Emotions when switching from being long time stock picker over to a more Boglehead approach

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Carol88888
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Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by Carol88888 » Wed Oct 10, 2018 1:40 pm

This isn't a question so much as an observation. For 28 years I bought only individual stocks. It seemed to work but I cannot tell you if I wouldn't have done better just putting it all in the S&P 500 or total stock market index because I added money at different times and was always buying and selling so the math of figuring this all out is beyond me.

This spring I decided I don't want to be doing this anymore. It's stressful, time consuming and like I said above in my case might not have even been all that rewarding.

Now every quarter I just buy one of two Vanguard ETFs. But old habits die hard and recently I felt like a chump buying before this recent pullback.
So I am wondering what I should tell myself. I guess I should be glad if stocks go down. I am going to be buying from now until I drop so what does it matter if I buy high sometimes? It all balances out.

Anyone else out there making a change from being active to passive? Suggestions on how you made it work?

TheAccountant
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by TheAccountant » Wed Oct 10, 2018 1:42 pm

Investing (or really buying anything) with your emotions is a great way to lose a ton of money.

I'd recommend reading the Bogleheads wiki and learning about the three-fund portfolio and proper asset allocation. Also check out the books Mr. Bogle has published - I believe there's a new one out.

Best of luck.

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galeno
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by galeno » Wed Oct 10, 2018 1:46 pm

Go for the 2 fund portfolio: X% VT (world stock) + Y% VCIT (interm US treasuries) if you don't want to worry about how much USA vs non-USA domicled.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

bloom2708
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by bloom2708 » Wed Oct 10, 2018 1:47 pm

You make it work by making a plan, implementing and then going on with your life doing something else.

You can fill the void with old/new hobbies. Perhaps get your investment "fix" here. Continue learning. Help others. Read topics not about investing.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

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galeno
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by galeno » Wed Oct 10, 2018 2:02 pm

From 1995-2005 (11 years) we used an 80/20 port. The 80% stock allocation started out each year with 16 individual stocks. Sometimes it would go to 12 stocks. It was a lot of stress. I paid constant attention to our stocks.

In 2006 we converted to Bogleheadism. Started at 60/40. As we are retired we hold 40/60 (age in bonds). Zero stress. I look at our portfolio once per year.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

KlangFool
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by KlangFool » Wed Oct 10, 2018 2:11 pm

Carol88888 wrote:
Wed Oct 10, 2018 1:40 pm

Now every quarter I just buy one of two Vanguard ETFs.
Carol88888,

1) That may not be good enough to break your habit. You may want to go with one of those funds of the fund like Vanguard Lifestrategy Moderate Growth Fund (60/40) fund. Then, you do not need to think about whether the stock market is up or down.

https://investor.vanguard.com/mutual-fu ... file/VSMGX

2) I lost 50% of my whole life savings by stock trading. I had to stay with the VSMGX and Wellington fund for a few years before I start buying the individual stock fund.

KlangFool

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GoldStar
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by GoldStar » Wed Oct 10, 2018 2:14 pm

It's too bad you weren't calculating your returns over those 28 years. That may have helped - you would have seen that (likely) all your efforts were fruitless compared to just indexing.

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Doom&Gloom
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by Doom&Gloom » Wed Oct 10, 2018 2:17 pm

Carol88888 wrote:
Wed Oct 10, 2018 1:40 pm
This isn't a question so much as an observation. For 28 years I bought only individual stocks. It seemed to work but I cannot tell you if I wouldn't have done better just putting it all in the S&P 500 or total stock market index because I added money at different times and was always buying and selling so the math of figuring this all out is beyond me.

This spring I decided I don't want to be doing this anymore. It's stressful, time consuming and like I said above in my case might not have even been all that rewarding.

Now every quarter I just buy one of two Vanguard ETFs. But old habits die hard and recently I felt like a chump buying before this recent pullback.
So I am wondering what I should tell myself. I guess I should be glad if stocks go down. I am going to be buying from now until I drop so what does it matter if I buy high sometimes? It all balances out.

Anyone else out there making a change from being active to passive? Suggestions on how you made it work?
For me, it was quite a relaxing change but very boring. With well diversified funds you obviously don't experience the violent and exciting jumps or the precipitous and exciting falls. Perhaps you are bored and miss the thrills? If so, finding another outlet for your kicks might fill that void.

Good luck figuring it out. I expect that once you figure out why you miss those emotions that you will be well on your way to no longer missing them with the stock market.

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Tourne
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by Tourne » Wed Oct 10, 2018 3:20 pm

bloom2708 wrote:
Wed Oct 10, 2018 1:47 pm
Perhaps get your investment "fix" here. Continue learning. Help others.
+1

While I was never an overly active investor (I let my high-priced advisor make the mistakes for me :oops: ), now that I am on my own, the temptation to question my asset allocation is always there. Whenever that temptation comes up, I surf the Bogleheads forums. There is more than enough “meat” here to keep me distracted, and I almost invariably learn something new about investing during the process. As an added bonus, for every AA change that I am considering, I can find someone (usually several someones) here who will argue persuasively against it. The result: I always find arguments to stay the course :D
Plans are nothing; planning is everything - Dwight D. Eisenhower

Carol88888
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by Carol88888 » Wed Oct 10, 2018 4:13 pm

Doom&Gloom wrote:
Wed Oct 10, 2018 2:17 pm
Carol88888 wrote:
Wed Oct 10, 2018 1:40 pm
This isn't a question so much as an observation. For 28 years I bought only individual stocks. It seemed to work but I cannot tell you if I wouldn't have done better just putting it all in the S&P 500 or total stock market index because I added money at different times and was always buying and selling so the math of figuring this all out is beyond me.

This spring I decided I don't want to be doing this anymore. It's stressful, time consuming and like I said above in my case might not have even been all that rewarding.

Now every quarter I just buy one of two Vanguard ETFs. But old habits die hard and recently I felt like a chump buying before this recent pullback.
So I am wondering what I should tell myself. I guess I should be glad if stocks go down. I am going to be buying from now until I drop so what does it matter if I buy high sometimes? It all balances out.

Anyone else out there making a change from being active to passive? Suggestions on how you made it work?
For me, it was quite a relaxing change but very boring. With well diversified funds you obviously don't experience the violent and exciting jumps or the precipitous and exciting falls. Perhaps you are bored and miss the thrills? If so, finding another outlet for your kicks might fill that void.

Good luck figuring it out. I expect that once you figure out why you miss those emotions that you will be well on your way to no longer missing them with the stock market.
Good point about figuring out what I think it is that I miss. I seem to be caught in between two different emotions. One is relief that this method is so much simpler and also seems to remove a lot of weight from my shoulders because I can say, "Well, the market is down. It's not me. I didn't do anything wrong."

And then there's the lingering thought that I should be trying to judge and control this better. Hey, I used to spend a lot of time picking my stocks, picking my spots to enter. Now, I've given that up. But isn't that a cop out? I'm dodging my job.

But I guess should just focus more on what I am have gained which is time and that's the ultimate luxury for me at this stage in my life.

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BeBH65
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by BeBH65 » Wed Oct 10, 2018 11:31 pm

You are making the transition. Are you already at this target state?
bloom2708 wrote:
Wed Oct 10, 2018 1:47 pm
You make it work by making a plan, implementing and then going on with your life doing something else.
In your plan you could have very few funds and your investing would be totally mechanic

Maybe you can benefit from posting your plan ( use the "asking portfolio questions" template ) to get confirmation and feedback.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

enadroj
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by enadroj » Thu Oct 11, 2018 12:07 am

+1 to these suggestions. Specifically, @tourne's point re: surfing Bogleheads forums to get reestablish convictions, and @BeBH65's point re: becoming 'totally mechanic and simplifying scenarios'. To that last point, I've found that I have a lot less of a temptation to do anything if I make it completely formulaic. Literally, relying on a spreadsheet to tell me what to do with new contributions and/or rebalancing.

I've also been prepping myself psychologically to what my portfolio would like during a 40%-50%+ drop in equities just so I can see it and prep myself to stay the course. I've used that to validate that my asset allocation between equities / fixed income, think through what would happen in a worst case scenario e.g. were I to lose my job at the same time, validate my comfort in sleeping at night given available emergency funds, etc.

Although I made it through both the dot-com bust and the 2008 crash without selling, my assets are much bigger and I am much closer to retirement. So, making sure that I can stay the course through the next big downturn and 'stay mechanical' is something I'm actively thinking about.

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GerryL
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by GerryL » Thu Oct 11, 2018 1:13 am

Carol88888,
How about this as a way to simplify and still get your stock-picking fix: Put the bulk of your $$$ into a basic 3- or 4-fund portfolio. Hold aside 5% to use for stock trading. Continue contributing to the Boglehead portfolio but otherwise leave it alone while you “play” in your stock-trading sandbox.

sharukh
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by sharukh » Thu Oct 25, 2018 3:35 pm

Hi KlangFool,
KlangFool wrote:
Wed Oct 10, 2018 2:11 pm
Carol88888 wrote:
Wed Oct 10, 2018 1:40 pm

Now every quarter I just buy one of two Vanguard ETFs.
Carol88888,

1) That may not be good enough to break your habit. You may want to go with one of those funds of the fund like Vanguard Lifestrategy Moderate Growth Fund (60/40) fund. Then, you do not need to think about whether the stock market is up or down.

https://investor.vanguard.com/mutual-fu ... file/VSMGX

2) I lost 50% of my whole life savings by stock trading. I had to stay with the VSMGX and Wellington fund for a few years before I start buying the individual stock fund.

KlangFool
Did you use these auto-rebalancing funds even in taxable account ?
Do you have any suggestions on how to handle this for taxable accounts , just buy VSMGX and not worry about tax drag ?

Thanks.

2cents2
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by 2cents2 » Fri Oct 26, 2018 8:04 am

When you get the urge to buy individual stocks, review what you posted here: “I don't want to be doing this anymore. It's stressful, time consuming and like I said above in my case might not have even been all that rewarding.”
An IPS would also be helpful when you are tempted.
viewtopic.php?t=61915

staythecourse
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by staythecourse » Fri Oct 26, 2018 8:42 am

Carol88888 wrote:
Wed Oct 10, 2018 1:40 pm
This isn't a question so much as an observation. For 28 years I bought only individual stocks. It seemed to work but I cannot tell you if I wouldn't have done better just putting it all in the S&P 500 or total stock market index because I added money at different times and was always buying and selling so the math of figuring this all out is beyond me.

This spring I decided I don't want to be doing this anymore. It's stressful, time consuming and like I said above in my case might not have even been all that rewarding.

Now every quarter I just buy one of two Vanguard ETFs. But old habits die hard and recently I felt like a chump buying before this recent pullback.
So I am wondering what I should tell myself. I guess I should be glad if stocks go down. I am going to be buying from now until I drop so what does it matter if I buy high sometimes? It all balances out.

Anyone else out there making a change from being active to passive? Suggestions on how you made it work?
Just curious what this has to do with buying as an active investor vs. passive? Are you saying you would have seen the drop coming if you were still actively managing your portfolio and gotten out in time? Second guessing when the market tanks is a natural human emotion and I am sure does not different between active and passive investors. I don't think this has to do with a passive or active debate. If anything a passive investor should have an easier time in a volatile market since they employ a static asset allocation. They stick with the same wave despite it going up or coming down. The active investor will be always looking if there is a wave going up and will continue to jump from one wave to another based on finding the next good wave (valuation based security selection).

My favorite single line comes from I believe Milton Friedman (please someone correct me if I am wrong). Paraphrasing he said once, "It is the duty of the equity investor to take on losses on occasion and he should do it with reproach to his plan". The second part of that quote has real meaning. So just because the market is tanking does not mean you should second guess a good investment plan.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

ClaycordJCA
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Re: Emotions when switching from being long time stock picker over to a more Boglehead approach

Post by ClaycordJCA » Fri Oct 26, 2018 8:49 am

galeno wrote:
Wed Oct 10, 2018 1:46 pm
Go for the 2 fund portfolio: X% VT (world stock) + Y% VCIT (interm US treasuries) if you don't want to worry about how much USA vs non-USA domicled.
VCIT is the ticker for intermediate corporate, not treasuries. I think you meant “VGIT.”

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