nisiprius wrote: ↑Thu Sep 14, 2017 7:59 am
james22 wrote: ↑Thu Sep 14, 2017 3:51 amA lot of very smug passive investors are going to learn when they look back at the beach that since the crash the one set of footprints they see are those of the central bankers that have carried them.
Nice rhetoric, but would you flesh it out to the point where we can make a judgement on it?
I understand you to be saying this:
a) Central bankers will raise interest rates, i.e. will begin participating passively rather than actively in the bond market, and allow interest rates to rise to a "natural" level set by private participants in the market.
b) As a result, there will be a severe stock market crash.
c) When it occurs, it will be much worse for investors in index funds than for investors in actively-managed funds as a class. That is to say, your ordinary, competently-managed, run-of-the-mill, low-cost, actively managed fund that are able to act prudently, and dodge obvious problems ahead, rather than being shackled to an index.
(To put it another way: active funds would be beating index funds if it were not for the Fed).
If that
isn't a correct, expression of your views, please correct it.
And, please name a good handful of good, solid, ordinary actively-managed funds that would be a fair comparison to index funds--ones available in 401(k) plans, one named in "16 Best Mutual Funds" articles, funds that an average retail investor could easily discover for themselves.
I'm saying this, nisiprius:
a) Central banks lowering of interests rates has inflated equities far beyond fair value.
b) As a result, there will be a severe stock market crash.
c) When it occurs, it will be much worse for investors who ignore valuation than for those who don't. That is to say, your ordinary competently, run-of-the-mill investor who actively manages his/her low-cost portfolio by prudently practicing strategic/tactical asset allocation, will dodge obvious problems ahead, rather than those shackled by "stay the course."
(To put it another way: active value investors would be beating passive investors if it were not for the Fed.)
The correct expression of my views: You can actively manage your low-cost portfolio.
I manage mine like so:
401K. More Stable Value and less Small Value index fund when the market overvalued, vice-versa when undervalued.
Roth IRA. More Preferreds (BAC-L, WFC-L) and less International Small when the market overvalued, vice-versa when undervalued.
As well as more Precious Metals, Energy, and REIT index funds when undervalued, less when overvalued.
Taxable. More cash when the market overvalued, less when undervalued.
As well as more Berkshire (BRK), Markel (MKL), Fairfax (FRFHF), Brookfield Asset Management (BAM), and Oaktree Capital Management (OAK) when undervalued, less when overvalued.