"Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

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Ferdinand2014
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Mon Sep 09, 2019 10:18 pm

3000 wrote:
Mon Sep 09, 2019 9:00 pm
Would the Vanguard Short-Term Treasury Fund Investor Shares (VFISX) be good for the Treasury part?
Yes it would if your only choice is Vanguard. A better choice is FUMBX (Fidelity Short Term Treasury Bond Index) because it has no minimum, is 100% treasury instead of 83% in VFISX and has a lower ER of 0.03 vs 0.20 if you have access to Fidelity. I actually prefer to buy treasury bills (4-week) at auction every Tuesday through Fidelity because it is free and I can set it to auto-roll into a new 4 week treasury every month.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Ferdinand2014
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Mon Sep 09, 2019 10:23 pm

willthrill81 wrote:
Mon Sep 09, 2019 10:27 am
deltaneutral83 wrote:
Mon Sep 09, 2019 10:14 am
90/10 all the way down to 50/50, it doesn't really matter, it's the same thing preached here in the 3F more or less. Buffet doesn't recommend 90/10 for people with less than 50x expenses I wouldn't guess.
I find it a little funny that he has made plans for 90/10 and not 100% stock. While I'm not advocating a 'living on dividends' approach, the dividend yield of the S&P 500 is about the same as 10 year Treasuries' yield. Yes, the former could go down, but the opportunity for capital appreciation is obviously far higher too.

My personal view is that if someone is planning on 2% or lower withdrawals (for whatever reason), a logical argument could be made for them to be 100% stock, assuming that their risk tolerance would allow for it. But a logical argument could also be made for them to be 100% fixed income. When your withdrawal rate is so low, the range of plausible portfolios expands quite a lot.
That is a good point. In fact it is my plan. I will live on 2% or less and donate the rest through trusts I have arranged for my grandchildren.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Ferdinand2014
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Mon Sep 09, 2019 10:37 pm

TN_Boy wrote:
Mon Sep 09, 2019 2:20 pm
deltaneutral83 wrote:
Mon Sep 09, 2019 12:16 pm
TN_Boy wrote:
Mon Sep 09, 2019 10:58 am

In the accumulation years, a 90/10 portfolio, while more aggressive than I like and non-diversified internationally, doesn't sound like a terrible plan. Beyond that context, the idea of a one-size fits all portfolio seems bad.

I have trouble believing Mr Buffett has a good grasp -- no matter his intentions or character -- of the right financial choices for people who are not ultra-wealthy.
I think Buffett is perfectly suited no matter the situation (lives in a reasonably sized home, eats at McDonalds, etc etc) to give financial planning advice, he just doesn't that often and people take what he says out of context. We have plenty of people here who are 100/0 with just a tad less than Mr. Buffett in the net worth column, so you cannot attribute those BH's to being out of touch and/or wealthy, so what would you attribute that towards? Seems the scapegoat of being wealthy in Buffett's case is being arbitrarily used.

Buffett only said 90/10 because it's simple and he couldn't care less about international. He'd be more than open to 60/40 just probably no international. There are also many "advisers" who encourage 100/0 at any age because they hope to get more AUM and there fore more compensation and some are broke themselves.
You said "He'd be more than open to 60/40 just probably no international."

Unless you sit in on those bridge games with Warren and Bill or have talked with Warren on the phone recently, I contend you have no idea what he would think of a 60/40 portfolio. In fact, this is the biggest problem I have with taking Buffett's suggestion -- he has thrown out this 90/10 recommendation in a couple of contexts, but there has been no back and forth with questions like "do you really mean 90/10 for everyone, are there any exceptions etc etc."

I'll reiterate: 90/10 S&P 500/US treasuries is a perfectly valid portfolio during accumulation for many people. It's not to my taste, especially near retirement, but I can see people choosing that mix.

But no, I do not understand how Buffett's opinion on personal finance should be taken as very useful. Obviously he understands investing. But I don't think he has spent much time pondering the financial issues of non-rich people, at least not in detail. Are his tax issues the same? If the stock market plummets 50 or 60%, will he be as concerned as the couple about to retire with a mere 300k in their 401k, invested 90% stock? Oh, retirement. Buffett is in his 80s. And not retired. So his retirement plan is not to retire. Which is very different from my retirement plan.

And a couple of your other comments ... sure some BHer's have a 100% stock allocation. What does that have to do with my post? And advisors encouraging people to be 100% stocks "because they hope to get more AUM". What does that have to do with anything? I thought we were talking about Buffett.

Incidentally, though he sold it last year, he did own a vacation home in Laguna Beach, CA for decades. It was an ocean view six bedroom house.

Buffett has a folksy and engaging style (I enjoy reading what he says and how he says it, but if you think he lives like you and I, or that his financial issues are similar you are sorely mistaken.
"Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.
By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long- term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.
I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.
It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.
"


2017 Shareholder letter
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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willthrill81
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by willthrill81 » Mon Sep 09, 2019 10:39 pm

Ferdinand2014 wrote:
Mon Sep 09, 2019 10:23 pm
willthrill81 wrote:
Mon Sep 09, 2019 10:27 am
deltaneutral83 wrote:
Mon Sep 09, 2019 10:14 am
90/10 all the way down to 50/50, it doesn't really matter, it's the same thing preached here in the 3F more or less. Buffet doesn't recommend 90/10 for people with less than 50x expenses I wouldn't guess.
I find it a little funny that he has made plans for 90/10 and not 100% stock. While I'm not advocating a 'living on dividends' approach, the dividend yield of the S&P 500 is about the same as 10 year Treasuries' yield. Yes, the former could go down, but the opportunity for capital appreciation is obviously far higher too.

My personal view is that if someone is planning on 2% or lower withdrawals (for whatever reason), a logical argument could be made for them to be 100% stock, assuming that their risk tolerance would allow for it. But a logical argument could also be made for them to be 100% fixed income. When your withdrawal rate is so low, the range of plausible portfolios expands quite a lot.
That is a good point. In fact it is my plan. I will live on 2% or less and donate the rest through trusts I have arranged for my grandchildren.
Do you mind adopting a 30-something with his own place? :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Ferdinand2014
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Mon Sep 09, 2019 10:44 pm

“The Bet” is Over and Has Delivered an Unforeseen Investment Lesson

"I made the bet for two reasons: (1) to leverage my outlay of $318,250 into a disproportionately larger sum that – if things turned out as I expected – would be distributed in early 2018 to Girls Inc. of Omaha; and (2) to publicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.
Addressing this question is of enormous importance. American investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s worth? Indeed, again in the aggregate, do investors get anything for their outlays?
Protégé Partners, my counterparty to the bet, picked five “funds-of-funds” that it expected to overperform the S&P 500. That was not a small sample. Those five funds-of-funds in turn owned interests in more than 200 hedge funds....

.....Every actor on Protégé’s side was highly incentivized: Both the fund-of-funds managers and the hedge-fund managers they selected significantly shared in gains, even those achieved simply because the market generally moves upwards. (In 100% of the 43 ten-year periods since we took control of Berkshire, years with gains by the S&P 500 exceeded loss years.)
Those performance incentives, it should be emphasized, were frosting on a huge and tasty cake: Even if the funds lost money for their investors during the decade, their managers could grow very rich. That would occur because fixed fees averaging a staggering 21⁄2% of assets or so were paid every year by the fund-of-funds’ investors, with part of these fees going to the managers at the five funds-of-funds and the balance going to the 200-plus managers of the underlying hedge funds."

"The bet illuminated another important investment lesson: Though markets are generally rational, they
occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential."


http://www.berkshirehathaway.com/letters/2017ltr.pdf

Read page 11-14. Very Instructive. This whole bet was done to prove a point that a low cost S&P 500 index fund (VFIAX) is all anyone really needs.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Riprap
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Riprap » Mon Sep 09, 2019 10:58 pm

Ferdinand2014 wrote:
Sun Sep 08, 2019 2:27 pm
:sharebeer

My IPS is enough cash (T-Bills) to sleep well at night. The rest of my investment goes into a super low cost S&P 500 index fund (FXAIX - Fido 500 index). I do not keep an AA, but instead keep an X number that works out to at least 2 years of emergency fund - living expenses and extra for large expenses over the next 1-3 years. This keeps me from ever having to rebalance and one fund keeps me from making behavioral mistakes by fiddling with an AA. Warren Buffett has made it clear that 10% is a rough guideline and that you should keep enough short term treasuries so you are comfortable, whatever that may be. Some may disagree with the short treasuries duration and others (probably most) would disagree with lack of international. It has worked well for me and I fully understand there may be periods where I will underperform international. My costs are just about zero as T-Bills at auction and on auto-roll at Fidelity are free and FXAIX has an ER of 0.015, so I at least know I will get whatever the S&P 500 gives me.
Interesting.

If retired, would you mind sharing your withdrawal rate from your combined investment assets? On average, smoothed out over time.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Mon Sep 09, 2019 11:16 pm

Riprap wrote:
Mon Sep 09, 2019 10:58 pm
Ferdinand2014 wrote:
Sun Sep 08, 2019 2:27 pm
:sharebeer

My IPS is enough cash (T-Bills) to sleep well at night. The rest of my investment goes into a super low cost S&P 500 index fund (FXAIX - Fido 500 index). I do not keep an AA, but instead keep an X number that works out to at least 2 years of emergency fund - living expenses and extra for large expenses over the next 1-3 years. This keeps me from ever having to rebalance and one fund keeps me from making behavioral mistakes by fiddling with an AA. Warren Buffett has made it clear that 10% is a rough guideline and that you should keep enough short term treasuries so you are comfortable, whatever that may be. Some may disagree with the short treasuries duration and others (probably most) would disagree with lack of international. It has worked well for me and I fully understand there may be periods where I will underperform international. My costs are just about zero as T-Bills at auction and on auto-roll at Fidelity are free and FXAIX has an ER of 0.015, so I at least know I will get whatever the S&P 500 gives me.
Interesting.

If retired, would you mind sharing your withdrawal rate from your combined investment assets? On average, smoothed out over time.
I am 15 years from retirement barring unforeseen calamities. I am saving approximately 1.5 years of current expenses each year between taxable and tax deferred. I will plan for 0% real return, but anticipate anywhere from 0-6% over the next 15 years. My goal is to live off 2%, but would likely be able to live off 3-4%. I only worry about what I can control namely my costs, savings rate and expenses.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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willthrill81
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by willthrill81 » Mon Sep 09, 2019 11:30 pm

Ferdinand2014 wrote:
Mon Sep 09, 2019 11:16 pm
I am 15 years from retirement barring unforeseen calamities. I am saving approximately 1.5 years of current expenses each year between taxable and tax deferred. I will plan for 0% real return, but anticipate anywhere from 0-6% over the next 15 years. My goal is to live off 2%, but would likely be able to live off 3-4%. I only worry about what I can control namely my costs, savings rate and expenses.
If the future looks anything like the past, you will likely be able to withdraw 4% and still see your portfolio grow significantly during your retirement.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by JoMoney » Mon Sep 09, 2019 11:36 pm

willthrill81 wrote:
Mon Sep 09, 2019 10:27 am
deltaneutral83 wrote:
Mon Sep 09, 2019 10:14 am
90/10 all the way down to 50/50, it doesn't really matter, it's the same thing preached here in the 3F more or less. Buffet doesn't recommend 90/10 for people with less than 50x expenses I wouldn't guess.
I find it a little funny that he has made plans for 90/10 and not 100% stock. While I'm not advocating a 'living on dividends' approach, the dividend yield of the S&P 500 is about the same as 10 year Treasuries' yield. Yes, the former could go down, but the opportunity for capital appreciation is obviously far higher too.

My personal view is that if someone is planning on 2% or lower withdrawals (for whatever reason), a logical argument could be made for them to be 100% stock, assuming that their risk tolerance would allow for it. But a logical argument could also be made for them to be 100% fixed income. When your withdrawal rate is so low, the range of plausible portfolios expands quite a lot.
People have made "logical arguments" for 110% stocks, some people with mortgages might be levered beyond that and don't even think about it.

I would point out, that a 100% stock allocation is somewhat reliant on functioning markets that have had infrequent hiccups. If you're making regular withdrawals for all of your income. You might have one less thing to worry about during some market-closing catastrophe with that 10% in cash/Tbills knowing that it's effectively two and half years of withdrawals (at a 4% withdrawal rate), even if the stock exchanges don't open tomorrow, or a week, or month later...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Oddibe McDowell » Tue Sep 10, 2019 7:06 am

Why do you guys think he recommended short term treasuries over total bond?

Maybe due to shorter duration / less risk on the bond side - that allows him to increase stock exposure?

I rely on total bond fund for my bonds. Are there risks we should look at more closely? Do any of you use all short term treasuries for your bond allocation?

Interested in any comments.


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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by midareff » Tue Sep 10, 2019 7:56 am

Speaking of the S&P500 or Total Stock Market...... neither Mr. Bogle or Mr. Buffet were particular fans of International. One having none of it and the other taking a position of no more than 20% of equities if you must. Many on the this site seem much more heavily inclined for international.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by JoMoney » Tue Sep 10, 2019 8:28 am

Oddibe McDowell wrote:
Tue Sep 10, 2019 7:06 am
Why do you guys think he recommended short term treasuries over total bond?

Maybe due to shorter duration / less risk on the bond side - that allows him to increase stock exposure?

I rely on total bond fund for my bonds. Are there risks we should look at more closely? Do any of you use all short term treasuries for your bond allocation?

Interested in any comments.
FWIW, I used to own a Vanguard short-term bond fund, I'm currently only using money market funds/accounts and U.S. Savings Bonds.
I don't know why Buffett chose to use short-term government bonds in the example bequest he plans for his wife.
My preference is to have my bond holdings relative maturity/duration matched to my expected need of the money, and since I think of it more as an "emergency fund", it could be a unexpected short-term need.
Vanguard's Total Bond fund is a very high quality low-cost fund. I don't see anything specifically wrong with 'Total Bond' other than it has a longer duration than what I'm looking for. I tend to think there is an implicit "market timing" element involved if one is choosing to buy bonds that have longer maturities than one is willing to hold them for. Market timing is not my game, but I do have a feeling that the current interest rate environment is not the time to be in long bonds. Some might say that having a preference rather than just buying the broad market of bonds is a form of 'market timing', I don't think of it as timing but as a risk preference. I have no expectation of being able to "buy low" and "sell high" with short-term bonds.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Tue Sep 10, 2019 8:30 am

Oddibe McDowell wrote:
Tue Sep 10, 2019 7:06 am
Why do you guys think he recommended short term treasuries over total bond?

Maybe due to shorter duration / less risk on the bond side - that allows him to increase stock exposure?

I rely on total bond fund for my bonds. Are there risks we should look at more closely? Do any of you use all short term treasuries for your bond allocation?

Interested in any comments.
Although generally total investment grade bond funds are considered relatively low risk, the overall duration of the index has increased over the last 10 years and with borrowing costs at all time lows, corporations have been on a borrowing binge and are more leveraged. Both of these changes could potentially increase volatility and reduce downside protection in a major crash. Warren Buffett and others such as David Swensen have advised only U.S. treasuries for the average investors bond allocation. Buffett recommends short term treasury bills as it is the safest most liquid investment in the world and for the average investor generally feels corporate paper and longer duration in the current interest rate environment are not a good idea. David Swensen has a similar view regarding corporate paper, but prefers a longer liability matching duration as outlined in his book. I view fixed income as my emergency fund, near term large expense fund and backstop to prevent ever having to sell equities in a downturn. So, for my fixed income, zero risk, high liquidity and low volatility are more important than yield. Others use fixed income to rebalance into equities as well as for some income and yield which then makes a longer duration and higher volatility a positive characteristic as long as the correlation is still low or negative to equities. Since that is not my purpose with fixed income, I will stick with super short term t-bills (essentially cash). Everyones AA and situation is different. There is no one size fits all.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by dbr » Tue Sep 10, 2019 8:52 am

One would imagine he suggested short term treasuries to be sure the money planned on would be there absolutely for sure. Once 90% of the portfolio is in stocks, there is hardly any reason to reach for more return in the 10% that is in bonds.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by 3000 » Tue Sep 10, 2019 6:26 pm

Ferdinand2014 wrote:
Mon Sep 09, 2019 10:18 pm
3000 wrote:
Mon Sep 09, 2019 9:00 pm
Would the Vanguard Short-Term Treasury Fund Investor Shares (VFISX) be good for the Treasury part?
Yes it would if your only choice is Vanguard. A better choice is FUMBX (Fidelity Short Term Treasury Bond Index) because it has no minimum, is 100% treasury instead of 83% in VFISX and has a lower ER of 0.03 vs 0.20 if you have access to Fidelity. I actually prefer to buy treasury bills (4-week) at auction every Tuesday through Fidelity because it is free and I can set it to auto-roll into a new 4 week treasury every month.
Thank you for the information.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by willthrill81 » Tue Sep 10, 2019 9:12 pm

dbr wrote:
Tue Sep 10, 2019 8:52 am
One would imagine he suggested short term treasuries to be sure the money planned on would be there absolutely for sure. Once 90% of the portfolio is in stocks, there is hardly any reason to reach for more return in the 10% that is in bonds.
I would think that short-term TIPS would be better than nominal Treasuries, but I suppose that short-term unexpected inflation isn't anticipated to be a real threat in this approach.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by dbr » Tue Sep 10, 2019 9:17 pm

willthrill81 wrote:
Tue Sep 10, 2019 9:12 pm
dbr wrote:
Tue Sep 10, 2019 8:52 am
One would imagine he suggested short term treasuries to be sure the money planned on would be there absolutely for sure. Once 90% of the portfolio is in stocks, there is hardly any reason to reach for more return in the 10% that is in bonds.
I would think that short-term TIPS would be better than nominal Treasuries, but I suppose that short-term unexpected inflation isn't anticipated to be a real threat in this approach.
His recommendations do have a flavor of being a sort of "plain vanilla" or "old fashioned" selection. By that I mean this whole discussion of S&P 500 vs TSM and nominal Treasuries vs TIPS. TSM and TIPS are sort of exotic in that world view.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by usagi » Tue Sep 10, 2019 11:04 pm

nedsaid wrote:
Sun Sep 08, 2019 5:52 pm
Most of us are not Billionaires, most of us won't be 90% S&P 500 and 10% Treasuries in our retirement portfolios.
Correct most are not billionaires, but I bet a lot could easily be 90% S&P 500 and 10% Treasuries if not for the orthodoxy around age in bonds, etc preaching to do otherwise. I get that impression by the number of posters who have mentioned SS covers most if not all of their expenses and other details. I really do not think it is at all far fetched. If you have fulfilling modest expense lifestyle and have diligently invest for 20-25 years or more it is readily doable. The issue comes down to lifestyle, income, and savings rate. I'll maintain many more people are in position to do this than most people think and likely don't because they are locked in on the mantra of 70-30, 60-40, 50-50 allocations preached in most responsible investment guides that are aimed at the masses.

I think there are a lot more people quietly living their lives in far greater financial security than people think. If you think about it, it has to be difficult to detect.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by usagi » Wed Sep 11, 2019 12:45 am

midareff wrote:
Tue Sep 10, 2019 7:56 am
Speaking of the S&P500 or Total Stock Market...... neither Mr. Bogle or Mr. Buffet were particular fans of International. One having none of it and the other taking a position of no more than 20% of equities if you must. Many on the this site seem much more heavily inclined for international.
I thumbed through Saint John Bogle's The Little Book of Common Sense Investing and his comments on international almost seemed glaring with disdain. I also noted Buffet's preferences and taken with other comments they both made, they are consistent. The U.S. market with its innate international exposure seems to be their mutual desired way to tap the international markets.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by Ferdinand2014 » Wed Sep 11, 2019 8:55 am

usagi wrote:
Wed Sep 11, 2019 12:45 am
midareff wrote:
Tue Sep 10, 2019 7:56 am
Speaking of the S&P500 or Total Stock Market...... neither Mr. Bogle or Mr. Buffet were particular fans of International. One having none of it and the other taking a position of no more than 20% of equities if you must. Many on the this site seem much more heavily inclined for international.
I thumbed through Saint John Bogle's The Little Book of Common Sense Investing and his comments on international almost seemed glaring with disdain. I also noted Buffet's preferences and taken with other comments they both made, they are consistent. The U.S. market with its innate international exposure seems to be their mutual desired way to tap the international markets.
For me, holding the S&P 500 lets the 504 corporation’s I invest with decide what markets outside the US are viable or profitable, what currencies to hedge or not, what regulations or governments are worth dealing with, to expand or contract based on local economic situations, etc. Combine that with a very high correlation with developed international to the U.S. stock market and my desire not to risk my hard earned dollars on emerging markets, settles any thoughts about international. It is certainly possible I will underperform at some point and outperform at other points in time. I am ok with that. If it keeps me from selling out and market timing because I have a deep conviction about my investing plan, then I suspect that is worth at least a bonus 2% return (which is the difference between what the average mutual fund earned vs what the average mutual fund owner earned according to Jack Bogles book on Common Sense Investing). Throw in the 2 greatest investing minds the world has known also strongly recommending it - in fact betting a million dollars very publicly to show what the average investor should do - adds a level of conviction that helps keep me from selling when I shouldn’t. I fully understand all of the arguments for total stock market, total bond market, long term treasury, international, emerging market, etc. Each must make there own conviction and as Jack Bogle said “Stay the course!”.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by midareff » Wed Sep 11, 2019 11:23 am

Ferdinand2014 wrote:
Wed Sep 11, 2019 8:55 am
usagi wrote:
Wed Sep 11, 2019 12:45 am
midareff wrote:
Tue Sep 10, 2019 7:56 am
Speaking of the S&P500 or Total Stock Market...... neither Mr. Bogle or Mr. Buffet were particular fans of International. One having none of it and the other taking a position of no more than 20% of equities if you must. Many on the this site seem much more heavily inclined for international.
I thumbed through Saint John Bogle's The Little Book of Common Sense Investing and his comments on international almost seemed glaring with disdain. I also noted Buffet's preferences and taken with other comments they both made, they are consistent. The U.S. market with its innate international exposure seems to be their mutual desired way to tap the international markets.
For me, holding the S&P 500 lets the 504 corporation’s I invest with decide what markets outside the US are viable or profitable, what currencies to hedge or not, what regulations or governments are worth dealing with, to expand or contract based on local economic situations, etc. Combine that with a very high correlation with developed international to the U.S. stock market and my desire not to risk my hard earned dollars on emerging markets, settles any thoughts about international. It is certainly possible I will underperform at some point and outperform at other points in time. I am ok with that. If it keeps me from selling out and market timing because I have a deep conviction about my investing plan, then I suspect that is worth at least a bonus 2% return (which is the difference between what the average mutual fund earned vs what the average mutual fund owner earned according to Jack Bogles book on Common Sense Investing). Throw in the 2 greatest investing minds the world has known also strongly recommending it - in fact betting a million dollars very publicly to show what the average investor should do - adds a level of conviction that helps keep me from selling when I shouldn’t. I fully understand all of the arguments for total stock market, total bond market, long term treasury, international, emerging market, etc. Each must make there own conviction and as Jack Bogle said “Stay the course!”.
Just for fun let's say you are near retirement 10 years ago. You have accumulated a nest egg of roughly $1.2 M, for the purpose of this example and are roughly 50/50, equities and FI. You split your equities 50% US Total Stock Market and 50% Total International. Ten years later your Total International is up 63.2% and Total US is up 257.2%. VFIAX (The S&P500 Admiral) was up 258.3% FWIW. Staying the course of that 50/50 equity split cost you about $570K gains. While you do have to know when to hold them you also need to know when to fold them. While nobody knows nothing, apparently St. Jack and Warren know a thing or two, having seen a thing or two over their investing lifetimes.

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meowcat
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by meowcat » Wed Sep 11, 2019 3:21 pm

nedsaid wrote:
Sun Sep 08, 2019 7:48 pm

I have followed Buffett for years and have learned a lot from him. Not saying that his advice regarding index funds is bad, in fact I agree with it. Most folks here are not going to invest using a 90% stock/10% Treasuries asset allocation. We need asset allocations that are appropriate to our own individual situations, 90/10 is not a one size fits all allocation. Mr. Bogle did say that an allocation of 65% stocks/35% bonds is good for most investors, that was probably the closest he came to giving one size fits all advice, he also has recommended Vanguard Balanced Index.
In all fairness to Mr. Buffett, AA was not his driving point. He knows well and good that 90/10 is not good for most investors. He was focused more on his confidence in the S&P 500. In other words, he wanted investors to know that his confidence in the S&P 500 was so high that he, Warren Buffett himself, was putting 90% of whatever he was leaving his Wife in it.
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by rascott » Wed Sep 11, 2019 3:47 pm

The benefits of intl investing since it has become widely available have been much more theoretical than real. Even going back to 1970.... having an intl diversified equity portfolio has done a lot of nothing for the investor. I doubt that changes much.

Even during the "lost decade" that intl proponents use....a US investor would have done much better just holding US SCV rather than Intl for their diversification.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by nedsaid » Wed Sep 11, 2019 4:04 pm

usagi wrote:
Tue Sep 10, 2019 11:04 pm
nedsaid wrote:
Sun Sep 08, 2019 5:52 pm
Most of us are not Billionaires, most of us won't be 90% S&P 500 and 10% Treasuries in our retirement portfolios.
Correct most are not billionaires, but I bet a lot could easily be 90% S&P 500 and 10% Treasuries if not for the orthodoxy around age in bonds, etc preaching to do otherwise. I get that impression by the number of posters who have mentioned SS covers most if not all of their expenses and other details. I really do not think it is at all far fetched. If you have fulfilling modest expense lifestyle and have diligently invest for 20-25 years or more it is readily doable. The issue comes down to lifestyle, income, and savings rate. I'll maintain many more people are in position to do this than most people think and likely don't because they are locked in on the mantra of 70-30, 60-40, 50-50 allocations preached in most responsible investment guides that are aimed at the masses.

I think there are a lot more people quietly living their lives in far greater financial security than people think. If you think about it, it has to be difficult to detect.
If you can accept the volatility of a 90% stock/10% bond portfolio, have at it. I took an 80/20 portfolio into the 2000-2002 bear market and had losses of 32%. A few years later, my 72/28 portfolio had losses of 35%. It was about what I could take in losses. Today, my portfolio is about 61/39. We are in a now decade long bull market, such markets make all of us brave. It takes a bear market to determine one's true risk tolerance. Lots of folks here have forgotten what a bear market feels like. There is an orthodoxy regarding increasing bonds and decreasing stocks as you get closer to retirement, it is there for good reason.
A fool and his money are good for business.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by nedsaid » Wed Sep 11, 2019 4:05 pm

meowcat wrote:
Wed Sep 11, 2019 3:21 pm
nedsaid wrote:
Sun Sep 08, 2019 7:48 pm

I have followed Buffett for years and have learned a lot from him. Not saying that his advice regarding index funds is bad, in fact I agree with it. Most folks here are not going to invest using a 90% stock/10% Treasuries asset allocation. We need asset allocations that are appropriate to our own individual situations, 90/10 is not a one size fits all allocation. Mr. Bogle did say that an allocation of 65% stocks/35% bonds is good for most investors, that was probably the closest he came to giving one size fits all advice, he also has recommended Vanguard Balanced Index.
In all fairness to Mr. Buffett, AA was not his driving point. He knows well and good that 90/10 is not good for most investors. He was focused more on his confidence in the S&P 500. In other words, he wanted investors to know that his confidence in the S&P 500 was so high that he, Warren Buffett himself, was putting 90% of whatever he was leaving his Wife in it.
I do recall that Mr. Buffett has said that he doesn't much like bonds here. The S&P 500 is a perfectly good investment, no argument there. But folks need an asset allocation that fits their situation.
A fool and his money are good for business.

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by willthrill81 » Wed Sep 11, 2019 4:16 pm

nedsaid wrote:
Wed Sep 11, 2019 4:04 pm
usagi wrote:
Tue Sep 10, 2019 11:04 pm
nedsaid wrote:
Sun Sep 08, 2019 5:52 pm
Most of us are not Billionaires, most of us won't be 90% S&P 500 and 10% Treasuries in our retirement portfolios.
Correct most are not billionaires, but I bet a lot could easily be 90% S&P 500 and 10% Treasuries if not for the orthodoxy around age in bonds, etc preaching to do otherwise. I get that impression by the number of posters who have mentioned SS covers most if not all of their expenses and other details. I really do not think it is at all far fetched. If you have fulfilling modest expense lifestyle and have diligently invest for 20-25 years or more it is readily doable. The issue comes down to lifestyle, income, and savings rate. I'll maintain many more people are in position to do this than most people think and likely don't because they are locked in on the mantra of 70-30, 60-40, 50-50 allocations preached in most responsible investment guides that are aimed at the masses.

I think there are a lot more people quietly living their lives in far greater financial security than people think. If you think about it, it has to be difficult to detect.
If you can accept the volatility of a 90% stock/10% bond portfolio, have at it. I took an 80/20 portfolio into the 2000-2002 bear market and had losses of 32%. A few years later, my 72/28 portfolio had losses of 35%. It was about what I could take in losses. Today, my portfolio is about 61/39. We are in a now decade long bull market, such markets make all of us brave. It takes a bear market to determine one's true risk tolerance. Lots of folks here have forgotten what a bear market feels like. There is an orthodoxy regarding increasing bonds and decreasing stocks as you get closer to retirement, it is there for good reason.
That's why I reject any blanket suggestion of an AA for anyone (e.g. Ferri's recent 30/70). Some people can handle 90/10 or 100/0. Others really need 30/70 or something even more conservative. And one's risk tolerance is likely a moving target. Unfortunately, there are no easy answers here, although it seems safe to say that investors should probably underestimate their risk tolerance at least a little.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by usagi » Wed Sep 11, 2019 9:07 pm

nedsaid wrote:
Wed Sep 11, 2019 4:04 pm
If you can accept the volatility of a 90% stock/10% bond portfolio, have at it. I took an 80/20 portfolio into the 2000-2002 bear market and had losses of 32%. A few years later, my 72/28 portfolio had losses of 35%. It was about what I could take in losses. Today, my portfolio is about 61/39. We are in a now decade long bull market, such markets make all of us brave. It takes a bear market to determine one's true risk tolerance. Lots of folks here have forgotten what a bear market feels like. There is an orthodoxy regarding increasing bonds and decreasing stocks as you get closer to retirement, it is there for good reason.
I appreciated your thoughts, I truly do. It is a rather uneasy position we find ourselves in with fixed income interest rates so depressed that committing a substantial portion of your portfolio to them could have very adverse impact (as can eh high equity allocation).

Muddying the waters, thing like this are often on my mind:

"Chinese researchers safely treated a man with leukemia and HIV using gene-edited stem cells"
https://finance.yahoo.com/news/chinese- ... 00310.html

The short of it is it is no longer in the sole realm of theory, we really are on the cusp of being able to resolve some health issue that may have large impact on life expectancy. Add in simple technological advancements that could alert and dispatch medical assistance if you have a heart attack or stoke and some of us may end up living far longer than we anticipated, Meaning, we may need to rethink asset allocation and withdraw rates.

I already made the adjustments I think are necessary in terms of withdraw rate and I am still noodling on asset allocation, but I think I have that figured out.

My honest opinion is your roughly 60-40 allocation is essentially prudent.

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nedsaid
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Re: "Warren Buffett's Investing Plan for His Family: Why It's a Good Plan for Your Family, Too"

Post by nedsaid » Wed Sep 11, 2019 10:56 pm

usagi wrote:
Wed Sep 11, 2019 9:07 pm
nedsaid wrote:
Wed Sep 11, 2019 4:04 pm
If you can accept the volatility of a 90% stock/10% bond portfolio, have at it. I took an 80/20 portfolio into the 2000-2002 bear market and had losses of 32%. A few years later, my 72/28 portfolio had losses of 35%. It was about what I could take in losses. Today, my portfolio is about 61/39. We are in a now decade long bull market, such markets make all of us brave. It takes a bear market to determine one's true risk tolerance. Lots of folks here have forgotten what a bear market feels like. There is an orthodoxy regarding increasing bonds and decreasing stocks as you get closer to retirement, it is there for good reason.
I appreciated your thoughts, I truly do. It is a rather uneasy position we find ourselves in with fixed income interest rates so depressed that committing a substantial portion of your portfolio to them could have very adverse impact (as can eh high equity allocation).

Muddying the waters, thing like this are often on my mind:

"Chinese researchers safely treated a man with leukemia and HIV using gene-edited stem cells"
https://finance.yahoo.com/news/chinese- ... 00310.html

The short of it is it is no longer in the sole realm of theory, we really are on the cusp of being able to resolve some health issue that may have large impact on life expectancy. Add in simple technological advancements that could alert and dispatch medical assistance if you have a heart attack or stoke and some of us may end up living far longer than we anticipated, Meaning, we may need to rethink asset allocation and withdraw rates.

I already made the adjustments I think are necessary in terms of withdraw rate and I am still noodling on asset allocation, but I think I have that figured out.

My honest opinion is your roughly 60-40 allocation is essentially prudent.
I get your point about very low bond yields. One reason I am bit more stock heavy at my age than I should be. Really hard to get excited about 2% yields. My target asset allocation for years has been 60% stocks/40% bonds and I have happily ignored my own target, low interest rates being the culprit. I checked today, and I am about 62% stocks/38% bonds and cash but for years hovered around 70/30. I have been gradually working my stock allocation down, slowly but reluctantly de-risking my portfolio.

Not too many years ago, one could receive 6% yields in bonds and effortlessly collect that without taking equity risk. I remember buying 10 year US Treasury Zero Coupon Bonds at 8%. This made sitting in a balanced portfolio easier. Now that 6% to 8% bond yield has changed to 2% to 3%. In that context, you can understand the interest in the Alternative Investments that Larry Swedroe has been recommending. From what I can see, the Alts have struggled to match the returns of boring old bonds.

So pretty much the answer to lower bond yields might be a higher allocation to stocks. So far the Alts haven't been doing it.
A fool and his money are good for business.

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