo of Wellington and Wellesley would work too.

+1

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Re: If index funds didn't exist, what would you do?

Post by linenfort » Mon Nov 25, 2013 7:26 am

There used to be a lot of thread titles along the lines of "Build my own index?"
I'd be tempted to buy 100 stocks with different characteristics and to adjust as litle as possible over the years. However, I think Bertilak's solution is best: Wellington and/or Wellesley.
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Re: If index funds didn't exist, what would you do?

Post by nisiprius » Mon Nov 25, 2013 7:35 am

linenfort wrote:....There used to be a lot of thread titles along the lines of "Build my own index?"
I'd be tempted to buy 100 stocks with different characteristics and to adjust as litle as possible over the years....
What if discount brokerages didn't exist and trades cost about $100 each? :)
However, I think Bertilak's solution is best: Wellington and/or Wellesley.
If index funds did not exist, it is unlikely that we would be drawn so closely to Vanguard and be so familiar with their list of mutual funds. As others have noted, if it weren't for index funds, the range of choice for good, conservatively managed, index-y, invest-don't-speculate, relatively-low-cost funds is much wider than just Vanguard.

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If all the trees were bread and cheese--
What would we do for drink?"--"Mother Goose"
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Re: If index funds didn't exist, what would you do?

Post by DRiP Guy » Mon Nov 25, 2013 7:38 am

Honestly? DRiPs and a spreadsheet stock screen, using some simple rules. That's how I started out investing, and if I was willing to dedicate the required time and effort, I think it would still be a pretty good method, IF a person is not too speculative (I feel I'm not).

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Re: If index funds didn't exist, what would you do?

Post by Calm Man » Mon Nov 25, 2013 8:24 am

VictoriaF wrote:
Calm Man wrote:
VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women didn't exist I would have not been divorced twice and probably would live several years longer.
Did you index your women, or they were active?

Victoria
#1 was indexed.
#2 was active.

Per cheesebreath's question:
Both had high expense ratios. But #1 at least provided matching contributions while #2 had extra taxes.
Last edited by Calm Man on Mon Nov 25, 2013 8:26 am, edited 1 time in total.

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Mon Nov 25, 2013 8:26 am

Calm Man wrote:
VictoriaF wrote:
Calm Man wrote:
VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
If women didn't exist I would have not been divorced twice and probably would live several years longer.
Did you index your women, or they were active?

Victoria
#1 was indexed.
#2 was active.
#3 should be sliced and diced.

Victoria
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Re: If index funds didn't exist, what would you do?

Post by bondsr4me » Mon Nov 25, 2013 8:35 am

sounds like a good time for "rebalancing"!! lol

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Re: If index funds didn't exist, what would you do?

Post by jb1934 » Mon Nov 25, 2013 8:42 am

Wellesley

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Re: If index funds didn't exist, what would you do?

Post by cheese_breath » Mon Nov 25, 2013 8:51 am

bondsr4me wrote:sounds like a good time for "rebalancing"!! lol
But instead he bought high and sold low.
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Re: If index funds didn't exist, what would you do?

Post by linenfort » Mon Nov 25, 2013 9:15 am

nisiprius wrote:
linenfort wrote:....There used to be a lot of thread titles along the lines of "Build my own index?"
I'd be tempted to buy 100 stocks with different characteristics and to adjust as litle as possible over the years....
What if discount brokerages didn't exist and trades cost about $100 each? :)
Hmm, you're making it tougher. I'm used to free and then $2 trades at Vanguard.
I would have bought equal parts Berkshire, Philip Morris and Microsoft, just after it becomes a publicly traded company. ;-)
However, I think Bertilak's solution is best: Wellington and/or Wellesley.
nisiprius wrote:If index funds did not exist, it is unlikely that we would be drawn so closely to Vanguard and be so familiar with their list of mutual funds. As others have noted, if it weren't for index funds, the range of choice for good, conservatively managed, index-y, invest-don't-speculate, relatively-low-cost funds is much wider than just Vanguard.
I suppose I'd be even more attracted to the Permanent Portfolo, then, which originally recommended some volatile growth stock mutual funds. And if even those crummy mutual funds didn't exist? Individual stocks, I guess, and the trading fees that go with them.
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Re: If index funds didn't exist, what would you do?

Post by Phineas J. Whoopee » Mon Nov 25, 2013 10:31 am

VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
The world would be less interesting, but would carry on. Men can reproduce by budding.

Haven't you ever encountered one man pointing out another, saying "this is my bud!"?

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Re: If index funds didn't exist, what would you do?

Post by VictoriaF » Mon Nov 25, 2013 10:40 am

Phineas J. Whoopee wrote:
VictoriaF wrote:If women did not exist ... Oops, a wrong forum.

Victoria
The world would be less interesting, but would carry on. Men can reproduce by budding.

Haven't you ever encountered one man pointing out another, saying "this is my bud!"?

PJW
Some are nipped in the bud.

Victoria
Last edited by VictoriaF on Mon Nov 25, 2013 11:01 am, edited 1 time in total.
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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