Bogle himself is saying we will expect like 3% for the next decades

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truenorth418
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by truenorth418 » Mon Oct 09, 2017 8:03 am

The same guy we laud for the quote "Nobody knows nothin'".

Yet here he is making predictions.

What's wrong with this picture?

30sep16
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 9:46 am

WanderingDoc wrote:
Mon Oct 09, 2017 1:59 am
Sounds good. I will throw $10K in. How long do you think can the doubling/tripling per year go on for?
Quite a few years. I refer you to the Horizon Kinetics link on various scenarios for the possible "ceiling" of Bitcoin.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 9:52 am

chevca wrote:
Mon Oct 09, 2017 6:51 am
Unless one has Warren Buffett amounts of money, having 1% of their assets in anything isn't going to move the needle much one way or the other. Why bother?
Because your brain is in the habit of thinking about aggressive investments that have upside potentials of 25% a year and downsides of 50% a year. But if the upside is 400% and the downside is 100% the math is entirely different, and the asymmetry is in an opposite direction.

Bitcoin will probably 4X this year. A 1% allocation will add 3% to your overall portfolio. Which is all Bogle and others are expecting for the future without Bitcoin.

1% risk to match what the pros are expecting for your ENTIRE portfolio.

It's nuts NOT to.

Also, if you read the Horizon Kinetics link I included, Bitcoin has the potential to increase another 100x or 1000x. Imagine what 1% does for you then. It would double your entire net worth at 100x and it would increase your net worth an order of magnitude at 1000x.

Now you might think there's only a 0-5% chance of that happening. But that's still an insurance policy you'd want to buy. How would you feel about yourself afterward if that happened, and you didn't?

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 9:55 am

BlueCable wrote:
Mon Oct 09, 2017 6:59 am
Purchasing Bitcoin may pay off, but it is speculation, not investment. It is little different than buying gold or Swiss francs.
Since August 2010, Bitcoin's CAGR is 381%. Gold 1.6%. Swiss Franc 0.5%.

How can someone take your comment seriously?

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 10:16 am

WanderingDoc wrote:
Mon Oct 09, 2017 1:59 am
Sounds good. I will throw $10K in. How long do you think can the doubling/tripling per year go on for?
Another way to buy Bitcoin:

There is a new Swedish Bitcoin ETN that made news when Mark Cuban bought into it recently. I've read in a couple of places that if you use Interactive Brokers, you can can ask them to give you access to Swedish funds and buy Bitcoin that way.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by grettman » Mon Oct 09, 2017 10:21 am

Yep as great as Jack Bogle his, his crystal ball is just as reliable as the talking heads on market watch, cnbc, and etc.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Mon Oct 09, 2017 10:33 am

BlueCable wrote:
Mon Oct 09, 2017 6:59 am
Purchasing Bitcoin may pay off, but it is speculation, not investment. It is little different than buying gold or Swiss francs.
Or tulip bulbs.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by chevca » Mon Oct 09, 2017 11:33 am

30sep16 wrote:
Mon Oct 09, 2017 9:52 am
chevca wrote:
Mon Oct 09, 2017 6:51 am
Unless one has Warren Buffett amounts of money, having 1% of their assets in anything isn't going to move the needle much one way or the other. Why bother?
Because your brain is in the habit of thinking about aggressive investments that have upside potentials of 25% a year and downsides of 50% a year. But if the upside is 400% and the downside is 100% the math is entirely different, and the asymmetry is in an opposite direction.

Bitcoin will probably 4X this year. A 1% allocation will add 3% to your overall portfolio. Which is all Bogle and others are expecting for the future without Bitcoin.

1% risk to match what the pros are expecting for your ENTIRE portfolio.

It's nuts NOT to.

Also, if you read the Horizon Kinetics link I included, Bitcoin has the potential to increase another 100x or 1000x. Imagine what 1% does for you then. It would double your entire net worth at 100x and it would increase your net worth an order of magnitude at 1000x.

Now you might think there's only a 0-5% chance of that happening. But that's still an insurance policy you'd want to buy. How would you feel about yourself afterward if that happened, and you didn't?
A 1% allocation to add 3% is what I call barely moving the needle. Of course, losing a percent or three is barely moving it the other way also. It's fine to do that, but I see no point in it and don't feel I need that "insurance".

If you think this will go up 4X this year and has potential to go up 100x or 1000x, why only put 1% in there? You seem fairly confident in this. Throw some money at it.

How will I feel if Bitcoin goes up 100x and I didn't put anything in it? Absolutely fine and will carry on just like I did the day before. My risk tolerance isn't that high. I'd feel worse putting money in something I don't know much about and worrying about it all the time.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by kathyauburn » Mon Oct 09, 2017 11:39 am

Vision wrote:
Fri Oct 06, 2017 3:01 pm
https://www.youtube.com/watch?v=KF1RodFhFwc

This is very depressing.

Even the master himself is saying we will get something like measly 3% from the market and the fun times are over.

Really? :(

Not fair. I guess due to exposure of everyone to these markets indexing is just not that profitable anymore. Too many players. Will we really have to stick to Bitcoin?
I use 3-3.5% in my projections.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Mon Oct 09, 2017 11:52 am

Leif wrote:
Mon Oct 09, 2017 12:28 am
This video is from a year ago. I'm sure his 10 year estimate has gone down based on current valuations.
Didn't spot that.

S&P is up maybe 18% since then, and bonds down 1%. Maybe we'll see a 0% real 10 year prediction soon.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by garlandwhizzer » Mon Oct 09, 2017 12:03 pm

Bogle, as always, gives an intelligent, rational, and sober analysis. Almost everyone who looks at current US market prices and the current and expected future state of our economy expects considerably less than historical returns. Arnott and GMO agree with Bogle's dour picture.

There are however two things to take into account. First, Bogle is a US only type investor, and there is among many analysts a belief that INTL and especially EM equities will substantially outperform US equities going forward. This would amount to a reversal of the long term trend of US outperformance. It is based on better valuations in EM and DM, and in EM better demographics, plus faster economic growth. It may or may not work out that way but it is prudent for all investors IMO at this juncture to consider adding INTL exposure including EM to their equity portfolios in some ratio that is comfortable for them. IMO the case for adding INTL exposure to a US equity portfolio has never been stronger than now. It has the potential but not the certainty of increasing portfolio returns but also likely adds increased risk and volatility.

The second thing: Bogle expects reversion to the mean of US PE ratios from today's generous valuations back to PE of about 17, which subtracts 3% from from his expected future annual equity returns. He may be right, but this is not a certainty. There has been in the US in recent decades so much concentration of wealth in the investing class that a lot of people have a huge amount of money to invest. On the other hand there are few/none attractive opportunities from a risk/reward point of view. Bonds are expected over the next decade to produce essentially zero real inflation adjusted returns. Real estate is expensive relative to historical norms as well. Stocks are generously valued. In short because there is a lot of money seeking limited investment opportunities, the prices of everything get driven up. This, IMO, is part of the reason for today's high equity valuations, high real estate prices and low bond yields. The top 1% in the US have more wealth than the bottom 70% combined and all that money has to go somewhere. A lot of it flows into investments, one major reason they are so richly valued in the first place. This may signify that we're not going to return to historical PE ratios anytime soon, perhaps never. This trend is particularly noticeable in PE 10 graph which has for decades departed from the mean and shows no sign of returning anytime soon. Equities may continue to be generously valued for a long time. Also, in the absence of inflation pressure, bond yields are also likely to remain low for a long time.

Even with these two things taken into account, future returns are expected to be lower than historical going forward in all investment categories. I think it's reasonable to expect 3% real return with a properly designed portfolio going forward rather than 2% - 3% nominal which is close to zero real. The good news is that the future of markets is not predictable beforehand and all such predictions may prove to be humorously inaccurate. Let us hope they are inaccurate in the right direction because invest we must.

Garland Whizzer

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by mickeyd » Mon Oct 09, 2017 12:12 pm

How do you beat 3%? Easy, take more risk.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by bayview » Mon Oct 09, 2017 12:27 pm

This thread reminds me of the saying:

Bulls make money; bears make money.

Pigs get slaughtered.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 12:41 pm

chevca wrote:
Mon Oct 09, 2017 11:33 am
30sep16 wrote:
Mon Oct 09, 2017 9:52 am
chevca wrote:
Mon Oct 09, 2017 6:51 am
Unless one has Warren Buffett amounts of money, having 1% of their assets in anything isn't going to move the needle much one way or the other. Why bother?
Because your brain is in the habit of thinking about aggressive investments that have upside potentials of 25% a year and downsides of 50% a year. But if the upside is 400% and the downside is 100% the math is entirely different, and the asymmetry is in an opposite direction.

Bitcoin will probably 4X this year. A 1% allocation will add 3% to your overall portfolio. Which is all Bogle and others are expecting for the future without Bitcoin.

1% risk to match what the pros are expecting for your ENTIRE portfolio.

It's nuts NOT to.

Also, if you read the Horizon Kinetics link I included, Bitcoin has the potential to increase another 100x or 1000x. Imagine what 1% does for you then. It would double your entire net worth at 100x and it would increase your net worth an order of magnitude at 1000x.

Now you might think there's only a 0-5% chance of that happening. But that's still an insurance policy you'd want to buy. How would you feel about yourself afterward if that happened, and you didn't?
A 1% allocation to add 3% is what I call barely moving the needle. Of course, losing a percent or three is barely moving it the other way also. It's fine to do that, but I see no point in it and don't feel I need that "insurance".

If you think this will go up 4X this year and has potential to go up 100x or 1000x, why only put 1% in there? You seem fairly confident in this. Throw some money at it.

How will I feel if Bitcoin goes up 100x and I didn't put anything in it? Absolutely fine and will carry on just like I did the day before. My risk tolerance isn't that high. I'd feel worse putting money in something I don't know much about and worrying about it all the time.
As I said in a few recent posts, my AA is currently 7.5% bitcoin, 92.5% cash.

I understand that's not going to be comfortable for many, and only was for me after spending several months researching bitcoin.

So I was focusing on getting people to think about a 1% allocation, which can still make a huge difference in your portfolio. It's odd for you to say adding 3%/year to your return is barely moving the needle, when Bogle is saying that's ALL you should expect from your entire portfolio for decades.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by JoMoney » Mon Oct 09, 2017 1:21 pm

mickeyd wrote:
Mon Oct 09, 2017 12:12 pm
How do you beat 3%? Easy, take more risk.
Taking on additional "small" and "value" risks hasn't increased returns over the past 13+ years

And over the same time period, increasing "market risk" through leverage might have gotten you an extra 2% if you happened to pick just the right amount, but the leverage decreased 'risk adjusted return' and if you leveraged up to much you would have done worse (or lost everything)... Here's a PV Backtest demonstrating

Taking on any amount of 'international stock' risk over the period would have reduced returns.

As demonstrated over the past decade+ period, increasing returns by increasing risk would not be as "easy" as some suggest.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by chevca » Mon Oct 09, 2017 1:28 pm

I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 1:37 pm

chevca wrote:
Mon Oct 09, 2017 1:28 pm
I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....
If someone has $1,000,000 in net worth, then NOT investing $10K (1%) in Bitcoin is foolish. That is the argument, according to sep and that article. If I earn $15K a month and put $10K once in Bitcoin, I wouldn't even notice. But the temptation of a possible 100X or 1000X return is enticing, even if there is only a 3-5% chance of happening.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Morse Code » Mon Oct 09, 2017 1:39 pm

I've been a Vanguard shareholder and followed the Diehards/Bogleheads forums since about 2001. It seems to me, Bogle's been warning about low equity returns for at least a couple decades and probably before that. I'm glad I've ignored this and kept high equity allocations all along.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by JoMoney » Mon Oct 09, 2017 2:15 pm

FWIW, looking at valuations as reported in Vanguard annual reports for the S&P 500 fund going back to 12/31/1996, just over 20 years, and on their website for the most recent info,
We're only slightly above the 'median' year end P/E and P/B ratios,
Dividend yields are higher than the 'median'
Growth (Earnings growth and ROE) has been well below the 'median'

If you believe better growth is coming, the valuation ratios might revert towards the mean without the market broadly losing value.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by rj49 » Mon Oct 09, 2017 3:44 pm

grettman wrote:
Mon Oct 09, 2017 10:21 am
Yep as great as Jack Bogle his, his crystal ball is just as reliable as the talking heads on market watch, cnbc, and etc.
Actually Mr. Bogle doesn't use a crystal ball, he uses the Gordon equation, of earnings growth rate + dividend yield=fundamental return, which has been fairly accurate in tracking actual returns over time. The variable, which he usually mentions, is p/e ratio, which would either add to or subtract from future estimated returns. Bill Bernstein also uses this equation to estimate future returns.

If you want more pessimistic views, GMO forecasts -3% or more for US stocks over the coming 7 years, mildly negative returns on international developed, and 3.8% gain for EM. The 25% gain in EM so far this year, plus 21% for developed, versus 15% for US stocks, shows that those who heeded that advice have been rewarded so far.

Others, like John Hussman, also forecast negative returns over the next 12 years for the SP500, based on high valuations, decreased economic growth and productivity, and demographic challenges (for the next 12 years 10,000 Americans a day will reach age 65).

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by chevca » Mon Oct 09, 2017 3:47 pm

WanderingDoc wrote:
Mon Oct 09, 2017 1:37 pm
chevca wrote:
Mon Oct 09, 2017 1:28 pm
I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....
If someone has $1,000,000 in net worth, then NOT investing $10K (1%) in Bitcoin is foolish. That is the argument, according to sep and that article. If I earn $15K a month and put $10K once in Bitcoin, I wouldn't even notice. But the temptation of a possible 100X or 1000X return is enticing, even if there is only a 3-5% chance of happening.
Yes, that's basically what I've been saying... it matter little to put 1% into something.

Penny stocks offer great returns on the off chance you guess which one(s) will go up instead of go away. Do those interest you Bitcoin folks?

Admittedly, I have not looked into Bitcoin at all, so my knowledge of it is nil. But, it sure sounds like a ponzi scheme of sorts... just keep convincing others to put their money in it. It's great... til it isn't.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Mon Oct 09, 2017 3:59 pm

rj49 wrote:
Mon Oct 09, 2017 3:44 pm
If you want more pessimistic views, GMO forecasts -3% or more for US stocks over the coming 7 years,
GMO assumes that today's high profit margins will partly revert towards the historical norm. This leads to even lower expected return.

If you fully adjust earnings for high margins, then US stocks are now more expensive than they were in 2000:

https://www.hussmanfunds.com/wmc/wmc171009m.png

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 4:19 pm

chevca wrote:
Mon Oct 09, 2017 1:28 pm
I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....
Since Aug 2010:

A 60/40 portfolio had a CAGR of 9.98%
A 1/59/40 portfolio had a CAGR of 19.65%

That includes two 80%+ crashes by Bitcoin in its early days.

The reason you people have convinced yourselves that a 1% AA makes no difference is that you aren't used to dealing with asset classes that have astronomical returns.

1% is 1% regardless of the size of your portfolio. I'm rather at a loss of words that you and another commenter are trying to argue portfolio size makes a difference. Of course it doesn't, unless you're sizing cash/bonds for X years of living expenses.

And I never said anything about what the rest of the 99% of the portfolio was invested in. I was saying a 1% allocation could add 3% to your returns, whatever they may be. As a Boglehead you should know the difference between, say, 6% and 9% annually over many years is absolutely massive.

And 3% is understanding it, because it's actually just about 10% historically. I wouldn't expect that to continue. If we take just the past 2 years, here are the returns:

60/40: 10.98%
1/59/40: 14.04%

There's your 3%.

To answer your question, why am I hanging out in Bogleheads? A few reasons:

1. This is where I started. Generally speaking I think you can't beat the market (with certain exceptions) and fees and AA are what determine your longterm performance. I held a standard BH portfolio until I became concerned stocks were due for another crash (especially with the last one only being papered over) and bonds are at the end of a 30-year bull run. And was particularly worried that every 40 years or so stocks and bonds crash at the same time (and we're due). That got me reading a lot. That brought me to Bitcoin. I read a whole lot more about Bitcoin.

2. After the next crash, I'll buy into stocks. I'll probably go for an index funds based "all weather" portfolio. I'll be here looking for advice on fund selection. My Bitcoin holdings will become part of my 15% or so commodities allocation.
Last edited by 30sep16 on Mon Oct 09, 2017 7:22 pm, edited 4 times in total.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 4:20 pm

WanderingDoc wrote:
Mon Oct 09, 2017 1:37 pm
chevca wrote:
Mon Oct 09, 2017 1:28 pm
I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....
If someone has $1,000,000 in net worth, then NOT investing $10K (1%) in Bitcoin is foolish. That is the argument, according to sep and that article. If I earn $15K a month and put $10K once in Bitcoin, I wouldn't even notice. But the temptation of a possible 100X or 1000X return is enticing, even if there is only a 3-5% chance of happening.
See my response to chevca above.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Mon Oct 09, 2017 4:50 pm

Morse Code wrote:
Mon Oct 09, 2017 1:39 pm
It seems to me, Bogle's been warning about low equity returns for at least a couple decades and probably before that.
US stocks have generally been quite expensive since the late 90s.

Since Jan 2000, real return has been only 3%, less than if you bought long term TIPS. And I expect the return from 2000-2030 will be lower. Valuation matters.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by FIREchief » Mon Oct 09, 2017 6:01 pm

rj49 wrote:
Mon Oct 09, 2017 3:44 pm
grettman wrote:
Mon Oct 09, 2017 10:21 am
Yep as great as Jack Bogle his, his crystal ball is just as reliable as the talking heads on market watch, cnbc, and etc.
Actually Mr. Bogle doesn't use a crystal ball, he uses the Gordon equation, of earnings growth rate + dividend yield=fundamental return, which has been fairly accurate in tracking actual returns over time.
The following article, published today, suggests that 3rd quarter earnings for the S&P 500 will be up from 3% to 6% over a year ago. Assuming 2% dividends, would Gordon'a equation then forecast a return of 5% to 7%? That sounds a whole lot better than 3% (although, not "bitcoin better").

http://www.marketwatch.com/story/third- ... 2017-10-09
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FIREchief
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by FIREchief » Mon Oct 09, 2017 6:02 pm

So if I decide to sell all my stocks and bonds and place everything in real estate and bitcoin, what is the optimal AA? Sounds like 99% real estate/1% bitcoin might be a sweeet spot. :twisted:
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

WanderingDoc
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 6:08 pm

FIREchief wrote:
Mon Oct 09, 2017 6:02 pm
So if I decide to sell all my stocks and bonds and place everything in real estate and bitcoin, what is the optimal AA? Sounds like 99% real estate/1% bitcoin might be a sweeet spot. :twisted:
I am currently sitting at 83% various forms of real estate, 9% cash, and 8% mutual funds. I am FI in my early 30s. If I instead invested in the TSP+Roth IRA when I bought my first property (2011, I wasn't even investing in real estate at this point, I was just living in this condo), I would have no option but to keep working full time for at least 20 years. At least now, a few years down the road I can reduce my hours, go surf, or pursue different challenges. More than one way to skin a cat :mrgreen:
One day it suddenly dawned on me that I had won the real estate lottery.

WanderingDoc
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 6:10 pm

30sep16 wrote:
Mon Oct 09, 2017 4:20 pm
WanderingDoc wrote:
Mon Oct 09, 2017 1:37 pm
chevca wrote:
Mon Oct 09, 2017 1:28 pm
I hadn't seen your earlier post about that, sorry. That is a bit of an extreme portfolio, but if it's your plan and something you can stick to, go for it.

I say doesn't move the needle much with the 1% theory, because, well, it doesn't. If someone has $10k invest and $100 of it in Bitcoin, even when Bitcoin has a really good year they have a couple extra hundred bucks. Big deal, IMO. Your portfolio in that situation has the other 99% of it dominating the return for the year. You wouldn't even notice what difference Bitcoin did for the year. That's why I said unless someone has WB type money throwing 1% in anything is sort of pointless to me. It certainly isn't going to make a "huge difference" having 1% in Bitcoin.

You seem to assume the rest of the portfolio doesn't move at all and Bitcoin only goes up with your 1% insurance policy. I don't wish to assume that.

I have to wonder 30sep, if you only invest in Bitcoin and hold cash for the rest, what do you like about hanging out here in Bogleheads? Are you still wondering if you should invest in some index funds? Are you just here to try and get people interested in Bitcoin? The more folks that buy in, even at 1% of their portfolio, is better for you? I doubt you will convert many around here, so if that is your interest here.....
If someone has $1,000,000 in net worth, then NOT investing $10K (1%) in Bitcoin is foolish. That is the argument, according to sep and that article. If I earn $15K a month and put $10K once in Bitcoin, I wouldn't even notice. But the temptation of a possible 100X or 1000X return is enticing, even if there is only a 3-5% chance of happening.
See my response to chevca above.
Worth it to try to link a credit card and see if it works? Maybe an Amex charge card will work, who knows. Just for the points. All CCs are payed in full anyway.

edit: I decided to link a bank but use the "2 small deposit verification" method instead of giving them my bank credentials. I figure, this will give me 2-3 days to read more about Bitcoin as a 'stopper' before I buy my first share.
One day it suddenly dawned on me that I had won the real estate lottery.

chevca
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by chevca » Tue Oct 10, 2017 7:19 am

30sep16 wrote:
Mon Oct 09, 2017 4:19 pm
To answer your question, why am I hanging out in Bogleheads? A few reasons:

1. This is where I started. Generally speaking I think you can't beat the market (with certain exceptions) and fees and AA are what determine your longterm performance. I held a standard BH portfolio until I became concerned stocks were due for another crash (especially with the last one only being papered over) and bonds are at the end of a 30-year bull run. And was particularly worried that every 40 years or so stocks and bonds crash at the same time (and we're due). That got me reading a lot. That brought me to Bitcoin. I read a whole lot more about Bitcoin.

2. After the next crash, I'll buy into stocks. I'll probably go for an index funds based "all weather" portfolio. I'll be here looking for advice on fund selection. My Bitcoin holdings will become part of my 15% or so commodities allocation.
So, you hang out on Bogleheads to be an extreme market timer and seek advice? :confused

I hope you continue to post and update us over the coming years.

Seasonal
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Seasonal » Wed Oct 11, 2017 10:49 am

lazyday wrote:
Sat Oct 07, 2017 3:12 pm
Seasonal wrote:
Sat Oct 07, 2017 11:56 am
A 50/50 portfolio would therefore return 2.5% real, which rounds to Bogle's 3%.
Bogle is predicting 3% nominal for the 50/50 portfolio, or 1.5% real.

I've queued up the video for you. Just listen to the next 10 seconds: https://youtu.be/KF1RodFhFwc?t=5m15s
Predictions are unlikely to be accurate to more than plus or minus 5 percentage points (or worse), as I mentioned. In that context, there's no real difference between 1.5%, 2.5% or 3%.

lazyday
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Wed Oct 11, 2017 2:15 pm

Seasonal wrote:
Wed Oct 11, 2017 10:49 am
Predictions are unlikely to be accurate to more than plus or minus 5 percentage points (or worse), as I mentioned. In that context, there's no real difference between 1.5%, 2.5% or 3%.
There's a lot of uncertainty but I think there's a large difference between 1.5% +- 5% and 2.5% +-5%.

Research affiliates predicts that over 10 years a 50/50 portfolio of S&P 500 and intermediate Treasuries will return about 0.7% +- 1.8% with 90% confidence. (Click "Create a New Portfolio".)

They give a 1 in 20 chance that it will return over 2.5% real, and 1 in 20 it will do worse than -1.2% real.

itstoomuch
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by itstoomuch » Wed Oct 11, 2017 2:28 pm

If you are going to make predictions, It is best to be more conservative than to be more aggressive. Best to be more correct than badly wrong on the wrong side :annoyed
Ymmv :oops:
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

WanderingDoc
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Wed Oct 11, 2017 5:44 pm

lostdog wrote:
Mon Oct 09, 2017 7:39 am
WanderingDoc wrote:
Sat Oct 07, 2017 4:04 pm
whodidntante wrote:
Sat Oct 07, 2017 3:58 pm
WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
Yes, it would be rational to save money in that environment. I expect these kind of muted returns and yet I max every tax advantaged account available to me.
I just watched that Bogle video. One word: Depressing. he basically said in so many words (if not directly) what I have been saying since about 2013:
The real return of the stock market, after taxes, inflation, fees, and human psychology is 0%, at best. I will probably throw no more than $10-12K into the market per year in the near future just for fun, I will write this into my IPS.
Are you serious? Giving into speculation? Market timing works?
Nope. Its because I have already "won" in real estate. I know what to do to continue more of the same, just in an even bigger way. I don't need the $10-12K per year I will put into mutual funds. Its because a bunch of physicians I know in person, and on some forums online all made a good case to diversify a bit out of real estate, if not for the fun and experimental aspect of it.
One day it suddenly dawned on me that I had won the real estate lottery.

carofe
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by carofe » Mon Oct 16, 2017 5:22 pm

truenorth418 wrote:
Mon Oct 09, 2017 8:03 am
The same guy we laud for the quote "Nobody knows nothin'".

Yet here he is making predictions.

What's wrong with this picture?
If you read his book you realize that he says that 1 decade predictions for the whole market can be fairly accurate (he shows you numbers in there) and necessary for planing. "Nobody knows nothin" quote is for short and medium term predictions and for stock picking. Everything is pretty clear in his books.
US Total Stock Market + Intermediate Term Bond. That's it.

carofe
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by carofe » Mon Oct 16, 2017 5:28 pm

I'm very sure that most people here that criticize Bogle for his prediction, or are saying that his prediction can be completely different to what may happen, have never read his book Common Sense Investing where he shows you details about the one decade predictions and how fairly accurate they can be.
US Total Stock Market + Intermediate Term Bond. That's it.

WhiteMaxima
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WhiteMaxima » Mon Oct 16, 2017 5:33 pm

Pay down mortgage. You will get more than 3% return.

Wakefield1
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Wakefield1 » Mon Oct 16, 2017 5:39 pm

I'm sure that he is not predicting a steady calm 3% ride but the usual bumps up and down. "Fasten seat belts".

carofe
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by carofe » Tue Oct 17, 2017 10:14 am

I opened today Common Sense on Mutual Funds the Fully Updated 10th Anniversary edition to look for Tactical Allocation and the first page I opened had this title: “Fairly Valued at 100 times earnings? And it goes to explain some interesting articles about people staying back in the 1998 that the sock was or wasn’t overvalued at 25 P/E. Interesting part of the book.

Anyways, Bogle says in his book that if you are concerned about overvalued stock and you feel like doing some changes, you can do Tactical Allocation as a “prudent” move that can help you sleep better, but don’t capitalize. He recommend the adjustment to be no more than 15% change in your stock position, e.g. 65/30 -> 50/50, and to do it gradually.
US Total Stock Market + Intermediate Term Bond. That's it.

emoore
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by emoore » Wed Oct 18, 2017 10:31 pm

carofe wrote:
Mon Oct 16, 2017 5:28 pm
I'm very sure that most people here that criticize Bogle for his prediction, or are saying that his prediction can be completely different to what may happen, have never read his book Common Sense Investing where he shows you details about the one decade predictions and how fairly accurate they can be.
How accurate has his prediction been from 10 years ago?

DaufuskieNate
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by DaufuskieNate » Thu Oct 19, 2017 5:53 am

emoore wrote:
Wed Oct 18, 2017 10:31 pm
carofe wrote:
Mon Oct 16, 2017 5:28 pm
I'm very sure that most people here that criticize Bogle for his prediction, or are saying that his prediction can be completely different to what may happen, have never read his book Common Sense Investing where he shows you details about the one decade predictions and how fairly accurate they can be.
How accurate has his prediction been from 10 years ago?
Here is my post on a different thread that answers this question:

I have a 2007 edition of Mr. Bogle's The Little Book of Common Sense Investing. Here is a quote:

"...the mostly likely investment return on stocks would be in the range of 7 to 8 percent. I'll be optimistic and project an annual investment return (a bit nervously!) averaging 8 percent."

This was a projection for 10 year returns on U.S. Stocks. Looking at Portfolio Visualizer returns for the period of September 2007 through September 2017, VFINX returned 7.64% and VTSAX returned 8.00%. Pretty good forecast.

During this 10-year period, stock returns were positive in 9 of 10 years, and were in excess of 8% in 7 of 10 years. It's a mistake to look at very recent performance and assume that a longer term forecast makes no sense.

Another quote from the same book: "It is dangerous...to apply to the future inductive arguments based on past experience." Translation: Mr. Bogle warns strongly against assuming that historical returns will continue into the future. Based on all the conflicting feelings on this topic throughout the forum, I would say this is one lesson from Mr. Bogle that many Bogleheads find hard to swallow.

carofe
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by carofe » Thu Oct 19, 2017 9:44 am

emoore wrote:
Wed Oct 18, 2017 10:31 pm
carofe wrote:
Mon Oct 16, 2017 5:28 pm
I'm very sure that most people here that criticize Bogle for his prediction, or are saying that his prediction can be completely different to what may happen, have never read his book Common Sense Investing where he shows you details about the one decade predictions and how fairly accurate they can be.
How accurate has his prediction been from 10 years ago?
His forecast formula hasn’t been always accurate, but just “fairly” accurate. It has two unknown components that are just estimated:
* P/E change, which the formula assumes it will revert to the mean.
* Earning Growth Rate, which historically has been around 6.6%, but lately it is trending to 5.4%, and currently Bogle estimate it will be 4% a year in the next decade.

Applicable to the SP500:
Total Return in 10 years = Current Dividend Yield + Estimated Earning Growth Rate + 100 * (Mean PE / Current PE - 1) / 10

See the linked chart comparing his forecast formula with the actual return at the end of the decade.

https://s1.postimg.org/1mrjc6r0tr/2_C20 ... 2_DFEA.jpg (the forum doesn’t let me put a img tag, it keeps saying my image is too big, more than 1200 pix high, which is not).

Anyway, the point is that Current Yields are low, Current P/E is high. It would take: keeping the P/E high and an outstanding Earning growth rate to have a return around the 10%+ average for SP500.
US Total Stock Market + Intermediate Term Bond. That's it.

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