The Three-Fund Portfolio

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radiowave
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Re: The Three-Fund Portfolio

Post by radiowave » Mon Nov 12, 2018 6:55 pm

Kcr8n wrote:
Wed Aug 22, 2018 8:29 am
WOW ! Lots of info here. I'm sold ! I'm retiring in March of 2019 at age 60 ! I will be rolling 401K into IRA with 3 funds !! I'm grateful I found Bogleheads !!
Kcr8n Welcome to the forum!

You may want to post your current 401k available funds here. You may be able to manage a 3 fund portfolio across your entire portfolio keeping funds in your 401k depending on costs and fund offerenings, e.g. if you have a good bond fund at low cost (I am fortunate to have the Vanguard Total Bond Fund available at institutional price which saves I think 2 basis points). There are some advantages to keeping funds in a 401k as they may give you some additional legal protections beyond a Rollover/Traditional IRA. If the costs are low and you have other 3 fund options in other accounts, it could work in your favor, then again, it may be easier to transfer the 401k $ into one place like Vanguard IRA.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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Re: The Three-Fund Portfolio

Post by LadyGeek » Mon Nov 12, 2018 7:44 pm

^^^ radiowave - FYI - You're responding to a post from Aug 22, 2018.

Kcr8n - Below can also apply to you.
bluerafters wrote:
Mon Nov 12, 2018 2:50 pm
Listened to the third episode of the Bogleheads podcast this morning. I have a Roth IRA that I regard as my most aggressive investment. The Roth is currently sitting at $12,000-$15,000 in VTSAX depending on the market on any given day. In early January 2019 I was going to lump sum $6000 to the VGTSX ($4000) and top up the VTSAX ($2000). At that point I would have the a total stock (US) and total international. After the Bogleheads episode, it's got me really thinking, doesn't it make more sense to move everything into:

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

I'm not fond of the lack of Admiral shares though. I would also cut down on ER by moving to the single fund. Any other downsides?
That's Vanguard Total World Stock Index Fund Investor Shares. I also listened to that episode (with Jonathan Clements), which asked about a global index fund. A very important point was that global funds are subject to currency risk (the price moves at the whim of the current currency exchange rates), which adds to the volatility. Jonathan Clements suggested an additional fund to diversify currency risk, but he wasn't very enthusiastic about that approach (or maybe Rick Ferri suggested that, I don't remember who said it). A three-fund portfolio might be the better option.

In order to give you appropriate advice, it's best to keep all the information in one spot. Please start a thread in the Investing - Help with Personal Investments forum and post your portfolio info using the Asking Portfolio Questions format. It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask in that thread.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: The Three-Fund Portfolio

Post by KJVanguard » Tue Nov 13, 2018 12:02 am

2015 wrote:
Sat Oct 27, 2018 12:00 am
Investing a hobby? Really? There is a sinkhole in anyone's future who regards investing as "fun", "interesting", or a "hobby". It's just a matter of time.

Time would be much better spent taking up golf, badminton, or croquet, or at least learning the solid history of failures on the part of those who regarded themselves as the smartest in the room.
I assume investing is a hobby for folks like Taylor who have been posting regularly to this forum for the last 20 years.

Not everyone thinks golf is fun. I would be lucky if I could even hit the damn ball! Not that I really care about my golf skills or lack thereof.

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Re: The Three-Fund Portfolio

Post by 2015 » Tue Nov 13, 2018 11:46 pm

KJVanguard wrote:
Tue Nov 13, 2018 12:02 am
2015 wrote:
Sat Oct 27, 2018 12:00 am
Investing a hobby? Really? There is a sinkhole in anyone's future who regards investing as "fun", "interesting", or a "hobby". It's just a matter of time.

Time would be much better spent taking up golf, badminton, or croquet, or at least learning the solid history of failures on the part of those who regarded themselves as the smartest in the room.
I assume investing is a hobby for folks like Taylor who have been posting regularly to this forum for the last 20 years.

Not everyone thinks golf is fun. I would be lucky if I could even hit the damn ball! Not that I really care about my golf skills or lack thereof.
You know what they say about assumptions. Generosity is the "hobby" that comes to mind when I think of why Taylor has been selflessly making contributions to people's lives for so long. Would that more be like him in our society today.

And I was being facetious when I was suggesting golf. Playing ping pong, Majong, or dominoes are also a better use of time than playing the amateur's game of viewing investing as fun, interesting, or a hobby. Professionals play an entirely different game than amateurs, and never think or act like amateurs. Amateurs think they are professionals, even though their own actions defeat themselves. Amateurs play to win, while professionals play not to lose.

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Re: The Three-Fund Portfolio

Post by MJW » Thu Nov 15, 2018 7:04 pm

2015 wrote:
Tue Nov 13, 2018 11:46 pm
You know what they say about assumptions. Generosity is the "hobby" that comes to mind when I think of why Taylor has been selflessly making contributions to people's lives for so long. Would that more be like him in our society today.

And I was being facetious when I was suggesting golf. Playing ping pong, Majong, or dominoes are also a better use of time than playing the amateur's game of viewing investing as fun, interesting, or a hobby. Professionals play an entirely different game than amateurs, and never think or act like amateurs. Amateurs think they are professionals, even though their own actions defeat themselves. Amateurs play to win, while professionals play not to lose.
I would say that learning about investing has become a hobby of mine. However, the actual practice of it is simply a means to an end. For me, that is best left pragmatic and emotionless.

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Re: The Three-Fund Portfolio

Post by 2015 » Fri Nov 16, 2018 12:23 am

MJW wrote:
Thu Nov 15, 2018 7:04 pm
2015 wrote:
Tue Nov 13, 2018 11:46 pm
...
Playing ping pong, Majong, or dominoes are also a better use of time than playing the amateur's game of viewing investing as fun, interesting, or a hobby. Professionals play an entirely different game than amateurs, and never think or act like amateurs. Amateurs think they are professionals, even though their own actions defeat themselves. Amateurs play to win, while professionals play not to lose.
I would say that learning about investing has become a hobby of mine. However, the actual practice of it is simply a means to an end. For me, that is best left pragmatic and emotionless.
Those who fail to study history are bound to repeat it. Every generation brings a new wave of investors who have to learn the hard way the lesson that the less attention devoted to investing the better (read Devil Take The Hindmost, Fraud: An American History, among others). Those who peddle marketing disguised as financial "information" know just how to cast their manipulation bait to those who suffer from fear of missing out. When investing becomes a hobby one is prone enter the mine field of behavioral bias and frail human decision making (as a result of a faulty cognitive/perceptual apparatus). The investor then comes face to face with the enemy in the mirror.

The beauty of the 3 fund portfolio is it frees one up to focus on far more life enhancing pursuits than simply investing (like reading widely outside the fields of investing, personal finance, and microeconomics).

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Re: The Three-Fund Portfolio

Post by MJW » Fri Nov 16, 2018 12:30 am

2015 wrote:
Fri Nov 16, 2018 12:23 am
MJW wrote:
Thu Nov 15, 2018 7:04 pm

I would say that learning about investing has become a hobby of mine. However, the actual practice of it is simply a means to an end. For me, that is best left pragmatic and emotionless.
Those who fail to study history are bound to repeat it. Every generation brings a new wave of investors who have to learn the hard way the lesson that the less attention devoted to investing the better (read Devil Take The Hindmost, Fraud: An American History, among others). Those who peddle marketing disguised as financial "information" know just how to cast their manipulation bait to those who suffer from fear of missing out. When investing becomes a hobby one is prone enter the mine field of behavioral bias and frail human decision making (as a result of a faulty cognitive/perceptual apparatus). The investor then comes face to face with the enemy in the mirror.

The beauty of the 3 fund portfolio is it frees one up to focus on far more life enhancing pursuits than simply investing (like reading widely outside the fields of investing, personal finance, and microeconomics).
One can have a simple, mostly hands-off portfolio and still enjoy learning about the subject if for nothing else than intellectual curiosity....AND pursue other interests as well. No one person is the authority on what is meaningful or worthwhile to pursue.

2015
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Re: The Three-Fund Portfolio

Post by 2015 » Fri Nov 16, 2018 10:50 pm

MJW wrote:
Fri Nov 16, 2018 12:30 am
2015 wrote:
Fri Nov 16, 2018 12:23 am
MJW wrote:
Thu Nov 15, 2018 7:04 pm

I would say that learning about investing has become a hobby of mine. However, the actual practice of it is simply a means to an end. For me, that is best left pragmatic and emotionless.
Those who fail to study history are bound to repeat it. Every generation brings a new wave of investors who have to learn the hard way the lesson that the less attention devoted to investing the better (read Devil Take The Hindmost, Fraud: An American History, among others). Those who peddle marketing disguised as financial "information" know just how to cast their manipulation bait to those who suffer from fear of missing out. When investing becomes a hobby one is prone enter the mine field of behavioral bias and frail human decision making (as a result of a faulty cognitive/perceptual apparatus). The investor then comes face to face with the enemy in the mirror.

The beauty of the 3 fund portfolio is it frees one up to focus on far more life enhancing pursuits than simply investing (like reading widely outside the fields of investing, personal finance, and microeconomics).
One can have a simple, mostly hands-off portfolio and still enjoy learning about the subject if for nothing else than intellectual curiosity....AND pursue other interests as well. No one person is the authority on what is meaningful or worthwhile to pursue.
While I agree with your last sentence, an untold number of individuals who write or have written on excellence, success and achievement from ancient times through the present would disagree on what could be deemed as worthwhile when it comes to pursuits. Particular areas of knowledge, competency and behaviors lead to success, achievement and superior outcomes (in all areas of life) while others do not.

I also fail to understand what is to be gained by ruffling around with finance, investing and economics, even if for the sake of "intellectual curiosity", when doing so has failed the average investor so spectacularly almost without exception. People have been led down the dark hallways of investing curiosity to their own detriment for hundreds of years (see below and note the first date: 1688).

https://medium.com/@jamiecatherwood/one ... 9bb810d4c5

Again, the beauty of the 3 fund portfolio is it allows one to personally break the cycle of behavioral mistakes made time and again by innumerable overconfident investors throughout history.

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Re: The Three-Fund Portfolio

Post by MJW » Sat Nov 17, 2018 12:17 pm

2015 wrote:
Fri Nov 16, 2018 10:50 pm
While I agree with your last sentence, an untold number of individuals who write or have written on excellence, success and achievement from ancient times through the present would disagree on what could be deemed as worthwhile when it comes to pursuits. Particular areas of knowledge, competency and behaviors lead to success, achievement and superior outcomes (in all areas of life) while others do not.

I also fail to understand what is to be gained by ruffling around with finance, investing and economics, even if for the sake of "intellectual curiosity", when doing so has failed the average investor so spectacularly almost without exception. People have been led down the dark hallways of investing curiosity to their own detriment for hundreds of years (see below and note the first date: 1688).

https://medium.com/@jamiecatherwood/one ... 9bb810d4c5

Again, the beauty of the 3 fund portfolio is it allows one to personally break the cycle of behavioral mistakes made time and again by innumerable overconfident investors throughout history.
I won't derail this thread further by arguing with you, and I'll be sure to check in with you the next time I get the impulse to learn about something.

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Re: The Three-Fund Portfolio

Post by Jacklh » Sat Nov 24, 2018 1:06 pm

I think both 2015 and MJW are correct depending on how you use the knowledge you obtained with an "investing hobby." If you use it to constantly change and adjust your portfolio according to your latest whim--it's bad and will almost always be detrimental to you portfolio. If, on the other hand, you use your investing hobby to thoroughly understand the financial markets and use that knowledge to enable you to confidently maintain your chosen investment policy through all market conditions both good and scary then it is good and will give you better long term results.

I can't speak for Taylor but I appreciate him sharing his wisdom from a lifetime of investing experience (hobby?) and I think his current hobby is helping people achieve their goals in an efficient and effective manner. Thank you Taylor and all of the Bogleheads because your generosity is priceless!

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Re: The Three-Fund Portfolio

Post by ZumZabo » Sun Nov 25, 2018 10:11 am

I can't speak for Taylor but I appreciate him sharing his wisdom from a lifetime of investing experience (hobby?) and I think his current hobby is helping people achieve their goals in an efficient and effective manner. Thank you Taylor and all of the Bogleheads because your generosity is priceless!
+1,000. A true gentleman in every aspect of the term.
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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Re: Re:

Post by ZumZabo » Sun Nov 25, 2018 10:24 am

abuss368 wrote:
Sat Oct 27, 2018 9:50 am
jwblue wrote:
Fri Oct 26, 2018 7:41 pm

Why are things so simple to others but so difficult for me? :confused

Am I not understanding something?
It is probably new to you as you continue on your journey. I would recommend a good book(s). A few of my favorites that really taught me a lot are:

* John Bogle "The Little Book of Common Sense Investing"
* John Brennan "Straight Talk on Investing"
* Taylor Larimore "The Bogleheads Guide to the Three Fund Portfolio"
* The Bogleheads Guide to Investing
* The Bogleheads Guide to Retirement Planning

And notably don't forget the forum! We are here to provide support and assist with any questions or concerns you may have.
abuss368

Your post demonstrates the desire to help others while asking nothing in return that defines this forum.

Thank you
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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Re: Re:

Post by abuss368 » Sun Nov 25, 2018 11:22 am

ZumZabo wrote:
Sun Nov 25, 2018 10:24 am
abuss368 wrote:
Sat Oct 27, 2018 9:50 am
jwblue wrote:
Fri Oct 26, 2018 7:41 pm

Why are things so simple to others but so difficult for me? :confused

Am I not understanding something?
It is probably new to you as you continue on your journey. I would recommend a good book(s). A few of my favorites that really taught me a lot are:

* John Bogle "The Little Book of Common Sense Investing"
* John Brennan "Straight Talk on Investing"
* Taylor Larimore "The Bogleheads Guide to the Three Fund Portfolio"
* The Bogleheads Guide to Investing
* The Bogleheads Guide to Retirement Planning

And notably don't forget the forum! We are here to provide support and assist with any questions or concerns you may have.
abuss368

Your post demonstrates the desire to help others while asking nothing in return that defines this forum.

Thank you
Hi ZumZabo -

Thank you for the kind words. Helping others to learn investing advice inspired by Jack Bogle is what makes this forum so rewarding and enjoyable.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

ZumZabo
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Re: Re:

Post by ZumZabo » Sun Nov 25, 2018 3:57 pm

abuss368 wrote:
Sun Nov 25, 2018 11:22 am
ZumZabo wrote:
Sun Nov 25, 2018 10:24 am
abuss368 wrote:
Sat Oct 27, 2018 9:50 am
jwblue wrote:
Fri Oct 26, 2018 7:41 pm

Why are things so simple to others but so difficult for me? :confused

Am I not understanding something?
It is probably new to you as you continue on your journey. I would recommend a good book(s). A few of my favorites that really taught me a lot are:

* John Bogle "The Little Book of Common Sense Investing"
* John Brennan "Straight Talk on Investing"
* Taylor Larimore "The Bogleheads Guide to the Three Fund Portfolio"
* The Bogleheads Guide to Investing
* The Bogleheads Guide to Retirement Planning

And notably don't forget the forum! We are here to provide support and assist with any questions or concerns you may have.
abuss368

Your post demonstrates the desire to help others while asking nothing in return that defines this forum.

Thank you
Hi ZumZabo -

Thank you for the kind words. Helping others to learn investing advice inspired by Jack Bogle is what makes this forum so rewarding and enjoyable.

Best.
You do it with class.
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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Re: The Three-Fund Portfolio

Post by tpsomerville » Sun Nov 25, 2018 5:54 pm

I've just finished reading this 47-page thread after starting a few days ago. Brilliant! Thank you, Mr. Larimore, for everything you've put into this and doing it with such grace and wisdom. Did I read correctly that you saw combat in the Battle of the Bulge? You are doubly a hero to us all.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sun Nov 25, 2018 6:34 pm

tpsomerville wrote:
Sun Nov 25, 2018 5:54 pm
I've just finished reading this 47-page thread after starting a few days ago. Brilliant! Thank you, Mr. Larimore, for everything you've put into this and doing it with such grace and wisdom. Did I read correctly that you saw combat in the Battle of the Bulge? You are doubly a hero to us all.
tpsomerville:

Yes, like most Americans during that terrible time, I did my part.

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

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Re: The Three-Fund Portfolio

Post by abuss368 » Sun Nov 25, 2018 8:59 pm

Taylor Larimore wrote:
Sun Nov 25, 2018 6:34 pm
tpsomerville wrote:
Sun Nov 25, 2018 5:54 pm
I've just finished reading this 47-page thread after starting a few days ago. Brilliant! Thank you, Mr. Larimore, for everything you've put into this and doing it with such grace and wisdom. Did I read correctly that you saw combat in the Battle of the Bulge? You are doubly a hero to us all.
tpsomerville:

Yes, like most Americans during that terrible time, I did my part.

Best wishes.
Taylor
Thank you for your service to our great country Taylor! :beer
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: The Three-Fund Portfolio

Post by ZumZabo » Sun Nov 25, 2018 9:03 pm

Deleted post to replace with following post. Made some mistakes with quotes and easier to just start over.
Last edited by ZumZabo on Sun Nov 25, 2018 9:28 pm, edited 1 time in total.
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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Re: The Three-Fund Portfolio

Post by ZumZabo » Sun Nov 25, 2018 9:22 pm

This is a former Morningstar post in Taylor’s own understated words about his service to us all.

I volunteered for the paratroops in 1943 at the age of 19. After training at Ft. Benning, Georgia, I sailed on the Queen Mary for England and more training near London which was being attacked by buzz-bombs and V-2 rockets.

In November, 1944, our group was flown to a town near Paris as replacements for 101st Airborne Division parachutists killed and wounded during the D-Day invasion. I was big and strong so I was picked to carry the 44 pound radio used by a forward mortar observer killed on D-Day.

A few weeks later, during the coldest winter on record, the German's broke through the Allied front lines in what became known as the Battle of the Bulge. Our 101st Airborne Division (about 8,000 men) was sent to hold Bastogne, Belgium, an important road junction needed to slow the German advance.

We held the town, but by Christmas we were surrounded. The Germans demanded our surrender. Our General replied "Nuts." The German's tried desperately to capture Bastogne but failed. Eventually, Patton and his tanks were able to come to our rescue.

I went to a hospital to recover from frostbite and returned to the 101st in time to help capture Berchestgarden--where Hitler's mountain retreat was located. HBO "Band of Brothers" tells the story better than I can.

Our Division was scheduled to go to the Pacific, but the war ended before we could get there. Instead, I marched in the Victory Parade down Fifth Avenue in January 1946 and was discharged shortly thereafter.

Seventeen years ago, I returned to Bastogne with my wife, and in a quiet dinner, presented the "Key to the City of Miami" to the family who sheltered me. It was humbling to learn that The City of Bastogne has built a beautiful museum and a giant memorial to the U.S. soldiers who died there. They are real heroes.
Thank you for caring.

Best wishes.
Taylor
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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Re: The Three-Fund Portfolio

Post by tpsomerville » Sun Nov 25, 2018 9:58 pm

ZumZabo wrote:
Sun Nov 25, 2018 9:22 pm
This is a former Morningstar post in Taylor’s own understated words about his service to us all.
Thanks! Histories like Mr. Larimore's shouldn't be forgotten.

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Re: The Three-Fund Portfolio

Post by columbia » Sun Nov 25, 2018 10:09 pm

:beer

spammagnet
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Re: The Three-Fund Portfolio

Post by spammagnet » Mon Nov 26, 2018 12:19 am

Taylor Larimore wrote:
Wed Nov 07, 2018 9:36 pm
Mndiver:

According to Morningstar, your international managed fund (FTIEX) has a 10-year cost projection of $1,398 which comes out of your return. Thanks to competition from Vanguard, Fidelity recently introduced an international index fund (FZILX) with "zero" cost. Talk to Fidelity about switching.

Best wishes.
Taylor
Taylor, considering the analysis you put into selecting the specific three Vanguard funds you recommend, with respect to turnover, taxes and other characteristics, how do the new "zero" cost funds compare to the three Fidelity funds recommended as substitutes for Vanguard, for those of us with Fidelity accounts? The zero funds are now listed along with others, in the "other than Vanguard" recommendation table in the wiki.

Thanks for sharing your expertise and for your contributions to my financial well-being.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Mon Nov 26, 2018 10:10 am

Taylor, considering the analysis you put into selecting the specific three Vanguard funds you recommend, with respect to turnover, taxes and other characteristics, how do the new "zero" cost funds compare to the three Fidelity funds recommended as substitutes for Vanguard, for those of us with Fidelity accounts?
spammagnet:

In my opinion, the simplicity of having all our securities with one good company (like Fidelity) is much more important than a few basis points saved in Expense Ratios.

Read my "Simplicity" link below.''

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

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Re: The Three-Fund Portfolio

Post by spammagnet » Tue Nov 27, 2018 8:54 am

Taylor Larimore wrote:
Mon Nov 26, 2018 10:10 am
In my opinion, the simplicity of having all our securities with one good company (like Fidelity) is much more important than a few basis points saved in Expense Ratios.
Taylor, I appreciate and follow that worthwhile advice. What I was asking was whether the Fidelity Zero funds are better than their other low-cost index funds, or insignificantly different, by whatever measure you employ. Previous discussions by you on the details of different funds have described some funds as better than others, in small details.

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Re: The Three-Fund Portfolio

Post by snailderby » Tue Nov 27, 2018 9:56 am

spammagnet wrote:
Tue Nov 27, 2018 8:54 am
Taylor Larimore wrote:
Mon Nov 26, 2018 10:10 am
In my opinion, the simplicity of having all our securities with one good company (like Fidelity) is much more important than a few basis points saved in Expense Ratios.
Taylor, I appreciate and follow that worthwhile advice. What I was asking was whether the Fidelity Zero funds are better than their other low-cost index funds, or insignificantly different, by whatever measure you employ. Previous discussions by you on the details of different funds have described some funds as better than others, in small details.
spammagnet, do you intend to hold this in a taxable or tax-advantaged account? If you use the search function, you can find many threads discussing the pros and cons of FZROX (Fidelity ZERO Total Market Index Fund) vs. FSKAX (Fidelity Total Market Index Fund). See, e.g., viewtopic.php?f=10&t=255356, viewtopic.php?f=1&t=258278, viewtopic.php?f=1&t=261696, and viewtopic.php?t=264129.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Tue Nov 27, 2018 11:08 am

Taylor, I appreciate and follow that worthwhile advice. What I was asking was whether the Fidelity Zero funds are better than their other low-cost index funds, or insignificantly different, by whatever measure you employ. Previous discussions by you on the details of different funds have described some funds as better than others, in small details.
spammagnet:

To my knowledge, I have never discussed small differences in Total Market Index Funds offered by various companies. Can you give an example?

I'm not sure, but I believe ALL Total Market Index Funds are superior to sector funds. Go with the company most convenient for you.

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

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Re: The Three-Fund Portfolio

Post by spammagnet » Tue Nov 27, 2018 11:44 pm

Taylor Larimore wrote:
Tue Nov 27, 2018 11:08 am
To my knowledge, I have never discussed small differences in Total Market Index Funds offered by various companies. Can you give an example?
Taylor, I'll look for the reference but I think it had to do with the amount of turnover in one fund vs another (generating capital gains), and the total number of companies represented in the fund. Perhaps the discussion was about Ex-US rather than US, but I do recall some correspondence to that effect.

I'm not contemplating anything other than total market funds, nor do I plan to move funds to a different fund company. I was just wondering whether you had an opinion about the differences (if any) between Fidelity's total market offerings. In the end, I suspect the difference isn't much.

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Re: The Three-Fund Portfolio

Post by Jkey6 » Fri Nov 30, 2018 9:46 am

My wife and I recently listened to Taylor's audiobook, Bogleheads' Guide to the Three Fund Portfolio, and are new members to this site.
We both greatly enjoyed the book, found it highly informative and wished we had read it a few years ago.

Both of us immediately agreed with the argument for reversion to the mean (we spent years chasing funds with greatest prior period returns), and also fully agreed on the low cost, high diversification model presented by the book.

However, we continue to ask ourselves one question - perhaps someone here can help us answer -
Thanks in advance to any insights.

*******************************************
Question for us:

If a bear market occurs (which we think is more likely than not) - then for next 5 or so years, would we really stay the course?

We are both 55 1/2, and for planning purposes targeting 60 for retirement.

Based on the 3 fund portfolio, 55% to 65% of our liquid assets will be invested in stocks (~80% in the Total US market, and up to 20% in the Total International market, which by design will track their underlying markets up and down) and then every 90 days we will re-balance to maintain the allocation.

If we did 'stay the course', would it not result in our watching up to 1/3 of our account disappear (60% allocation equities x 50% market correction = 30% loss). At the same time, we know from experience that we can not time the market, and that its critical we continue growing our nest egg in order to generate 4% growth for income and 2% so as to beat inflation once retirement does come.

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ruralavalon
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Re: The Three-Fund Portfolio

Post by ruralavalon » Fri Nov 30, 2018 12:27 pm

Welcome to the forum :)

Jkey6 wrote:
Fri Nov 30, 2018 9:46 am
My wife and I recently listened to Taylor's audiobook, Bogleheads' Guide to the Three Fund Portfolio, and are new members to this site.
We both greatly enjoyed the book, found it highly informative and wished we had read it a few years ago.

Both of us immediately agreed with the argument for reversion to the mean (we spent years chasing funds with greatest prior period returns), and also fully agreed on the low cost, high diversification model presented by the book.

However, we continue to ask ourselves one question - perhaps someone here can help us answer -
Thanks in advance to any insights.

*******************************************
Question for us:

If a bear market occurs (which we think is more likely than not) - then for next 5 or so years, would we really stay the course?
Are you very certain in your prediction of a bear market? Why are you that certain?

Are you aware that there have been 36 market corrections since 1980, and that only 10 went on to become a bear market (10/36 = 28%)?


We are both 55 1/2, and for planning purposes targeting 60 for retirement.

Based on the 3 fund portfolio, 55% to 65% of our liquid assets will be invested in stocks (~80% in the Total US market, and up to 20% in the Total International market, which by design will track their underlying markets up and down) and then every 90 days we will re-balance to maintain the allocation.
At age 55.5 and 4.5 years to retirement I would usually suggest that 50-60% in stocks (40-50% in bonds or other fixed income) might be reasonable, not far off from what you have in mind.


If we did 'stay the course', would it not result in our watching up to 1/3 of our account disappear (60% allocation equities x 50% market correction = 30% loss). At the same time, we know from experience that we can not time the market, and that its critical we continue growing our nest egg in order to generate 4% growth for income and 2% so as to beat inflation once retirement does come.
The basic solutions are:
1) increase the bond (or other fixed income) allocation to reduce the risk of loss, and add to the risk that you will not meet your goal at age 60; or
2) be flexible in your retirement age, to work longer if that proves necessary. In other words, change the goal as necessary.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Taylor Larimore
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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Fri Nov 30, 2018 2:07 pm

Jkey6 wrote:
Fri Nov 30, 2018 9:46 am
My wife and I recently listened to Taylor's audiobook, Bogleheads' Guide to the Three Fund Portfolio, and are new members to this site.
We both greatly enjoyed the book, found it highly informative and wished we had read it a few years ago.

Both of us immediately agreed with the argument for reversion to the mean (we spent years chasing funds with greatest prior period returns), and also fully agreed on the low cost, high diversification model presented by the book.

However, we continue to ask ourselves one question - perhaps someone here can help us answer -
Thanks in advance to any insights.

*******************************************
Question for us:

If a bear market occurs (which we think is more likely than not) - then for next 5 or so years, would we really stay the course?

We are both 55 1/2, and for planning purposes targeting 60 for retirement.

Based on the 3 fund portfolio, 55% to 65% of our liquid assets will be invested in stocks (~80% in the Total US market, and up to 20% in the Total International market, which by design will track their underlying markets up and down) and then every 90 days we will re-balance to maintain the allocation.

If we did 'stay the course', would it not result in our watching up to 1/3 of our account disappear (60% allocation equities x 50% market correction = 30% loss). At the same time, we know from experience that we can not time the market, and that its critical we continue growing our nest egg in order to generate 4% growth for income and 2% so as to beat inflation once retirement does come.
jkey6:

Welcome to the Bogleheads Forum!

I am pleased that you enjoyed my book.

Boglehead, ruralavalon, gave you excellent advice. If you are going to worry about inevitable bear markets, reduce your stock allocation. It is important to have a portfolio that frees you from worry. Then Stay-the-Course.

My printed book, not the audio version, provides this link to help you decide your most appropriate stock/bond allocation:

Vanguard Investor Questionnaire

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

LXEX55
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Re: The Three-Fund Portfolio

Post by LXEX55 » Sun Dec 02, 2018 7:32 am

My wife and I read your book and appreciate its value and wisdom. I do wish you would have discussed a drawdown strategy in retirement. May I ask do you subscribe to the standard 4% drawdown rate in retirement, or do you use a different calculation based on years left in retirement, risk tolerance as to running out of money, etc. Ben Stein offers such a graph one of his books. According to Stein's chart, assuming I live to 95 (doubtful, but possible) I am 100% safe with a drawdown rate of 3.2%. This is based on a 50/50 allocation I am sorry if I posted in the wrong thread, no disrespect to the topic or readers meant.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sun Dec 02, 2018 10:46 am

LXEX55 wrote:
Sun Dec 02, 2018 7:32 am
My wife and I read your book and appreciate its value and wisdom. I do wish you would have discussed a drawdown strategy in retirement. May I ask do you subscribe to the standard 4% drawdown rate in retirement, or do you use a different calculation based on years left in retirement, risk tolerance as to running out of money, etc. Ben Stein offers such a graph one of his books. According to Stein's chart, assuming I live to 95 (doubtful, but possible) I am 100% safe with a drawdown rate of 3.2%. This is based on a 50/50 allocation I am sorry if I posted in the wrong thread, no disrespect to the topic or readers meant.
LXEX55:

Portfolio "drawdown strategy" is complicated with many possibilities depending on each individual situation. My co-authored book, The Bogleheads' Guide to Retirement Planning, covers this subject well.

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

Calygos
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Re: The Three-Fund Portfolio

Post by Calygos » Mon Dec 03, 2018 6:46 am

I was just glancing at the Three-Fund portfolio wiki page and noticed that the section on other considerations should be updated to reflect Vanguard's recent change to Admiral shares minimums.

LXEX55
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Re: The Three-Fund Portfolio

Post by LXEX55 » Mon Dec 03, 2018 10:05 pm

ZumZabo wrote:
Sun Nov 25, 2018 9:22 pm
This is a former Morningstar post in Taylor’s own understated words about his service to us all.

I volunteered for the paratroops in 1943 at the age of 19. After training at Ft. Benning, Georgia, I sailed on the Queen Mary for England and more training near London which was being attacked by buzz-bombs and V-2 rockets.

In November, 1944, our group was flown to a town near Paris as replacements for 101st Airborne Division parachutists killed and wounded during the D-Day invasion. I was big and strong so I was picked to carry the 44 pound radio used by a forward mortar observer killed on D-Day.

A few weeks later, during the coldest winter on record, the German's broke through the Allied front lines in what became known as the Battle of the Bulge. Our 101st Airborne Division (about 8,000 men) was sent to hold Bastogne, Belgium, an important road junction needed to slow the German advance.

We held the town, but by Christmas we were surrounded. The Germans demanded our surrender. Our General replied "Nuts." The German's tried desperately to capture Bastogne but failed. Eventually, Patton and his tanks were able to come to our rescue.

I went to a hospital to recover from frostbite and returned to the 101st in time to help capture Berchestgarden--where Hitler's mountain retreat was located. HBO "Band of Brothers" tells the story better than I can.

Our Division was scheduled to go to the Pacific, but the war ended before we could get there. Instead, I marched in the Victory Parade down Fifth Avenue in January 1946 and was discharged shortly thereafter.

Seventeen years ago, I returned to Bastogne with my wife, and in a quiet dinner, presented the "Key to the City of Miami" to the family who sheltered me. It was humbling to learn that The City of Bastogne has built a beautiful museum and a giant memorial to the U.S. soldiers who died there. They are real heroes.
Thank you for caring.

Best wishes.
Taylor
Taylor, your modesty reminds me very much of my late dad who was wounded in the battle of Attu. He would never talk about the war or the circumstances of his getting shot. One night when I was about 12 educational TV did a special on the battle of Attu. After seeing it, I said "wow, dad you are a hero!". He very seriously said, "no, the real heros did not come back. We buried them on the beach under a wooden cross."

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"To Index Bonds or Not?"

Post by Taylor Larimore » Tue Dec 04, 2018 10:16 am

Bogleheads:

Morningstar researcher, John Rekenthaler, has written an article analyzing Vanguard Total Bond Market Index Fund -- the bond fund in the Three-Fund Portfolio. This is his Conclusion (underline mine):
When comparing Total Bond Market with the leading actively run rivals, it falls slightly short on income, is fully competitive for total returns, and comfortably delivers the best diversification. In addition, it would seem to be the timely choice, given the length of the current economic recovery. Total Bond Market, or a similar index fund, is what I would purchase, were I in the market for a bond fund .
https://www.morningstar.com/articles/90 ... r-not.html

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

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Re: "To Index Bonds or Not?"

Post by ruralavalon » Tue Dec 04, 2018 10:35 am

Taylor Larimore wrote:
Tue Dec 04, 2018 10:16 am
Bogleheads:

Morningstar researcher, John Rekenthaler, has written an article analyzing Vanguard Total Bond Market Index Fund -- the bond fund in the Three-Fund Portfolio. This is his Conclusion (underline mine):
When comparing Total Bond Market with the leading actively run rivals, it falls slightly short on income, is fully competitive for total returns, and comfortably delivers the best diversification. In addition, it would seem to be the timely choice, given the length of the current economic recovery. Total Bond Market, or a similar index fund, is what I would purchase, were I in the market for a bond fund .
https://www.morningstar.com/articles/90 ... r-not.html

Best wishes
Taylor
I read the article, it's a good overview of -- why to own bond funds and the pros and cons of each type of Intermediate-term bond fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Benjamin Buffett
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Re: The Three Fund Portfolio

Post by Benjamin Buffett » Wed Dec 05, 2018 7:08 pm

Boglenaut wrote:
Mon Jan 02, 2012 12:54 am
ofcmetz wrote:I really like the three fund portfolio, but I can't resist the urge to season mine with a few extra REIT's and TIP's. So I guess the cajun in me likes something slightly more spicy.
I am not Cajun, but agree. How could anyone argue with the three fund portfolio? But of course in my eternal quest to improve on perfection, I have some TIPS, REITs, and some small/mid cap around the edges. I even put in a tiny pinch of HY Bond for seasoning. But those three funds (or their equivelents) do all the heavy lifting.

But if I only had the three funds, I'd be fine with that. This year (oops, I mean last year) I reduced my taxable funds from 6 to 2.
I came up with an interesting portfolio concept when toying with a portfolio that included real estate for a friend who did not want to invest directly in physical real estate, and did not want international stocks. They wanted it to be liquid and potentially easy to construct in a 401k.

Lets look at the three fund portfolio's skeleton:
* 60% A US Stock Market Index
* 20% A diversifier that attempts to avoid overlap with the first, which in most cases would be international stocks
* A bond fund or cash allocation to cushion the more volatile parts of the portfolio, and provide room for rebalancing

if we want to include REITs, which seem pretty solid and resistant to inflation we can use
* 60% US Stock Market Index Fund
* 20% REIT Index Fund
* 20% Bond Fund or Cash(CD Ladders?) Allocation

This would give a person some real estate exposure, resistance to inflation, reduce potential international risks, increase gains because of REIT growth potential, and be relatively easy to maintain. Diversified, and easy to use.

Sample funds I would use if I had 10k to make one of these:
VTI stock market
VNQ reits
BND bonds

Personally I split my investable money, almost everything I make that doesn't get eaten by essential bills, between direct real estate and my boglehead three fund 401k and other accounts (each with a three fund portfolio). The real estate is not rebalanced with the three fund portfolios because it isn't very liquid......but my three fund cannot really have REITs because I already have a real estate heavy portfolio....... so international makes more sense for me, which is why recently I began increasing it from 5% to closer towards 20%.

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Re: The Three-Fund Portfolio

Post by hornet1 » Thu Dec 06, 2018 11:11 am

Benjamin Buffett wrote:
Wed Dec 05, 2018 7:08 pm
Boglenaut wrote:
Mon Jan 02, 2012 12:54 am
ofcmetz wrote:I really like the three fund portfolio, but I can't resist the urge to season mine with a few extra REIT's and TIP's. So I guess the cajun in me likes something slightly more spicy.
I am not Cajun, but agree. How could anyone argue with the three fund portfolio? But of course in my eternal quest to improve on perfection, I have some TIPS, REITs, and some small/mid cap around the edges. I even put in a tiny pinch of HY Bond for seasoning. But those three funds (or their equivelents) do all the heavy lifting.

But if I only had the three funds, I'd be fine with that. This year (oops, I mean last year) I reduced my taxable funds from 6 to 2.
I came up with an interesting portfolio concept when toying with a portfolio that included real estate for a friend who did not want to invest directly in physical real estate, and did not want international stocks. They wanted it to be liquid and potentially easy to construct in a 401k.

Lets look at the three fund portfolio's skeleton:
* 60% A US Stock Market Index
* 20% A diversifier that attempts to avoid overlap with the first, which in most cases would be international stocks
* A bond fund or cash allocation to cushion the more volatile parts of the portfolio, and provide room for rebalancing

if we want to include REITs, which seem pretty solid and resistant to inflation we can use
* 60% US Stock Market Index Fund
* 20% REIT Index Fund
* 20% Bond Fund or Cash(CD Ladders?) Allocation

This would give a person some real estate exposure, resistance to inflation, reduce potential international risks, increase gains because of REIT growth potential, and be relatively easy to maintain. Diversified, and easy to use.

Sample funds I would use if I had 10k to make one of these:
VTI stock market
VNQ reits
BND bonds

Personally I split my investable money, almost everything I make that doesn't get eaten by essential bills, between direct real estate and my boglehead three fund 401k and other accounts (each with a three fund portfolio). The real estate is not rebalanced with the three fund portfolios because it isn't very liquid......but my three fund cannot really have REITs because I already have a real estate heavy portfolio....... so international makes more sense for me, which is why recently I began increasing it from 5% to closer towards 20%.
Thanks for that post man. So I actually was thinking of something similar and I also invest directly in real estate. But right now with the current market 'volatility' shouldn't you be going higher Bonds/fixed?

Like a portfolio that is more defensive at least for the short term (1-2 years and wait for a correction or downturn, then rebalance back at yhe 60% stock / 10% international / 30% Bonds later when in growth phase again??)
For instance for short run:

*30% US Stocks VTI ( isn't this highly inflated now a
nd volatile?)
*60% BND bonds ( perhaps shorter term bonds since inverse yield curve)
* 10% GLD or SLV ( silver/gold commodities for a downturn)

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Re: The Three-Fund Portfolio

Post by LXEX55 » Sun Dec 09, 2018 4:14 pm

Mr. Larimore, simple question: Is there ever a bad time economically for it to be unwise for a person to enter into the three portfoliio investing philosphy? In other words, when I retire in April, should I immediately move my 401k funds over the three Vanguard funds you suggest (50%/50% at age 63.5) no matter what I hear or read about economic predictions about corrections, recessions, or whatever? Thank you for time, sir.

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Re: The Three-Fund Portfolio

Post by Taylor Larimore » Sun Dec 09, 2018 6:34 pm

LXEX55 wrote:
Sun Dec 09, 2018 4:14 pm
Mr. Larimore, simple question: Is there ever a bad time economically for it to be unwise for a person to enter into the three portfoliio investing philosphy? In other words, when I retire in April, should I immediately move my 401k funds over the three Vanguard funds you suggest (50%/50% at age 63.5) no matter what I hear or read about economic predictions about corrections, recessions, or whatever? Thank you for time, sir.
LXEX55:

I started investing in 1950 at the age of 21. As told in my book, I made many, many investing mistakes. Arguably the worst was listening to "economic predictions about corrections, recessions, or whatever" and taking action.

In 1950 the S&P stocks were about 20. Today the index is 2,633 (not including dividends). If I had simply bought the market and invested regularly, I would be much wealthier today.

To answer your question: There is never a bad time (that you can recognize) to invest in The Three-Fund Portfolio. Just do it now and ignore the "noise."

I do not suggest a stock/bond ratio of "(50%/50% at age 63.5)" for everyone. We are all different. Our asset-allocation depends on our goal(s), time-frame, risk-tolerance and personal financial situation.

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

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Re: The Three-Fund Portfolio

Post by CABob » Sun Dec 09, 2018 8:18 pm

LXEX55 wrote:
Sun Dec 09, 2018 4:14 pm
In other words, when I retire in April, should I immediately move my 401k funds over the three Vanguard funds you suggest (50%/50% at age 63.5) no matter what I hear or read about economic predictions about corrections, recessions, or whatever?
It is difficult to improve upon Taylor's response, but I would point out that I assume your retirement funds are invested in some manner in your 401k. Therefore, taking that money and investing it in another account would not be a new investment, but a sideways move to some extent. I suggest you reinvest the money in something similar to what it is now as far as a stock to bond allocation.
Bob

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Re: The Three-Fund Portfolio

Post by Brit » Fri Dec 14, 2018 4:30 pm

Taylor,

Having read The Bogleheads Guide to Retirement many times and learned more from it each time that I read it in different stages towards retirement. Like many other things that are high value they require a significant focus and time commitment read, truly comprehend, and make a determination of what one needs to action, when and why.

That can be off-putting for many people who may not believe that they are "smart enough" to grasp the concepts and gain confidence in "yes I can and will manage my own portfolio, after all I'm the only one responsible for the financial outcome".

The Three Fund Portfolio does an outstanding job of making the core subject of selecting a simple and effective portfolio very approachable and dare I say it rather fun!

I'm giving them both away together as Christmas presents friends who I know will benefit from them, with the message "The most useful books I've ever read, adopted, and seen the most value out of in my life."

Many, many thanks for the generous contribution of your most valuable asset -- the gift of knowledge and wisdom.

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Re: The Three-Fund Portfolio

Post by BogleMelon » Fri Dec 14, 2018 4:37 pm

shorekat14 wrote:
Wed May 09, 2018 7:10 am
This is probably a very rookie question (and if it's misplaced, apologies in advance) - but what is the advantage of going with a three-fund portfolio (US equity/non-US equity/fixed income) vs. a single target fund?
An example: for people who doesn't have an access to a good bond fund in their 401K, a three-fund portfolio in their IRA could fix the problem to maintain desired allocation
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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