[A Boglehead explains the simplest way to manage your money - alternative viewpoint]

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Earl Lemongrab
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[A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Tue Sep 11, 2018 12:51 pm

[Split into a new thread from: A Boglehead explains the simplest way to manage your money --admin LadyGeek]

I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
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Re: A Boglehead explains the simplest way to manage your money

Post by Taylor Larimore » Tue Sep 11, 2018 3:55 pm

Earl Lemongrab wrote:
Tue Sep 11, 2018 12:51 pm
I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
Earl:

How many securities do you manage "easily?"
Care to list them and the type of account?
What "tools" do you use?

I am willing to learn

Thank you.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: A Boglehead explains the simplest way to manage your money

Post by JupiterJones » Tue Sep 11, 2018 4:48 pm

Earl Lemongrab wrote:
Tue Sep 11, 2018 12:51 pm
I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
And a hammer makes driving a nail easy too. That doesn't mean there's no reason to ever use thumbtacks.
Stay on target...

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Re: A Boglehead explains the simplest way to manage your money

Post by Earl Lemongrab » Tue Sep 11, 2018 6:59 pm

Taylor Larimore wrote:
Tue Sep 11, 2018 3:55 pm
Earl Lemongrab wrote:
Tue Sep 11, 2018 12:51 pm
I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
Earl:

How many securities do you manage "easily?"
Care to list them and the type of account?
What "tools" do you use?

I am willing to learn
Do you mean how many distinct ETFs/funds, or the number of holdings? Some are in more than one account.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: A Boglehead explains the simplest way to manage your money

Post by Taylor Larimore » Tue Sep 11, 2018 7:21 pm

Earl Lemongrab wrote:
Tue Sep 11, 2018 6:59 pm
Taylor Larimore wrote:
Tue Sep 11, 2018 3:55 pm
Earl Lemongrab wrote:
Tue Sep 11, 2018 12:51 pm
I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
Earl:

How many securities do you manage "easily?"
Care to list them and the type of account?
What "tools" do you use?

I am willing to learn
Do you mean how many distinct ETFs/funds, or the number of holdings? Some are in more than one account.
Earl:

I don't know the difference between "distinct ETFs/funds, or the number of holdings." Perhaps you could give us both?

Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: A Boglehead explains the simplest way to manage your money

Post by Earl Lemongrab » Tue Sep 11, 2018 7:54 pm

Here's the complete list of holdings. Basically the first three columns of the spreadsheet. I didn't try to align the third column, which expresses the type of account (TF == tax-free, TD == tax-deferred, TX == taxable).

Other columns have the target percentage and dollar value, the actuals of those, the deltas between the target and actual, and a formula to apply the 5/25 rebalancing rule.

The last is expressed as color-coded signals, like: INCREASE, IN RANGE, REDUCE.

Code: Select all

Domestic Equity   
  Large Cap   
     MGC     TX
     IVV     TX
     IVV     TX
     IVV     TX
     S&P 500 Index   TD
  Large Value   
     VTV     TX
     VTV     TX
  Small Cap   
     Russell 2000 Index Fund   TD
     IJR     TX   
     VB      TX     
     IWM     TF     
  Small Value   
     IJS     TX
     VBR     TX     
     VBR     TF
  Real Estate   
     VNQ     TF
     VNQ     TF     
     
International Equity   
  Large Cap   
     VPL     TX
     VPL     TX
     VEA     TX     
     VEA     TF
     VGK     TX
     VGK     TX
  Large Value   
     EFV     TF
     EFV     TX
  Small Cap   
     VSS     TX
     VSS     TF     
     VSS     TF     
     VSS     TX 
  Emerging Markets   
     VWO     TX
     VWO     TF
     VWO     TX     
     VWO     TX

Fixed Income
   EE Bonds   TD
   Bond Market Index Fund   TD
   Stable Value Fund   TD
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Re: A Boglehead explains the simplest way to manage your money

Post by Earl Lemongrab » Tue Sep 11, 2018 7:58 pm

columbia wrote:
Tue Sep 11, 2018 7:41 pm
The important issue is how much is one actually benefitting from a complex portfolio. History clearly indicates: not much.
Depends on what you mean. If you mean tilts, then it doesn't have to be much more complex. You can easily use something that has two funds each for US and international stocks. But the fact that there hasn't been much lately is recency bias. You can use the same argument for a two-fund portfolio, US and bonds.

Much of the complexity in mine comes from generating bonuses. That produces real money.
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Re: A Boglehead explains the simplest way to manage your money

Post by LadyGeek » Tue Sep 11, 2018 8:00 pm

What do you mean by "generating bonuses"? Is that a rebalancing bonus or something else?
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Re: A Boglehead explains the simplest way to manage your money

Post by Taylor Larimore » Tue Sep 11, 2018 8:10 pm

Earl Lemongrab wrote:
Tue Sep 11, 2018 7:54 pm
Here's the complete list of holdings. Basically the first three columns of the spreadsheet. I didn't try to align the third column, which expresses the type of account (TF == tax-free, TD == tax-deferred, TX == taxable).

Other columns have the target percentage and dollar value, the actuals of those, the deltas between the target and actual, and a formula to apply the 5/25 rebalancing rule.

The last is expressed as color-coded signals, like: INCREASE, IN RANGE, REDUCE.

Code: Select all

Domestic Equity   
  Large Cap   
     MGC     TX
     IVV     TX
     IVV     TX
     IVV     TX
     S&P 500 Index   TD
  Large Value   
     VTV     TX
     VTV     TX
  Small Cap   
     Russell 2000 Index Fund   TD
     IJR     TX   
     VB      TX     
     IWM     TF     
  Small Value   
     IJS     TX
     VBR     TX     
     VBR     TF
  Real Estate   
     VNQ     TF
     VNQ     TF     
     
International Equity   
  Large Cap   
     VPL     TX
     VPL     TX
     VEA     TX     
     VEA     TF
     VGK     TX
     VGK     TX
  Large Value   
     EFV     TF
     EFV     TX
  Small Cap   
     VSS     TX
     VSS     TF     
     VSS     TF     
     VSS     TX 
  Emerging Markets   
     VWO     TX
     VWO     TF
     VWO     TX     
     VWO     TX

Fixed Income
   EE Bonds   TD
   Bond Market Index Fund   TD
   Stable Value Fund   TD
Earl:

I count 35 individual securities. There is a good chance you are making a mistake.

Have you compared your portfolio's (risk, return and taxes) to the simple Three-Fund Portfolio? It could be worthwhile -- not even counting the Simplicity benefits (link below).

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: A Boglehead explains the simplest way to manage your money

Post by EyeYield » Tue Sep 11, 2018 9:49 pm

Earl Lemongrab wrote:
Tue Sep 11, 2018 7:54 pm
Here's the complete list of holdings. Basically the first three columns of the spreadsheet. I didn't try to align the third column, which expresses the type of account (TF == tax-free, TD == tax-deferred, TX == taxable).

Other columns have the target percentage and dollar value, the actuals of those, the deltas between the target and actual, and a formula to apply the 5/25 rebalancing rule.

The last is expressed as color-coded signals, like: INCREASE, IN RANGE, REDUCE.

Code: Select all

Domestic Equity   
  Large Cap   
     MGC     TX
     IVV     TX
     IVV     TX
     IVV     TX
     S&P 500 Index   TD
  Large Value   
     VTV     TX
     VTV     TX
  Small Cap   
     Russell 2000 Index Fund   TD
     IJR     TX   
     VB      TX     
     IWM     TF     
  Small Value   
     IJS     TX
     VBR     TX     
     VBR     TF
  Real Estate   
     VNQ     TF
     VNQ     TF     
     
International Equity   
  Large Cap   
     VPL     TX
     VPL     TX
     VEA     TX     
     VEA     TF
     VGK     TX
     VGK     TX
  Large Value   
     EFV     TF
     EFV     TX
  Small Cap   
     VSS     TX
     VSS     TF     
     VSS     TF     
     VSS     TX 
  Emerging Markets   
     VWO     TX
     VWO     TF
     VWO     TX     
     VWO     TX

Fixed Income
   EE Bonds   TD
   Bond Market Index Fund   TD
   Stable Value Fund   TD
Earl,

I must be missing something, because I don’t see complexity, I see redundancy. Help set me straight.

Just looking at the domestic equity side of things.

If you kept it simple and just used IVV for large cap and IJR for small cap, you would have done significantly better. At least during the last ten years that some of those ETF’s have been in existence.

S&P 500 (IVV) already has plenty of Large Value and Mega Cap. Small Cap Blend (IJR) has plenty of Small Cap Value.

A small cap blend is, in and of itself (at least to me), a tilt from large cap. Why make it so complicated?

I’d be interested in what tools you used to guide you in your decision making process, because to me it looks like a classic example of how using too many funds (ETF’s) can be harmful to a portfolio.

Thanks,
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by LadyGeek » Tue Sep 11, 2018 10:04 pm

FYI - The original thread was getting derailed. I split Earl Lemongrab's counterpoint into a new thread so we can discuss separately.
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Re: A Boglehead explains the simplest way to manage your money

Post by tj » Tue Sep 11, 2018 11:20 pm

LadyGeek wrote:
Tue Sep 11, 2018 8:00 pm
What do you mean by "generating bonuses"? Is that a rebalancing bonus or something else?
See this thread:

viewtopic.php?f=10&t=196884&sid=1b65703 ... 0d62c48567

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by tibbitts » Tue Sep 11, 2018 11:29 pm

I can see the value in pursuing bonuses, just like credit card rewards. But some of us have also made mistakes while pursuing bonuses - missed some disqualifying factor in the fine print (for example, maybe you once held an account with a predecessor firm.) In any case it's certainly a potentially profitable hobby, but I think people who pursue it minimize the amount of research, effort and attention to detail involved, simply because they enjoy it so much.

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Re: A Boglehead explains the simplest way to manage your money

Post by Earl Lemongrab » Wed Sep 12, 2018 12:18 am

Taylor Larimore wrote:
Tue Sep 11, 2018 8:10 pm
I count 35 individual securities. There is a good chance you are making a mistake.
Why do you think that? My spreadsheet aggregates and analyzes my entire portfolio and compares it to target. I know my asset allocation and can see at a glance how I am doing with regards to the target.
Have you compared your portfolio's (risk, return and taxes) to the simple Three-Fund Portfolio? It could be worthwhile -- not even counting the Simplicity benefits (link below).
No, why would I do that? What do think a few years of performance comparison would show? Have you compared yours against other portfolios like ones with no international? Are you going to switch when you see underperformance?

I created my portfolio using the materials I had at hand, including model portfolios from Merriman, Swedroe, Bernstein, and others. I have since then largely stayed the course, other than some changes driven by my 401(k) dropping some funds that I was using.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: A Boglehead explains the simplest way to manage your money

Post by Earl Lemongrab » Wed Sep 12, 2018 12:19 am

LadyGeek wrote:
Tue Sep 11, 2018 8:00 pm
What do you mean by "generating bonuses"? Is that a rebalancing bonus or something else?
Transfer bonuses from moving my assets. That causes some duplication when accounts are divided, but then sometimes they get reintegrated. It matters little to me. The cash I get does.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by bloom2708 » Wed Sep 12, 2018 8:51 am

Earl, you are willing/able to deal with more complexity.

That still does not mean it is "better" than a less complex solution.

When new people stumble off the street here (often) I think we should sell them on understanding simplicity (3 fund or similar). If they understand a total market portfolio (with or without international bonds), then they can become brilliant scholars of finance and complicate all they want.

We need contrarian viewpoints. Have as many funds and transfer bonuses as you want. In general, I'll take what Taylor is selling and try to send that advice on to new Bogleheads. :idea:
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by goingup » Wed Sep 12, 2018 9:08 am

I feel like Earl got put on the spot a bit. He wasn't trying to be anybody's role model. Obviously he has a well organized portfolio. I believe the redundancy is the result of having multiple brokerage accounts due to "chasing" new account incentives.

Simplicity is not everyone's goal.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by cmublitz » Wed Sep 12, 2018 9:28 am

Tax Loss Harvesting has the effect of fragmenting an otherwise "clean" 3 fund portfolio. I am now "stuck" holding both VTSAX (Vanguard Total Stock Market) and VFIAX (Vanguard 500 Index) because of that choice to realize short term losses. Simplicity became the victim in pursuit of reducing taxes years ago.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Wed Sep 12, 2018 10:56 am

bloom2708 wrote:
Wed Sep 12, 2018 8:51 am
Earl, you are willing/able to deal with more complexity.

That still does not mean it is "better" than a less complex solution.
You can look very hard and NEVER find anything that I posted to that effect. I leave the "portfolio shaming" to the three-funders.

The point of this thread was not about portfolio construction. It was about portfolio management. Some people have decided to shift it. If my relatively complex portfolio is no big deal to manage, then others that are less complicated should be no problem. You don't need three funds to be able to handle it.

Modern tools and all that.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by bloom2708 » Wed Sep 12, 2018 11:03 am

Earl Lemongrab wrote:
Wed Sep 12, 2018 10:56 am
bloom2708 wrote:
Wed Sep 12, 2018 8:51 am
Earl, you are willing/able to deal with more complexity.

That still does not mean it is "better" than a less complex solution.
You can look very hard and NEVER find anything that I posted to that effect. I leave the "portfolio shaming" to the three-funders.

The point of this thread was not about portfolio construction. It was about portfolio management. Some people have decided to shift it. If my relatively complex portfolio is no big deal to manage, then others that are less complicated should be no problem. You don't need three funds to be able to handle it.

Modern tools and all that.
Good stuff. I'll leave the shaming of supposed "portfolio shamers" to others. :wink: :arrow:
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Wed Sep 12, 2018 11:07 am

goingup wrote:
Wed Sep 12, 2018 9:08 am
I feel like Earl got put on the spot a bit. He wasn't trying to be anybody's role model. Obviously he has a well organized portfolio. I believe the redundancy is the result of having multiple brokerage accounts due to "chasing" new account incentives.

Simplicity is not everyone's goal.
Of course. That's why in the initial message I wanted to draw a distinction between distinct ETFs and the number of holdings. I also at various times performed tax-loss harvesting, which is why some asset classes have multiple representatives.

The question never was about portfolio construction, it was about management. After an update, I can glance down the "Rebalance" column and see if anything needs immediate attention. Usually not. There's another section of the spreadsheet that has an account-based listing of cash. This lets me know where I need to do some investing. As dividends only come around occasionally, most of the time there's nothing to do there.

Like I said in the other reply, I don't go in for portfolio shaming. I know that there are a number of possible portfolios, and NO ONE knows which will perform better in the future. Mine is a fairly typical slice-and-dice tilted one from the time I created it. If I were starting from scratch, I'd probably do something different. But I'm not.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by 2015 » Wed Sep 12, 2018 11:13 am

bloom2708 wrote:
Wed Sep 12, 2018 11:03 am
Earl Lemongrab wrote:
Wed Sep 12, 2018 10:56 am
bloom2708 wrote:
Wed Sep 12, 2018 8:51 am
Earl, you are willing/able to deal with more complexity.

That still does not mean it is "better" than a less complex solution.
You can look very hard and NEVER find anything that I posted to that effect. I leave the "portfolio shaming" to the three-funders.

The point of this thread was not about portfolio construction. It was about portfolio management. Some people have decided to shift it. If my relatively complex portfolio is no big deal to manage, then others that are less complicated should be no problem. You don't need three funds to be able to handle it.

Modern tools and all that.
Good stuff. I'll leave the shaming of supposed "portfolio shamers" to others. :wink: :arrow:
I would say the issue is not with the portfolio at all, but rather with the investor behavior that always hitches a ride on its coattails. No need for "shaming". Investor behavior has a far greater impact on investing results than the most cleverly designed portfolio ever could. Reality doesn't care how clever you think you are, only how rational you are, rational being your perception of reality matching what is going on in reality. And it is in the nature of being human to be not rational.

Some of us advocate simplicity simply because it keeps us out of the deep end of the pool where for the history of investing so many overconfident swimmers have drowned.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Wed Sep 12, 2018 11:47 am

2015 wrote:
Wed Sep 12, 2018 11:13 am
I would say the issue is not with the portfolio at all, but rather with the investor behavior that always hitches a ride on its coattails. No need for "shaming". Investor behavior has a far greater impact on investing results than the most cleverly designed portfolio ever could. Reality doesn't care how clever you think you are, only how rational you are, rational being your perception of reality matching what is going on in reality. And it is in the nature of being human to be not rational.

Some of us advocate simplicity simply because it keeps us out of the deep end of the pool where for the history of investing so many overconfident swimmers have drowned.
I don't exactly understand what you're saying. Is it the old claim that people with more complicated portfolios are more prone to changing and trend chasing?
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by jjface » Wed Sep 12, 2018 11:56 am

At the end of the day we are all different. There is no optimal solution. Earl's portfolio is his and mine is mine.

Simplicity is not the only desirable feature otherwise we would all just stick our money in a target fund and be done with it. Even vs a 3 fund portfolio a target fund is surely the simplest way to manage your money. Or a balanced fund if you don't believe in a glide path.

Whilst the 3 fund portfolio has a good balance of pros and cons it may be too simple for some folks and that is okay. Earl says his is easy to manage (to him) so that is fine (for him). Earl also values tax loss harvesting, account bonuses etc all which require a more complicated portfolio.

I'm pretty sure Earl can understand that many people would find his portfolio to be too complicated to be worth the extra work for them and the rest of us can probably understand that to Earl it is easy enough for him to manage to be worth it to him.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by iceport » Wed Sep 12, 2018 12:02 pm

2015 wrote:
Wed Sep 12, 2018 11:13 am
I would say the issue is not with the portfolio at all, but rather with the investor behavior that always hitches a ride on its coattails. No need for "shaming". Investor behavior has a far greater impact on investing results than the most cleverly designed portfolio ever could. Reality doesn't care how clever you think you are, only how rational you are, rational being your perception of reality matching what is going on in reality. And it is in the nature of being human to be not rational.

Some of us advocate simplicity simply because it keeps us out of the deep end of the pool where for the history of investing so many overconfident swimmers have drowned.
I agree completely. I don't generally "advocate simplicity" in general because I don't necessarily practice it. But I wholeheartedly agree that the primary benefit of simplicity is that it minimizes temptations to make portfolio adjustments that are susceptible to behavioral errors.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by staythecourse » Wed Sep 12, 2018 12:11 pm

Everyone should do what they want, but will say there is a DEFINITE cult mentality on this forum. Just because you like the 3 fund and you follow it does NOT make it the ten commandments. Confirmation bias is HUGE on this very forum and would warn EVERY investor from falling into such a trap.

The most important thing ANY intelligent (yes if you are don't doing this then are not acting intelligent) is to look into every viewpoint and see what fits your situation and psychological makeup. I'm a physician and reminds me of when I had junior residents ask me the best way to do procedure x. The only rationale answer is the way you feel most comfortable and confident in as that will decrease the risk of mistake the most for YOU (not what a study says of 1000 participants).

Good luck.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Carlos Danger » Wed Sep 12, 2018 12:26 pm

"Simple" depends on the particular person.

We have 3 funds in a 403(b), 10 ETFs in our Vanguard IRAs and Taxable Account as well as some shares in 5 individual companies. If I suffer an untimely/early death, I have instructions written up for the Mrs. to go to one fund in the 403(b) (S&P 500 Index fund) and a Vanguard Retirement Target date fund.

I want to tilt toward more mid and small cap than an S&P or even Total Market fund, and I want to be slightly tilted toward certain sectors/industries/companies that I view as being growth sectors/industriescompanies over the next couple of decades. I have the time, wherewithall, etc. to do so. For me, it IS very simple and no more difficult than a 3-fund portfolio. I have a spreadsheet that I can simply enter $$$ amounts into for each holding, and it gives me the total % of our portfolio in each one (right above a row with my target %) as well as the % of our portfolio in every individual company in each fund (except for the S&P 500 fund, I didn't enter all of the S&P into the spreadsheet and stopped once I got down to companies only comprising 0.1% of the portfolio).

It takes about 1 minute to input the $$$ amounts of our 18 fund and stock holdings from the Vanguard and 403(b) websites into my spreadsheet, and I then can see on one screen exactly how much $$$ is in each fund and what percent of our portfolio is in each fund (vs targets) as well as each individual corporation within those funds.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by gotester2000 » Wed Sep 12, 2018 1:32 pm

I don't follow a 3 fund approach as I consider real estate and gold for AA. Yet, I am surprised when people say that managing 35 funds is as simple as a 3 fund portfolio. To me anything simple than 3 fund is a 2 fund or 1 fund portfolio 😉.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Wed Sep 12, 2018 2:00 pm

gotester2000 wrote:
Wed Sep 12, 2018 1:32 pm
I don't follow a 3 fund approach as I consider real estate and gold for AA. Yet, I am surprised when people say that managing 35 funds is as simple as a 3 fund portfolio. To me anything simple than 3 fund is a 2 fund or 1 fund portfolio 😉.
Who said that? *I* didn't say that. I said it was no big deal to manage it. Realistically, if you have all your holdings at the same custodian then the number of funds doesn't matter much. If you have multiple accounts at different custodians, it's more effort even if you have a "three-fund" portfolio.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Fallible » Wed Sep 12, 2018 5:20 pm

iceport wrote:
Wed Sep 12, 2018 12:02 pm
2015 wrote:
Wed Sep 12, 2018 11:13 am
I would say the issue is not with the portfolio at all, but rather with the investor behavior that always hitches a ride on its coattails. No need for "shaming". Investor behavior has a far greater impact on investing results than the most cleverly designed portfolio ever could. Reality doesn't care how clever you think you are, only how rational you are, rational being your perception of reality matching what is going on in reality. And it is in the nature of being human to be not rational.

Some of us advocate simplicity simply because it keeps us out of the deep end of the pool where for the history of investing so many overconfident swimmers have drowned.
I agree completely. I don't generally "advocate simplicity" in general because I don't necessarily practice it. But I wholeheartedly agree that the primary benefit of simplicity is that it minimizes temptations to make portfolio adjustments that are susceptible to behavioral errors.
Also agree. The importance of simplicity in investing is best understood when we remember the Warren Buffett quote, often repeated by Jack Bogle: "Investing is simple, but it's not easy." The "not easy" part refers to behavioral errors all investors make and that are more likely with complexity.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by RadAudit » Wed Sep 12, 2018 5:50 pm

OP, good idea. I, too, use a spreadsheet to manage my portfolio. (Of course, I have about 31 fewer funds than you do; but, I can't multiple and divide either) Great for tracking against rebalance bands and I've set it up to calculate th amounts of money to move among accounts.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by randomizer » Wed Sep 12, 2018 6:09 pm

My main concern here would be what happens to you and your heirs if your mental faculties deteriorate (see other threads on how to communicate intent etc in case of death etc).

But regardless of the simple-vs-complex debate, having a plan and sticking to it seems to be one of the most important things (with the other things being keeping a high savings rate and keeping costs and taxes low etc).
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by bertilak » Wed Sep 12, 2018 7:15 pm

randomizer wrote:
Wed Sep 12, 2018 6:09 pm
My main concern here would be what happens to you and your heirs if ...
+1

The first paragraph of my ISP reads:
  • The purpose of this document is to give guidance to anyone who has taken over the responsibility of managing our investment portfolio.
The less guidance needed the better. That's how I measure simplicity. Reliance on a spreadsheet and the need to explain its operation fails my simplicity test.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by mickens16 » Wed Sep 12, 2018 8:27 pm

staythecourse wrote:
Wed Sep 12, 2018 12:11 pm
Everyone should do what they want, but will say there is a DEFINITE cult mentality on this forum. Just because you like the 3 fund and you follow it does NOT make it the ten commandments. Confirmation bias is HUGE on this very forum and would warn EVERY investor from falling into such a trap.

The most important thing ANY intelligent (yes if you are don't doing this then are not acting intelligent) is to look into every viewpoint and see what fits your situation and psychological makeup. I'm a physician and reminds me of when I had junior residents ask me the best way to do procedure x. The only rationale answer is the way you feel most comfortable and confident in as that will decrease the risk of mistake the most for YOU (not what a study says of 1000 participants).

Good luck.
This is an excellent point that unfortunately will be overlooked by most people posting to this thread. I've also noticed that this cult mentality has gotten worse. Many posters with alternate views have stopped/left this forum over the past couple years. With an excel spreadsheet managing more than three funds/etf's is not difficult.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by bloom2708 » Wed Sep 12, 2018 8:45 pm

Givens:

Manage a simple portfolio = easy

Manage a medium complex portfolio = easy

Manage a complex portfolio = easy

Manage a very complex portfolio = easy

All equally easy using modern tools.

If so, then the assumption must be that performance and return is the differentiator?

Or something else?
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Thu Sep 13, 2018 12:10 am

There's a difference between "easy" and "equally easy". I didn't state and didn't intend to imply that a more complex portfolio was as easy to maintain as a simpler one. Just that it wasn't difficult.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by motorcyclesarecool » Thu Sep 13, 2018 5:49 am

Earl Lemongrab wrote:
Thu Sep 13, 2018 12:10 am
There's a difference between "easy" and "equally easy". I didn't state and didn't intend to imply that a more complex portfolio was as easy to maintain as a simpler one. Just that it wasn't difficult.
Can you quantify the CAGR you’ve earned through transfer bonuses? That might help folks understand whether the juice is worth the squeeze.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Thu Sep 13, 2018 10:11 am

motorcyclesarecool wrote:
Thu Sep 13, 2018 5:49 am
Earl Lemongrab wrote:
Thu Sep 13, 2018 12:10 am
There's a difference between "easy" and "equally easy". I didn't state and didn't intend to imply that a more complex portfolio was as easy to maintain as a simpler one. Just that it wasn't difficult.
Can you quantify the CAGR you’ve earned through transfer bonuses? That might help folks understand whether the juice is worth the squeeze.
I don't think that's important, so I don't calculate it. Remember that the bonus is on top of the regular growth the ETFs experience. The correct way to evaluate is the pay for the amount of time and effort, which is at a considerable rate.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by 2015 » Thu Sep 13, 2018 2:45 pm

staythecourse wrote:
Wed Sep 12, 2018 12:11 pm
Everyone should do what they want, but will say there is a DEFINITE cult mentality on this forum. Just because you like the 3 fund and you follow it does NOT make it the ten commandments. Confirmation bias is HUGE on this very forum and would warn EVERY investor from falling into such a trap.

...
Cult? The only "cult" I'm personally guilty of following is what I read widely outside the fields of investing, economics, and personal finance, all of which repeatedly point to simplicity. Try as I may, I can't find an exception.

To every Boglehead with a spreadsheet, technical analysis, or latest finance post from "one of the good guys" (who have mortgage to pay, kids to educate, or simply their own ego to stroke), everything, but everything, looks like a nail.

The confirmation bias I see repeatedly here is that people stay within the confines of investing. In any complex adaptive system, where investing lies, and indeed where even the context of our own lives exist, a taking a narrow, confined view can have ghastly consequences.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by 2015 » Thu Sep 13, 2018 2:49 pm

Earl Lemongrab wrote:
Wed Sep 12, 2018 11:47 am
2015 wrote:
Wed Sep 12, 2018 11:13 am
I would say the issue is not with the portfolio at all, but rather with the investor behavior that always hitches a ride on its coattails. No need for "shaming". Investor behavior has a far greater impact on investing results than the most cleverly designed portfolio ever could. Reality doesn't care how clever you think you are, only how rational you are, rational being your perception of reality matching what is going on in reality. And it is in the nature of being human to be not rational.

Some of us advocate simplicity simply because it keeps us out of the deep end of the pool where for the history of investing so many overconfident swimmers have drowned.
I don't exactly understand what you're saying. Is it the old claim that people with more complicated portfolios are more prone to changing and trend chasing?
It's not an old "claim" at all. In fact, there's a plethora of recent material on it in the last couple of decades. Read all of the latest work in behavioral science, neuroscience, physiological processes, biology, et al.

And yes, complexity leads to all kinds of mistakes. Particularly for the overconfident. And it's human nature to be overconfident. Hence, it's human nature to be blind. Complexity exacerbates this blindness and faulty human decision making.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Thu Sep 13, 2018 6:45 pm

2015 wrote:
Thu Sep 13, 2018 2:49 pm
Earl Lemongrab wrote:
Wed Sep 12, 2018 11:47 am
I don't exactly understand what you're saying. Is it the old claim that people with more complicated portfolios are more prone to changing and trend chasing?
It's not an old "claim" at all. In fact, there's a plethora of recent material on it in the last couple of decades. Read all of the latest work in behavioral science, neuroscience, physiological processes, biology, et al.

And yes, complexity leads to all kinds of mistakes. Particularly for the overconfident. And it's human nature to be overconfident. Hence, it's human nature to be blind. Complexity exacerbates this blindness and faulty human decision making.
Where it is the data that shows that people who follow Bogleheads principles are prone to that? And were does it indicate that any particular investor will?
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by H-Town » Fri Sep 14, 2018 12:04 am

Earl Lemongrab wrote:
Tue Sep 11, 2018 12:51 pm
[Split into a new thread from: A Boglehead explains the simplest way to manage your money --admin LadyGeek]

I've never bought into the simplicity mantra. Modern tools allow managing more complex portfolios easily.
Simplicity is valuable in the sense that it will prevent investors do harm to their own portfolio. I've seen many people going after bonuses and more likely than not they will make mistake. It happens to the most experience investors.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by goblue100 » Fri Sep 14, 2018 6:18 am

I have to say, my own portfolio resembles Earls portfolio more than a 3 fund. With after tax, two 401ks, rollover IRA, Roth IRA and I used the Scott Burns 10 speed portfolio as my initial model before I ever heard about the Boglehead way. Could I simplify? Yes, but I'm staying the course. It takes me an hour every three months to enter values into a spread sheet which then calculates percentages of equity and bonds. If anything needs to be changed, its pretty evident. Most times, I do nothing.

I think the thread title is misleading, I don't think Earl ever suggested his method was easier than the three fund. Just that a more complex portfolio isn't that hard to manage.
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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by student » Fri Sep 14, 2018 6:43 am

I think some have read too much into what Earl had said. I think he was simply saying that with modern tools, it is not difficult to manage a more complex portfolio. I have more than 3 funds, mostly leftover from years ago. Now I mainly invest in 3 types (Total Market Index, International Index and TIAA Traditional). Because I am more conservative in viewing the wash sale rules, for example, I use different types of international index fund in different accounts. I use Personal Capital and Fidelity to keep track of my portfolio.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by 2015 » Fri Sep 14, 2018 7:10 am

Earl Lemongrab wrote:
Thu Sep 13, 2018 6:45 pm
2015 wrote:
Thu Sep 13, 2018 2:49 pm
Earl Lemongrab wrote:
Wed Sep 12, 2018 11:47 am
I don't exactly understand what you're saying. Is it the old claim that people with more complicated portfolios are more prone to changing and trend chasing?
It's not an old "claim" at all. In fact, there's a plethora of recent material on it in the last couple of decades. Read all of the latest work in behavioral science, neuroscience, physiological processes, biology, et al.

And yes, complexity leads to all kinds of mistakes. Particularly for the overconfident. And it's human nature to be overconfident. Hence, it's human nature to be blind. Complexity exacerbates this blindness and faulty human decision making.
Where it is the data that shows that people who follow Bogleheads principles are prone to that? And were does it indicate that any particular investor will?
I never stated people who follow BH principles are any more prone to behavioral error than anyone else. In fact, I would argue that those who follow the BH principle of simplicity are less likely to make behavioral errors than those who add complexity through their attempts at building a clever portfolio or investing strategy. I recommend reading everything you can regarding the nature of complex adaptive systems, which investing is embedded in, and more importantly, in which human beings' lives are embedded in. Once you understand this, you begin to see it everywhere, even in the most clever arguments for complexity in investing. It's simply not possible to do one thing within systems such as investing or even in our lives without unknown and unknowable other adaptive system inputs being affected and in turn affecting the outcome.

The overconfident among Bogleheads like break dancing on the head of a data pin because it gives them a false sense of precision, of certainty, when in fact none exists in complex systems. I agree with Munger that people love spreadsheets because it's what's taught in business schools and because it gives people something to do. The anecdote to this obsession is to deal in ranges of outcomes, to include generous margins of safety when taking actions, and to reduce actions to their most simple basics. Indeed, all to many times in the complex system of a human life it is better to take no action than to take actions where secondary negative consequences and third order negative consequences cannot be adequately foreseen or mitigated. To me, this is risk in its most heinous form, and it lurks in many human decisions, but particular those where complexity snakes.

If you haven't already, I'd recommend reading Kahneman's Thinking, Fast and Slow, among a plethora of other books available on behavioral science. There's also Nassim Taleb's work. As it pertains to investing, read The Hour Between Man and Wolf (one of my favorites) for an excellent treatise on the biological impact of duress on the frail apparatus of human-decision making. There are many other books, but I'd start there. I also recommend reading Munger's work on simplicity and circle of competence.

A most excellent observation made in another thread was that the current bull market makes geniuses of us all (as bull markets generally do). It is only during the next flavor of an "unprecedented" market crash that the cacophony of human panic will explode in full display like a Fourth of July fireworks show (for "data", see prior BH threads regarding the 08 market crash). It has been so throughout investing history. Entirely too many books on this for investors to still be making the mistake of thinking they're the smartest person in the room.

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Re: [A Boglehead explains the simplest way to manage your money - alternative viewpoint]

Post by Earl Lemongrab » Fri Sep 14, 2018 11:52 am

All I can do is relate my own experience. From the time I finalized the initial portfolio in 2007, I have made the following changes:

1. When the 401(k) dropped the Large Value fund, I changed the allocation to reduce that and Small Blend, while increasing Large Blend and Small Value. This kept the same theoretical factor weightings while working better with the 401(k) lineup.

2. Progress towards goals led me to change from 70/30 to 65/35 stock/bond.

2. Progress towards goals led me to change from 65/35 to 60/40 stock/bond.

So regardless of what your study purports to show, I haven't been performance chasing or other fiddling.
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