Boglehead Podcasts: Volunteers needed to convert the audio into text

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Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by neurosphere » Wed Nov 06, 2019 12:23 pm

Hi all, there is an effort underway to get wonderful podcasts that the John C. Center for Financial Literacy, Bogleheads, and Rick Ferri have and continue to create available in text versions.

You can browse this thread for some prior discussions on this issue.

3 episodes have been completed in a joint effort with me, Barry Barnitz, and asset_chaos. But there's a lot more work to do, not to mention new podcasts come along monthly.

There is already machine-translated text for each podcast (#9 is pending). And those are available on a shared google drive folder. What we need is for a human to listen to a 5 minute excerpt of a given podcast and edit the text and make sure it matches the audio. [note, I do not know if making changes or entering a shared google drive is anonymous or not]

There is a free web-based tool to help, where you can upload the podcast and then use keyboard shortcuts to pause/play and jump forwards and back, as well as adjust the audio speed. But any tool or method you use is just fine.

There is a Google Sheets in that shared folder which shows all the 5-minute segments waiting to be transcribed. The goal is to insert your name in a cell which corresponds to a segment you are working on, so that we don't inadvertently duplicate efforts.

Here is an example of a finished product, Episode #001 with Jack Bogle himself. It's an amazing interview.

We figure that 5 minute chunks are manageable, and might take 10-25 minutes of time, depending on your typing skills. :D

Any and all suggestions/contributions are welcome!

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Wed Nov 06, 2019 7:35 pm

Hi:

It is not much, but I have have posted the finished formatted podcast introductions from each of the ten available raw transcriptions that have yet to be transcribed on the Bogle Center posts. We have three finished transcripts (1,5 and 12), and the raw transcript from episode no. nine is not yet available.

The completed introductions (opening 1.5 to 2.5 minutes)

1. Episode 002
2. Episode 003
3. Episode 004
4. Episode 006
5. Episode 007
6. Episode 008
7. Episode 010
8. Episode 011
9. Episode 013
10. Episode 014
Last edited by Barry Barnitz on Wed Nov 06, 2019 10:54 pm, edited 1 time in total.
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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by asset_chaos » Wed Nov 06, 2019 8:40 pm

Thanks to a suggestion from Pondering about the otter transcription site, a pretty good machine transcription of episode 9 is also now in the shared drive. I did the human editing for the introduction and closing segments (first couple of minutes and last minute).
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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Fri Nov 08, 2019 12:00 am

Hi:

Episode 11 with Mel Lindauer is ready for corrective editing by audio comparison to the written text. Here is the google spreadsheet Episode 011: Mel Lindauer.

The introduction, shaded in blue, has already been published.

regards
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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by asset_chaos » Fri Nov 08, 2019 6:23 am

The machine transcription of November's episode 15 is now in the shared drive. I did the human editing of the beginning and ending boilerplate and Rick's introduction of the guest.
Regards, | | Guy

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Fri Nov 08, 2019 11:55 am

Here is the remainder of the first five minutes of the interview, after the introduction, for Episode 15. Please check for accuracy:
Rick Ferri: I'm so glad to have you on the show I get so many questions about exchange-traded funds versus mutual funds: What should I buy ? Should I buy an ETF? Should I buy a mutual fund? And I'm hopefully going to be able to answer a lot of those questions today but let's start out with you. How did you get involved in the ETF business?

Eric Balchunas: Yeah good question. I was an economics major and a journalism major, so I did a couple things out of college. One was I work at InstitutionalI investor, the magazine. I was in the newsletter division at first, covered derivatives but then I got moved over to covering funds and a newsletter called Fund Action, which is still around today. Actually ironically, now they'll call me to get a quote. So come full-circle okay, I wrote for them.

Rick Ferri: What was that. When did you start?

Eric Balchunas: Mid to late ‘90s. I remember the Vanguard PR guy, John Worth. He actually sent me recently an email I wrote him in like ‘97 asking him for information on some Vanguard fund which I didn't recall, but at the time the big companies were T Rowe Price. Fidelity like Vanguard was a little more down the list. Indexing was still a minor player in the funds business but I certainly remember covering them a little bit. So then I went off, worked at, did some third-party marketing, a couple different jobs. But I found a job, Bloomberg in year 2000 and I instantly loved it. So I was working in the public relations department for about two years. But then right around 9/11, a few months after that, I moved back out of Manhattan to South Jersey and I didn't want to make that commute to New York, so I transferred to the data office and I took a job there. And the closest thing that would be applicable for me was fund data, so I worked in the data. After the funds data area of Bloomberg for fourteen years and right in the middle of that time, I got assigned ETFS in about 2006.

I immediately saw they were going to be a big deal and you know, after you talked to some people, go to a conference a--to… you're like, yeah, this is actually, this product makes a lot of sense. And you sort of see that if you know mutual funds and closed-end funds you sort of see the ETs is taking a few evolutionary steps forward at once, not just one little step but a few. And so I just sort of made myself the expert on ETFs around that time. Started going to conferences and at the same time building out the DES page for ETs to make them more ETFs, add fields like index rating methodology and so forth. So I was like the ETF data guy for many years.

And then I started writing a little bit because I had that background and the research group just took a notice in some of the posts I would do for the--our website, and asked me to join research and head up the ETF research for Bloomberg Intelligence which is the research wing of Bloomberg. And I've been doing that for about three years now, and managed a team of four people who now write ETF research. Although we'll do mutual funds a little bit; will do hedge funds even; and will work in some of the global scene as well, but largely we stick to US ETs.

Rick Ferri: Then you also do a television program once a week.

Eric Balchunas: Yeah, so when I was trying to become the ETF guy within Bloomberg in the late 2010- 2012- 2014. Look around that time I felt there was vacuums in ETF coverage all over the company, whether its sales, television, radio. And so I just sort of tried to forge through and make myself available and sort of doing a couple hits here and there for televisions. Found myself a weekly segment on Friday at 4:30 p.m. which is like 3:00 in the morning for financial television but still other beggars can't be choosers.
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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Sat Nov 09, 2019 12:58 pm

Here is Episode 011 with Mel Lindauer. There are segments around the ten to thirteen minute mark, that need transcription, and speaker attribution around the thirty to thirty three minute mark needs affirmation. Audio verification is also required. Unclear guesses are highlighted in red. Google docs. link: Episode 011 Mel Lindauer.

Episode 011-Mel Lindauer, host Rick Ferri

[Music]
[Applause]
[Music]

Rick Ferri: Welcome to the eleventh episode of Bogleheads on Investing. Today we have special guest one of the founders of the Bogleheads, Mel Lindauer. I'll be talking with Mel about the incredible growth of the Bogleheads over the years in this country and abroad.

00:29 [Music]
00:33 [Applause]
00:33 [Music]

Rick Ferri: Hi everyone. My name is Rick Ferri and I'm the host of Bogleheads on Investing. This episode, as with all episodes, are brought to you by the John C. Bogle Center for Financial Literacy a 501(c)( 3) corporation.

Today we'll be talking with Mel Lindauer. Mel is one of the founders of the Bogleheads. The Bogleheads are a global community of individual investors who helped each other through forums, the incredibly in-depth Bogleheads wiki, there is this podcast, local meetings, national meetings. It's a global phenomena that just keeps getting better.

So let me introduce the Prince of the Bogleheads, Mel Lindauer.
Welcome Mel.

Mel Lindauer: Well it's great to be with you Rick. I love your podcast. Thanks for all you're doing. It's nice to be with you.

Rick Ferri: Well thank you for being on the program Mel. We're really excited to have you today. You were Boglehead number two. Boglehead number one was Taylor Larimore who was a good friend of Jack Bogle and started the Bogleheads many years ago on the Morningstar forum, but before we get to the history of the Bogleheads, could you talk a little bit about your background. I mean you didn't come from the investment industry.

Mel Lindauer: No I didn't. I ran a graphic art business in the Philadelphia area for thirty years. In 1968 started investing with a [colleague] friend who was a broker and little did I know that the program he put me in was 50% Commission. And they claimed that by paying a 50% up frontthat you-- that was going to entice you to stay into the program.

Rick Ferri: So Mel, I remember that back when I was in the military they would-- those 50% plans were called cafeteria plans. Do you remember that phrase.

Mel Lindauer: Oh yes, I remember that well and in our later days we fought against that to try to get them out of the military because they were taking advantage of our service people and fortunately I think that we succeeded. We raised such a ruckus, I think Congress gotten, our Senate, got involved and I think they're no longer allowed on military bases if I, if I'm correct.

Rick Ferri: I think you are but go ahead and continue with your background.

Mel Lindauer: I started investing in the late 60s with that program but when I, my business started doing well I thought that I should start learning more about investing. So I started reading a lot of investing books, magazines,and really became a student of investing. So I started helping friends and relatives who asked for my help because I knew something about investing and they didn't. And eventually when I retired in 1997, I turned the business over to my sons. I was looking for some kind of charity work that I could do volunteer work and that's how I got involved with the Morningstar forum. I figured that I could help out there by helping other people avoid all the mistakes that I made in my early years of investing.The Morningstar diehards forum was the first bogleheads forum.

Rick Ferri: [Correction]: at first everything was on Morningstar. It wasn't even called Bogleheads back then was it.

Mel Lindauer:
That's right because the people used to call us other forum members--there were a lot of forums on Morningstar--and they used to make fun of us and call us Bogleheads and it was a derogatory term back then we wore as a badge of honor but Morningstar thought [Center was er] derogatory term. They didn't want to upset Jack by calling us the Bogleheads so they called us the Vanguard Diehards and the subtitle of our forum was Bogleheads Unite Talk About Your Favorite Fund Company. We did not become the Bogleheads officially until we left Morningstar in 2007 and started Bogleheads org forum

Rick Ferri: Could you just explain for just a few minutes, for people who are not familiar with what the Bogleheads are, exactly what the organization is, and who the people are that are behind it. How big it is. I mean how much it's grown.

Mel Lindauer: Well the numbers are just phenomenal. We get something like seventy to ninety thousand unique visitors a day on the forum. The number of hits are in the millions, so it has grown from a small organization to a very large organization. We have about close to a hundred thousand registered members and any one time on the forum we have about ten guests for each registered form member that's online. We get a couple thousand posts a day. It's just grown phenomenally. But basically the Bogleheads is an organization of people who volunteer to help other investors, and we have no vested interest. We don't sell anything. We have no ads. None of the board members, none of the officers get paid a penny either. It's all volunteer work and I think that's very important. So basically this is funded by a nonprofit organization and the way expenses are paid is by donations.

Rick Ferri: So how would someone find out how to donate.

Mel Lindauer: Well they would donate to the John C. Bogle Center for Financial Literacy and the address is on the forum. They can donate directly to the forum. It’s not tax deductible. If they donate to the John C. Bogle Center for Financial Literacy and then we donate as part of our mission to support the forum it is a charitable deduction.

Rick Ferri: Who was it who came up with the idea of starting a forum that concentrated on low fee investing and at that time at least on Vanguard funds.

Mel Lindauer: The initial impetus for the Bogleheads on the Morningstar forum was Taylor Larimore The bogleheads had used to post on other forums, but they kept asking for their own forum and that is why Morningstar called our group the Diehards because we kept insisting on
getting our own forum. And that forum soon became the number one forum, the most popular forum on Morningstar.The number of posts on that were greater than all of the other forums combined. So there was a really a thing that was led by Taylor. Taylor is just one unique individual. And Taylor and I got connected fairly early in the beginning.

I joined shortly after the diehards was started, but I just wanted to lay in the background and see what was going on,and who was who, and who knew what they were talking about and so forth. And there were questions about annuities that nobody answered, so I thought well I know about annuities, so I'll answer the questions. So I started answering questions about annuities. And then Taylor got in touch with me and said now I really like the stuff you're doing. Why don't we work together. And that's how Taylor and I ended up working together.

Rick Ferri: So you said you know Taylor is one unique individual. What did you mean?

Mel Lindauer: Yes, Taylor is a World War II vet. He was in the Battle of the Bulge as a paratrooper and he and I--as I'm a Marine; he's a paratrooper-- we joke around a lot. But we really respect each other and he is the kind of guy that I would want to have my back anywhere. He is a real gentleman, an ace. Jack Bogle called him the king of the bogleheads and it's a well-deserved title. I told Taylor many times I call me the Prince of the Bogleheads and I told Taylor I have no desire, this prince has no desire to be king. So Taylor has to stick around as long as I'm around.

Rick Ferri: Well one of the things that you started was an annual Bogleheads reunion.

Mel Lindauer: Yeah, that was, that was kind of a strange occurrence. I made a post on “In Thanksgiving 1999” on the Vanguard Diehards Morningstar forum, and I listed all the things I was thankful for: my wife, my kids. and so forth and good fortune, and a lot of people did the same thing. Everybody was chiming in and we felt like we were a family. The dialogues, we were, even though we didn't know each other, we just felt like a family. And Taylor chimed in and said basically the same thing that most of us said we were thankful for, our wife and the kids and how lucky we'd been in life and so forth. But at the end, Taylor said,”and I'm especially thankful to Jack Bogle for founding Vanguard because I live in the house that Jack built. He calls his 35th floor condo overlooking Biscayne Bay the house of Jack [boom].

Jack Bogle saw that post. Jack used to follow our forum on a somewhat regular basis. He saw that post [and retied theTaylor] and asked Taylor if there was any interest in possibly getting together. And you know for Taylor and I this was like an invitation to the White House or an audience with the Pope.

[10:49 for somebody objects Thatcher do ask if
10:52 we would like to get together with him]


So Taylor knew that I was a snowbird in Florida in the winter and he contacted me and said Jack is going to be the keynote speaker at the Miami Herald Making Money seminar. Do you think this would be a good opportunity for us to get together with him like he mentioned. So I contacted the Miami Herald people and asked him if they could arrange something a room for some of us to get together with Jack at lunch for lunch, for maybe an hour so and they kind of shoot us away as groupies and said that they had Jack too busy. He didn't have time to get together with us.

So I called Jack's office and told them that hey said that we couldn't get together. And Jack said “well I'll go wherever you want”.So now we decide to have the get-together all away from the Miami Herald Making Money seminar and the Miami Herald people came patting hand and said Mel is there any chance we could send a reporter and a photographer to cover your event with Jack. So we hired a chef, a cook, and a maid and had a get together with Jack with about 22 or so Bogleheads. And it was a memorable evening. Jack sat after dinner. Jack's sitting in the living room around, we were all around, and asking questions and so forth and it was just a really a night to remember.

So this all occurred in Taylor's condo and I had the good fortune of driving Jack from the hotel to Taylor's and then driving back after the event was over. And you talked about being happy, being petrified of what I was going to say to this guy for a half hour or forty minutes that took to get to Taylor's house, and I can tell you that Jack was the most gentle easy going, unpretentious guy. I knew he played golf and I mentioned golf and we started talking about golf. But there was never a pregnant pause. I mean Jack was just so easy to talk to.What a remarkable guy and I had such a hard time calling him Jack. He kept telling me to call him Jack. He likes everybody that called him Jack but he was Mr. Bogle and it took a long, long time for me to be able to call him Jack.

Rick Ferri: Well that would be understandable for two reasons. Number one: who Jack Bogle was. But number two: you are in that culture, right I mean tell Taylor tells me that you're a Kentucky Colonel. Is that correct?

Mel Lindauer: That's it. Yeah that's correct. I was honored by the governor of Kentucky some time ago. I think was in 1981, as a Kentucky Colonel, and that's my license my Florida license plate is KY [ gol Kentucky Colonel]. I am very proud of being a Kentucky Colonel and proud of my heritage and coming from Kentucky. But yes you're right. We did say “yes sir, no sir” first the Marine Corps. Marine Corps reinforced. So the very first Boglehead reunion took place in Taylor Larimore’s condo in Florida in 2000.

But these reunions have just grown substantially over twenty years and now, even what's going on now, even though Jack has passed. Reunion still seems to continue to grow. We thought this would be a one time off. You know Jack had offered to get together with us and so we had our
reunion and we thought that was the end of it but Jack posted using Taylor's computer that night talking about what a great night it was and how he loved being with his Bogleheads and so forth.

And the next thing you know I got a request for Mel when's the next month. Well I had no idea that there was going to be more than one. But well not another. Is it yeah, so I was I was approached by someone who I didn't know from the forum. But he had inherited a farm in Pennsylvania near Vanguard so he offered his farm and he wanted to host the Bogleheads for the second reunion. So at that time when he got in touch with me, I told him I'm leaving for Florida. I'll be gone for three months. When I get back we'll get together and we'll talk about it.

After I got back from Florida I called and they told me that he had died while I was in Florida so I said “oh well just forget about it” and his family would not let it go They said they wanted to do it in his honor because that's what he wanted. So our second reunion was at his farm in Pennsylvania near Vanguard. And several things happened there. Jack took us on a tour of Vanguard, was our Vanguard tour director. And Jason Zweig covered that for Money magazine He was with Money magazine at that time and ended up, we ended up, with a six or eight page spread in Money Magazine and titled “Here Come the Bogleheads” and it's still available online. And that was the start of what continued to be or, what turned out to be, an annual or almost annual event.

We had our next one in conjunction with the Morningstar conference in Chicago.The next one was in conjunction with the CFA Institute. We had another one with the money show. So all the ones we did initially other than the first two were done in conjunction with shows where Jack was appearing.

In 2005 and we couldn't find anywhere that Jack appearing so then he got in touch with me and said “Mel when's our next conference” and I said, what we're trying to find something where you're speaking and tie-in with that, and that's when Jack said “I don't care about where I'm speaking I'll go wherever you guys want me” and that was that. We broke away from the shows and started doing our own shows. We went to DC. Then we went to San Diego and then after that we went to Dallas Fort Worth, and Dallas Fort Worth was a really touching event because Jack was in the hospital. Jack had made every one of our events, and he told us that he wanted to speak to the crowd so we put a phone line in and wired it into the ballroom and Jack called in at the appointed time. Don't actually how you got a phone in the intensive care in the hospital but anyway Jack called in and he talked to us for about 15 minutes so that was the only one that Jack missed .

But being concerned for his health, I thought that we would keep them in Philadelphia so Jack didn't have to travel and so all the conferences since then had been held in Philadelphia where Jack has not had to go cross-country or travel at all other than from his home.

Rick Ferri: So may I understand that getting to one of these conferences is a pretty hot ticket in that there's a limited seating and in order to go to the conference as soon as the invitation goes out on the internet, are on the Bogleheads forum they have to almost immediately reserve their spot because these tickets are gone within a day.

Mel Lindauer: And there's a reason for that. We started out the first conference with about 20 people and we liked the intimacy, so I kept trying to enlarge the crowd a little bit at a time to find out if we were going to lose that intimate feeling, where people got a chance to talk to Jack and the authors that were there and so forth. So we went from 20 to somewhere around 40 for the second one, maybe 60 for the third, and finally we got to 200. And at that point I felt that anything larger than that we would lose the personal touch, so we we now sell about 225 tickets and they go, sometimes they've gone as in as little as six hours. This year we sold out again despite Jack's-- the fact that Jack is not going to be there-- we still sold out in less than one day and we have a waiting list for people who are hoping that they can get in. But we feel that the 200, somewhere around 200, is the ideal number. Because people got to talk to Jack. I got to talk to people like you and Bill Bernstein and all of the authors and the people who they have whose books they've read and it just works out that they get a chance to meet them and talk to them. And we feel that that's one of the real important parts of the event. I actually think I could sell out Yankee Stadium but we don't want that kind of event like Warren Buffett's event where you have thousands and thousands and tens of thousands of people there. But I just like the intimate feeling and everybody agreed that that was the ideal setup so yes the tickets are scarce as hen’s teeth.

Rick Ferri: But one thing that you did set up several years ago was local chapters so that people could go locally and have the same intimate feeling and talk about a lot of the same topics, which by the way I wanted to clarify, the Bogleheads is not about Vanguard. I mean Jack Bogle did, was the founder of Vanguard, but the Bogleheads is not a Vanguard fan club, exposes the virtues of Jack Bogle, not necessarily Vanguard.

Mel Lindauer: Well Vanguard says we're their biggest fans and their biggest critics and that's probably true. The reason we like Vanguard and mention Vanguard a lot is because of the low cost and their indexing and so forth, and their corporate structure which is the way it's set up is unique.But we have mentioned and we feel that there are certainly other places especially when people don't have access to Vanguard; there are other companies that we respect. But the main thing we look for is low cost because cost matters and of course we are fans of indexing.But there are other companies and we mentioned them in some of our books so and and if Vanguard does something wrong they're going to hear about it and they're going to read about it on the bogleheads org. forum. So we are friends, we probably drive, driven tons and tons and billions possibly of money to Vanguard simply because we were getting people out of bad situations into good situations, but we also recommend Fidelity and some of the other places where they have good choices available. I think that in many ways Vanguard was the leader and it's really to drive down cost everywhere. But it's become in many ways a more of a level playing field where you have indexing products at Schwab, Fidelity, you've got ETF companies like iShares. Everyone has come way down in price and access to extremely low-cost index investing and of course, Vanguard was the leader, driving that.

Rick Ferri: I agree, a lot of people don't have access to Vanguard but there are a lot of good funds and a lot of good companies everywhere now because it has become much more of a level playing field exactly and I credit Jack and our message has gotten across. I'm sure that we had some impact on that--Bogleheads forums have-- so it's good. It's good for all investors whether they are at Vanguard or Fidelity or Schwab or wherever they are, it's good that they're focusing on costs. So we feel that we might have had some little, played a little part in that you know that was Jack's mission and our. What we tried to do is carry on Jack's mission and spread the word, so helping to spread the word. Let's talk about local chapters. You know a lot of people can't make it to the annual conference or they can't get a ticket to the annual conference, but there are local chapters now, all over the country effect even all over the world now. Chapters of beginners.

Mel Lindauer: Yeah, that's one of the things that I'm proudest of is setting these chapters up. We have close to a hundred now, and we have them in foreign countries. I think we have six maybe six or seven foreign chapters and we have chapters all around the country and these chapters meet on their own and they do basically what we do in the conference they get together and they talk about things that they're interested in. We do not dictate their meeting frequency or their agendas or anything.They're kind of on their own, but usually I try to pick a coordinator from the forum and the members come from the forum so it's an extension of the forum. But where people to meet in person and talk about things that are important to them and find out that there are other people just like them in in Sioux Falls Idaho or you know wherever it happens to be. I think it's really great because it also brings in other people, it brings spouses in a lot of the conferences, a lot of the Bogleheads local chapter meetings. Couples come and it brings maybe a spouse in that's not really interested in learning about investing but it's a social event too and they go and they pick up, say, oh this is interesting. So I think it's a great extension of our forum and our conferences and it's one of the things that I am most satisfied in the way it turned out.

Rick Ferri: And there are even local chapters overseas in several countries and I understand that some of these countries are even starting their own Bogleheads conferences now.

Mel Lindauer: Yes. And some of them they send me information on these and some of these things look like they are bigger than our conferences because they don't put a limit on it and I've seen some of these things and stadium seating that looks like it goes forever. So the United Arab Emirates in Dubai but we have been. And in one of the conferences when I was doing book signings a guy came up to me and handed me a book and I didn't recognize the book and it turns out that he was giving me the book. He was the chapter leader in Taiwan. So yeah, they, I mean we've had people from some of the other countries come over some of the local chapters come to our conferences. So it's a great thing. I really think that Taylor and I can be really proud of the little seed we planted and the way it's grown and just so many people that are getting involved like you and Bill Bernstein and and all of the other people.Jason has been a good friend of the Bogleheads. He's written so many great columns but not a Jonathan Clements has always been a Bogleheads favorite, writing his columns in the Wall Street Journal, and Christine Benz too from Morningstar. It's been so great to see all of these people who have large readerships spreading the message too.

Rick Ferri: So Mel, you mentioned books several times. Can you talk about the different Boglehead books and you talked about the authors. Can you're talking about the authors?

Mel Lindauer: Initially I got a call and the guy identified himself as Bill Fallone from Wiley Publishing and he said I'd like you to do a book. And I'm thinking, I know there are hundreds of thousands of people who’ve written books and can't get them published and I get a guy calling me out of the blue asking me to write a book. I hung up on him. I thought it was a hoax. So he wouldn't take no for an answer. He kept calling back and one time he called back and he mentioned, he said. “don't hang up, Taylor Larimore” and what when he said Taylor I figured well he must know something. Anyway it was Bill Fallone from Wiley Publishing, a legitimate publisher who wanted us to do a book. And I was leery of doing a book because I told him there are tons and tons of books out there written by people who are much much smarter than we are, and why would you want somebody like us to write a book. I said the only way I will write a book is if we can assume that people know nothing, and we are going to write at that level because books like Bill Bernstein's first book with all the math in it, I said “it's a brilliant book, he's a great guy but if people can't understand it, they just put the book down, their eyes glaze over, it goes right over their head and the book is not useful". So there are plenty of those kinds of books out there, for the people who want the high end. I said the only way I would consider doing it would be if we could write at a level assume people knew nothing. So they agreed to to do the book. We brought Michel LaBeouf in as a co-author, and the three of us did the book. Well the book was successful in the US, and it started being published in foreign languages. And I was getting books showing up in a box on my on my porch that I didn't recognize and it turned out they were the foreign version. So the book has been very successful and it's been printed on a number of different languages and hopefully our message, Jack Bogle's message, is getting spread around the world. One of the things that I'm most proud of is when I read the reviews on Amazon where people say that I could understand the book, they didn't talk down to me. Which means we were on target because that's exactly the audience that we wanted. People who needed guidance and didn't feel that this was rocket science. So the first Bogleheads book is still out there; it's now in a second printing, if I'm not mistaken, or its second edition.

???? 30:29 There was another book and I know this, wasn't there was another book because I was involved in the [youth book].

????? 30:37 You certainly were you and the queen of the Bogleheads, Laura, and Taylor and I thought this was the perfect opportunity to display the talents of the people who were on the Bogleheads Forum. So what we did is created the outline and we had people volunteer to write a chapter. Sometimes it was two or three people worked together on a chapter where they had expertise. So that book is a showcase of the talents that are on the Bogleheads Forum. Every chapter in there was written by people who are on the forum and give free advice. Our job was to put it all together and make it read like one person wrote it but each person got credit for the chapters they wrote in the chapters. So it was a it was a community effort and I'm very proud of the way that book turned out.

Rick Ferri: So just to clarify more for me if you will the title of the first book and then the title of the second book.

Mel Lindauer: The first book was The Bogleheads Guide to Investing and the second book was the Bogleheads Guide to Retirement Planning. There's a third book now which Taylor put out which is The Bogleheads Guide to the Three Fund Portfolio. It was his lifelong effort if you will.

Rick Ferri: So let's continue to move on and talk about how the Bogleheads continue to expand in many different directions and one which is incredibly impressive is the amount of information and content that is available on the Bogleheads wiki site.

Mel Lindauer: Oh yeah.That's a treasure trove of information and it is again a joint effort by people knowledgeable. Bogleheads who volunteer to write the articles, to edit the articles, to keep them up to date, and this will live live on long, long after we're all gone. And hopefully people are making use of it. We're getting lots of reads and hits on it and it just continues to expand and more and more people are becoming weekly editors and it's just an extension, if you will, of Bogleheads Guide to Retirement Planning, which showcased a number of authors.This is showcasing the wealth of knowledge that's available on the boards. For them on a regular everyday basis. Not only does it have a retirement planning information but there's 529 plans; there's all kinds of information about the tax efficiency of various Vanguard funds and other ETFs. Now just you name it, if you're looking for good quality unbiased uncommercial information about low-cost investing, I mean the Boglehead wiki is just a phenomenal resource. I just can't get over how much information is there, and it's free, and you can read it at your pace.

The other, there's another thing there too.If you want to see the history of the Bogleheads conferences there's videotapes on there. You can go right through the history of all the conferences and so forth. In the early days we had transcripts of what happened. What we said ,what Jack talked about, the Q and A's and so forth. So there's a wealth of information there both from a historical standpoint going back to the first Bogleheads conference up through today's. So you could spend hours and hours and hours on there and never ever begin to touch all the information. It's available.They're highly recommend it to people who have time to read and want to study and sometimes you have to read before you even know what the questions are. So you can read some of that information and then you can go on the forum and ask a question about it. And you might be getting an answer from the same person who wrote the wiki article.

I also want to add that it's not only in the U.S. Now the wiki has extended internationally. There's a Canadian webring, there's other countries, now they're adding content to the wiki. It's just phenomenal. We don't have a Spanish forum and we have a United Arab Emirates forum so these are sub forums now on our forum where people come on Bogleheads.org from the United Arab Emirates and they talk to each other. Some people who are in the US. wanting to go to the Arab Emirates, they're learning about investing there. So there are subforums on our main forum for Spain and Canada and the United Arab Emirates now. So yes, our reach is international both in the chapters but also on the main forum.

Rick Ferri: Now I'd also like to add that I had guests from the UK on the Bogleheads forum last month and Robin Powell from the UK is interested in starting a UK forum on the Bogleheads.So hopefully we can connect that together because there's a lot of people in the UK now especially with all the changes of the laws over there where indexing and low cost investing now is just starting to become very popular. So this Bogleheads phenomenon, the Bogleheads wiki, the Bogleheads org site, the conferences, the local chapters is just, just growing and growing. I do want to make one plug for something that's on the wiki that's called “Taylor's gems” which Taylor has spent years collecting, reading books and maybe you could comment on that because just an incredible collection that Taylor has put together.

Mel Lindauer: Taylor used to go to the library, I think it was every Saturday and read books and he has read so many books over the years and he picks out key elements, things that strike him as being important, and he makes notes of these and they're called “Taylor's gems” and each book that he reads he might end up with 20 or 30 or even 50 of Taylor's gems and when he posts these on the forum there, they're available now for everybody and basically this is Taylor's summary of whatever book it was read as if you want to get the key elements of any particular book all you have to do is look for Taylor's gems and you'll find something that really strikes your interest. Then you go get the book. I was just on the wiki site and there's lists of literally dozens and dozens and dozens and dozens of investment books and finance books for individual investors. And next to it are Taylor's gems so if you want to just read a little bit about what the book is about you can just click on Taylor's gems and you can read because he's already read it. If it's out there, he's read it and he's taken notes.

Yeah and he's putting them up there on the bogleheads.org. forum and also the people who are putting up content for the wiki have taken his gems and have put them on the wiki and, by the way, the transcripts from these podcasts that I'm doing are also now being put up on the wiki. So everything's up there, these are things that are going to be available for people long after we're gone and I'm so thrilled to see all this happening and your podcasts are, you know, that's that's today. Today people want to listen to podcasts. and it's great. I mean you're doing a super job and I'm really thankful for you stepping up and doing this.

Rick Ferri: It's just another tool in our tool belt of educating investors. If it's people helping people. So Mel, just be very clear, the Bogleheads are a non-commercial site and there's no one getting paid, and also a lot of this is part of the nonprofit organization, so could you talk about those two things.

Mel Lindauer:
Yeah ,the the Bogleheads forum. No one gets paid to for giving advice. No one gets paid for commercials. No one paid. No one in the Bogleheads organization makes any money. No one is paid anything. The same goes true the same thing is true for the John C. Bogle board with Center for Financial Literacy. It's a non-profit 501 (c)(3) corporation approved by the IRS. We can take donations and we use donations for to help support the forum and for educational purposes to try to spread the word any way we can. And also the Bogle Center puts on the annual conferences.

Rick Ferri: Well you've done a fabulous job. You and Taylor have done a fabulous job getting the Bogleheads up and running and just pushing this thing along for twenty years. You're to be commended.

Mel Lindauer: It's a crusade that Jack started and it's turned into a freight train that just keeps on picking up boxcars and moving faster and faster down the track. In the twenty plus years I've been involved in it went from a really small thing to what I feel now is something that will carry on long after I'm gone. And you know we've got people like you and and others that are spreading the message.

Rick Ferri: And hopefully you guys will be and on after we're going but you're gonna outlive me Mel so enough to worry about that all right what what I am hope my goal is.

Mel Lindauer: Rick I know you're a pickleball player and you're a high-ranked pickleball player. Than I am however I'm pretty good for my age and I can hold my own and there's not many guys my age that can keep up with me. My goal is to be playing pickleball in a hundred. Well and and I'm doing it I'm doing everything I can to stay in shape I play pickleball a couple of hours a day I walk four miles on the beach and I'm doing all I can to reach my goal .I told Taylor, said “Taylor I got a… I'll make a deal with you. I'll come to your hundred if you come to my hundred a. Taylor, of course we have to clarify, Taylor is 95 or 96 years old .

Rick Ferri: Yeah Mel, I really appreciate the time today that you've taken and what you've done to help investors educate themselves and avoid all the biases that take place out there all the noise that happens out there and thank you for everything you've done for continuing to spread the word and I know you're going to be doing this for a long, long time .

Mel Lindauer: Well Rick, it's been great being with you and I want to thank you for your service and for everything you've done for the Bogleheads. You’re an important part, and I'm looking forward to seeing you in October in Philly.

Rick Ferri: Thank You Mel. This concludes the eleventh episode of Bogleheads on Investing .I'm your host Rick Ferri. Join us each month to hear a new special guest. In the meantime visit Bogleheads.org and the Bogleheads wiki, participate in the forum and help others find the forum. Thanks for listening.

[Applause]
[Music]
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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by neurosphere » Sun Nov 10, 2019 10:30 am

(duplicate)
Last edited by neurosphere on Sun Nov 10, 2019 10:31 am, edited 1 time in total.

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by neurosphere » Sun Nov 10, 2019 10:30 am

Barry Barnitz wrote:
Sat Nov 09, 2019 12:58 pm
Here is Episode 011 with Mel Lindauer. There are segments around the ten to thirteen minute mark, that need transcription, and speaker attribution around the thirty to thirty three minute mark needs affirmation. Audio verification is also required.
Thanks Barry. I just went through the entire text with the audio and fixed errors, attributions, etc. I pasted the draft in the placeholder page for the transcript on the Boglecenter.net site. It should be ready to officially publish!

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Sun Nov 10, 2019 1:30 pm

Hi:

Thanks! I have posted the transcript and have linked it on all appropriate pages. Four down, eleven to go.

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Additional administrative tasks: Financial Page affiliate blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; Wiki Bogleheads® España.

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Sun Nov 10, 2019 6:22 pm

Hi:

Here is a first go at a transcription of Episode 004 with Christine Benz. There are two small passages that I cannot make sense of, and there are a number of words that I cannot decipher. These are marked in red. Also there are a few places where I am unsure how to attribute the speaker. These are marked by question marks. I also may have made some errors in attribution. Recall I do not have audio access, so this needs an audio check.

Episode 004 with Christine Benz

[Music]
[Applause]
[Music]
[Applause] [Music]

Rick Ferri: Welcome everyone to the fourth edition Bogleheads on Investing. In today's episode we'll be speaking with Christine Benz of Morningstar. Christine is a certified financial planner and is the director of personal finance at Morningstar.

[Music]
[Applause]
[Music]

Rick Ferri: Hello everyone my name is Rick Ferri. I am the host of Bogleheads on Investing this podcast is brought to you by the John C Bogle Center for Financial Literacy a 501(c)(3) corporation. Today our special guest is Christine Benz who holds a Certified Financial Planner certificate and is the director of personal finance at Morningstar. Christine has been with Morningstar for over twenty five years. She started as an analyst and an editor. She serves as the director of Morningstar's mutual fund analysis and is the author of several books. So with no further ado let's get to Christine. Today we have with us Christine Benz who is a Bogleheads favorite, and I want to welcome you to our podcast Christine. Thank you for being on the show.

Christine Benz: Well Rick, it's my pleasure and it's my pleasure to have gotten to know you through the great Bogleheads organization. Great thanks.

Rick Ferri: I have a lot of questions for you today and I'm looking toward you to be my go-to person for what to do year-end 2018. There's been a big tax law change that took place that affected a lot of things we do in 2018. The first thing I'd like you to do, if you could, is talk a little bit about the tax law changes. How it affects investors and then what should we be doing this year in tax planning, based on these tax law changes.

Christine Benz: Yeah all good questions.There is a lot that is different about the tax laws for 2018 and beyond.The biggie I think probably affecting most investors is that many fewer of us will be itemizing our deductions than was the case in the past because we have a higher standard deduction. So if you're a single taxpayer single filer your standard deduction is 12,000 for 2018. It's 24,000 for married couples filing jointly so that means that your itemized deductions may not exceed that standard deduction. So it feels a little weird you know if you've been in the habit of making charitable contributions as my husband and I have over the years. We've always got this file on our desk whether we write a check or donate something to Goodwill we put some supporting documentation in that file.Well it's kind of weird knowing that our tax advisor has told us that we probably will be standard deduction people this year that we're not necessarily having to keep that paperwork. So that's a really big thing and a big change. You have heard it mainly in the context of charitable contribution.

Rick Ferri: I think that's true because I've done the same thing. I've looked at my taxes for 2018 and I've said I'm gonna be doing standard deduction. I know I have a small mortgage payment on my home. You know I make charitable contributions but it's not going to add up to $24,000. My medical expenses, because I'm a military retiree, pretty much paid for. So way I look at, you know, will I even get to $24,000 with the property tax on my home and such and the answer's no; so I've stopped keeping track of charitable contributions as well I go to Salvation Army with a box of things and they say to me do you want to receive and now I say no.

Christine Benz: I can't stop saying yes for some reason and I'm still keeping them but I think it's just sort of I just so anchored on the ways of doing things. Another baking related topic is that there's now this cap on state and local tax deductions which includes the property tax. So if you were in the past in excess of $10,000 in all of those deductions, when you can deduct them now there's a $10,000 cap on how much you can deduct in state and local taxes, including property taxes. So that’s kind of a blow for folks like me in a state where we do have, or certainly in an urban area where we have very high property taxes. Those will be capped at $10,000 so that'll put a lot more folks into that standard deduction camp as well.

Rick Ferri: So aside from deductions, I mean what other things should we be thinking about when it comes to year-end tax plan.

Christine Benz: Well one thing I would point out before we leave this whole idea of deductions is seniors who are taking required minimum distributions from their IRAs have a nice way of still being able to get a tax benefit from charitable contributions and that's by using what's called a qualified charitable deduction or QCD. And the basic idea there is that you send a portion of your required minimum distribution directly to the charity of your choice, and I always advise people to have their investment provider, whether it's Vanguard or Schwab, whatever, work directly with the charity of their choice or the charities. It doesn't need to be just one to enact this qualified charitable distribution.

But the beauty of that strategy is that the amount that you steer to charity through this QCD; it doesn't affect your adjusted gross income. So it's as if you never took the income and the beauty of lowering your adjusted gross income is that you are eligible for more credits and tax deductions than you otherwise would be. So it's very advantageous even if you're not a high roller in terms of making charitable contributions. Even if you're just, you know, making a five hundred dollar contribution per year or if you're a very large contributor, send it through that QCD if you're subject to RMB. So that's one point I would make on that front.

Rick Ferri: Let me get some clarification on that because I've always been a little bit confused. So I haven't paid taxes on the money that's in an IRA so let's say I've got $500,000 in my IRA, and I'm over the age of 59 and a half by the way, do I have to be over the age of 59 and a half to do this.

Christine Benz: You have to be over the age of 70 and a half to do this. So you can start pulling pulling your money from your IRA once you're close 59 and a half, but you have to be subject to required minimum distributions which kick in at age 70 and a half to be able to take advantage of this QCD. So unfortunately, Rick you've got a, you've got, I think you've got a little bit of time before you can take advantage of this maneuver. But folks who are subject to RMDS can take advantage. So that's the key.

Rick Ferri: That's the key. I didn't understand I have to be subject to the required minimum distribution and then let's say instead of taking 50 thousand dollars out in paying taxes on the fifty thousand I could have say ten thousand dollars of that go directly to the charity. The charity would get ten thousand, I would not have to pay taxes on that ten thousand…

Christine Benz: Exactly right.

Rick Ferri: ...and then I only have to take out forty thousand. That's a great deal.

Christine Benz: That's right it is a great deal. So it's something that people who are very charitably inclined and making huge contributions should take advantage of as well smaller donors. It's really a no-brainer, so it's a way to earn a tax win in this era where many fewer of us will be able to get a deduction from our charitable contributions. Which is not to say you shouldn't be charitable but just that you'll probably get less paying from your charitable contributions. One point I would make though is been hearing a lot about this concept of what's called charitable clumping or charitable clustering. And the basic idea is if you aren't able to take advantage of this qualified charitable distribution as you're too young, you can potentially aggregate your charitable contributions into a single year and deduct them in that year so when you think that you will make a lot of charitable contributions you will be over that standard deduction threshold. So that's an idea to consider rather than making a lot of smaller contributions. Maybe save them for a single year when your itemized deductions will exceed that standard deduction. Or save them until you're 70 and a half.

Rick Ferri: Great.

Christine Benz: Or you could use a donor advised fund to for this purpose so you can, and Vanguard offers donor advised products.But the idea is that you could steer your charitable contributions into that donor advised fund, maybe take advantage of this bunching strategy, where you're making a sizable contribution in a single year and the beauty of the donor advised fund is that the money does not have to get doled out to charity all in one go, that you can actually take your time to distribute it over a period of years. Do your due diligence on the quality of the charities and so forth before you actually make the contribution So those are very neat tools for people who are charitably inclined and not subject to our age and as with all taxes consult your tax advisor first.

Rick Ferri: Absolutely could you talk a little bit about health care and how that works into this new 2018 tax law.

Christine Benz: Well the biggie there is again it gets back to deductibility. So many fewer taxpayers will be deducting their health care costs because they will not be in excess their itemized deductions, will not exceed the standard deduction. So there again if people have some latitude to maybe delay procedures or speed up procedures, elective medical procedures and try to bunch them into a single year, perhaps that same year where they make sizable contributions and will be deducting doing itemized deductions that can be a good strategy. I think that's another area to get some tax advice and of course it can be difficult to really time your healthcare costs. A lot of these things are out of our control, but if you do have procedures that where you know you'll have high out-of-pocket costs and you can potentially aggregate them into a single year when you'll be an Itemizer that can be a good strategy.

Rick Ferri: One other area that I'd like to talk about before we get into investing is the cash flow out of your portfolio if you're retired and you're taking or you need to take money from your portfolio. You've got IRAs, you've got personal accounts, you've got Roth accounts, and could you give us some guidance on how the tax law changes have affected that strategy.

Christine Benz: I think the general rules of the road still hold up where when you think about tax efficient withdrawal sequencing you generally want to think about spending taxable assets first because they have fewer long-term tax benefits associated with them, followed by tax deferred which have some tax benefits, you want to hang on to them perhaps a little bit longer, followed by Roth IRA accounts which you usually put in the safe to later camp because they have the greatest tax benefits associated with them and they're also the best assets for your heirs to inherit. So typically we would put them last in the withdrawal queue. And I think that that strategy generally still makes sense. Of course, if you're subject to required minimum distributions you have to put those in the front of the queue, the traditional tax deferred account RMDs, because if you don't take them you'll pay a big penalty. So I think that that general calculus still makes sense under the tax laws.

???????
There are a couple of neat things so that people can think about who are holding significant taxable accounts. So people who are in temporarily or maybe permanently low tax bracket so for 2018, that's single filers who are earning less than thirty eight thousand six hundred, or married couples filing jointly who are earning less than seventy thousand seventy seven thousand two hundred. People in that tax range or below can actually take advantage of what's called tax gain harvesting, and this strategy basically entails that if you have these appreciated holdings on your books, if you have positions in your taxable accounts that have appreciated since purchase, you can sell them and even rebuy them the next day because there's no wash sale that applies to appreciated securities. You can sell them and essentially wash out the tax burden associated with those securities. So if, for whatever reason, taxes go up or if you are in a higher tax bracket in the future than you are today, you can wash out the tax burden associated with the securities. And this is the part that I forgot to mention. You're in the zero-percent bracket for long term capital gains so you won't owe any taxes on having made that change.So that's a neat strategy to consider.

???????
Let's go investment side of this and one thing I want to talk about is the difficult year for active funds not only because the performance has not kept up with the indexes but also because active funds tend to distribute their embedded capital gains as they turn over their portfolio. So it appears that we're going to have a year where the funds lost money and people are going to have to pay taxes on distributions. It's a double whammy. I have been tracking these mutual fund capital gains distributions for us just because I think maybe no one wants, no one else wanted to do it. But it's been really eye-opening to see that in a year like 2018 where not only have many active funds underperformed, but many funds have losses or at least some funds have losses and yet we're seeing these huge capital gains distributions because we're seeing redemptions on active funds. So investors are fleeing active funds that means that the managers are having to sell securities to pay off departing shareholders.That leaves a smaller base of shareholders who are holding the bag and left to pay taxes on the distributions. It's been kind of a terrible spiral for people in active funds where they have had to pay capital gains taxes for several years running, including in 2018 where we've had kind of a volatile - lousy market year. So this does illustrate one of the issues with actively managed funds, where you have higher turnover, where you can see these big distributions come at a time that isn't especially opportune. It wasn't such a big deal in that year like 2017. The market was great. I think many investors, while they might not have loved paying taxes on the distributions,they at least had strong returns to show for themselves. But in 2018 it's kind of slim pickings on the return front and investors are going to be getting sacked with these huge capital gains bills.


16:06
So let's explore this a little bit. You know we talked about this thing called asset location, where you want to take your less taxable assets and put them in your personal account, like municipal bonds and write an index fund an index
16:22 Hutt's right exactly and more taxable
16:24 assets the ones that are that were
16:27


You'll have to pay taxes on, I like corporate bonds and into your retirement account but right now we can actually go a step further. If you have actively managed equity funds and you have index funds, index stock fund, so you have a combination, call it core and satellite, a core and explore, whatever you want to call it, and I don't hear a lot of people talking about this, but form a tax location perspective it seems better to put those actively managed funds equity funds, if you're going to have them, in your IRA accounts, and put your index funds in your taxable accounts. Does that make sense?

Christine Benz: Absolutely. That's, that's such good advice Rick. And another related point I would make is you don't have to go out of your way to own tax inefficient funds in your text deferred account. So just because you're getting a tax break doesn't mean that you need to own actively actively managed funds there. That if you like index funds you can just as easily own them in your tax deferred accounts, and you're not really
giving anything up. So I think that is a really important concept. Asset location, what you're putting where, I would say individual stocks are another place, if to the extent that you own individual stocks taxable accounts are generally a good place to house them because you have more control over capital gains realization than you do with a fund, where you get that distribution whether you have sold a share or not. In the case of individual stocks, the only way you're going to trigger some sort of a capital gain situation is if you yourself. So let's talk about that too because now we can differentiate the difference between using mutual funds, open-end mutual funds and exchange traded funds. Exchange-traded funds are more like an individual stock where you don't get taxed until you sell the fund because ETFs, given the way that they are managed and they're created and redeemed, there's very little if no capital gain distributions from an exchange-traded fund. Now there's a lot of caveats around that, but I'm talking about seasoned ETFs versus opened end mutual funds where you could have capital gain distributions, and that even includes index funds as well.

????????
It does except I would say that, in my opinion, Vanguard’s index funds are a notable exception or and that the ETFs are share classes of the index fund so in practice Vanguards equity index funds have been quite tax efficient alongside their ETF counterparts. But that's exception.Generally speaking you're right, I think, that ETFs are a better mousetrap from the standpoint of limiting taxable capital gains than are index mutual funds. So if you really want to solve for this capital gains distribution situation the best way to do it is to gravitate toward some type of an ETF. A key caveat I would make is that the income distributions, dividend distributions are not solved for with the ETF format that you still will owe taxes on those income distributions as they're made, so it's not something that you can necessarily get away from entirely by being inside the ETF wrapper.

And by the income distributions you mean dividends and interest income that comes off of the securities that are in the account right ,as opposed to capital gains that are created within a mutual fund.

That's right. The ETF doesn't provide you any shields against receiving those distributions and knowing taxes on them, so even if you're reinvesting them it doesn't matter, you still owe taxes if you own the holding within a taxable account.

Rick Ferri: Christine, I want to shift now to portfolio management because you have a rather unique view on portfolio management strategy and it's called a bucket approach and you've written a lot about this. First of all, could you explain what it is and then we can get into some questions about it.

Christine Benz: Sure I always take pains, first of all, to say that I did not invent this idea. The person who was most influential to me in terms of wanting to work on this bucket strategy and talk about it to investors was Harold Evensky, the financial planner in Coral Gables, and Harold told me probably twelve years ago that this bucket strategy was one that he used with his clients and basically the idea was he would manage a long-term portfolio for them and then he would bolt on this cash bucket which would encompass maybe one to two years worth of the clients living expenses and that money would not be invested in the market but would be held separately. And the idea, even though perhaps it did not deliver an absolutely
optimized portfolio result because the portfolio wasn't fully invested, but the basic idea was that the clients knowing that they had a couple of years worth of their living expenses set aside in cash kept them on board with the long-term plan because they knew that disruption and their cash flows wouldn't cause them to stop being able to go out to dinner, or they'd have to really cut back on their food budget or whatever the things that qualified or constituted quality of life for them.They knew that those assets were safeguarded.

So that was the simple bucket concept that Harold talked to me about and I've expanded on it in my work, where I've talked about using a three bucket strategy where you have that cash bucket and you're there you're just thinking about, well how much in portfolio withdrawals will I need over the next couple of years to maintain my standard of living and then stepping out from there on the risk spectrum, so for the next say eight years worth of portfolio withdrawals.Well there you're taking more risk with the money with the expectation that you'll earn a higher return and you're stepping out on the risk into short and intermediate term high quality bonds mainly with that portion of the portfolio. So the idea is that you have enough set aside with that cash bucket plus the second bucket which is primarily high-quality short and intermediate term bonds that you could encounter Armageddon with the equity so it's tax could go down and stay down for a good long time for as long as a decade, and yet you'd still have more or less stabilized your standard of living through that front end of your portfolio being in high-quality instruments and cash. Which is not to say that people will necessarily spend from their portfolios and precisely that that sequence so you won't necessarily blow through your cash holdings and then move on to the short and intermediate term bonds, but in a worst-case scenario where you encounter that terrible equity market environment right when you embark on retirement that's what I think this bucket strategy nicely solves for.

Rick Ferri: Let me throw out an example.So I've got two million dollars and I need to withdraw from that $50,000 a year to live the lifestyle I want to in retirement and add that to Social Security and maybe some pension money or so, and that give me enough so I pay my bills and I can live the lifestyle I want. I would put say a hundred thousand dollars in a money market fund or maybe a CD or something very,very secure. Very safe and that is ready two years worth of living expenses that is set aside. In addition for that, I would put another say eight years of money or four hundred thousand dollars into intermediate term bond fund that you know good quality high-quality intermediate term bond fund, so that's another eight years worth of money that's there. So that's a total of ten year worth of money and then I wasn't exactly right, I would be free, if you think about it that way that's only $500,000. So I could using the bucket approach justify putting the other 1.5 million, or 75% of my assets, into equities. Correct?

Christine Benz: Exactly right. And that's the, that's what I love about this strategy, Rick, is that I think it helps people take something like asset allocation, which frankly I think can be incredibly black boxy, and it helps them back into well what is the same asset allocation given my spending from my portfolio and so in the, in the case tha tyou just discussed where you've got someone who's using quite a modest withdrawal rate then that effect of that is that the portfolio is quite aggressively positioned so a big related caveat is is that person going to be reasonably comfortable with the gyrations in the long term portfolio, in the equity piece of the portfolio. So even knowing that the money having ten years worth of portfolio withdrawals set aside may not provide all the peace of mind that everyone needs to be comfortable with such an aggressive asset allocation in retirement. But I like it in that it does help people get in the right ballpark of what their asset allocation should look like in retirement and the other key thing I like about it is that behaviorally I think it makes sense so you kind of see the light bulb go off with people that if you have a ten year runway of relatively safe investments to spend from, you should be able to put up with market volatility like we've had so far in 2018 or even worse. So it should help you stay in your seat with whatever asset allocation makes you've decided makes sense for you.

And this whole idea ignores the income that's actually coming in from that two million dollars. I've got the hundred thousand dollars in CDs which might be yielding maybe three thousand dollars in income at 3%. Then I've got intermediate-term bonds that's let's say I get 4% off of that and that would be, on 400,000 that would be another $16,000.It's almost twenty thousand right there. and then I've got 1.5 million in equity which is yielding two percent in dividends so that's another thirty thousand and pretty much my fifty thousand dollars a year is coming in from cash flow from the portfolio. Well that that's such a good point that this bucket one, the idea is that you're spending from it as the years goes by so you've got to find a way to refill it. And I love the idea of people doing exactly what you're talking about where that bucket one the cash bucket it's kind of organically getting refilled throughout the year from these income and dividend distributions as they occur. And then say if there's an additional need above and beyond what's organically being generated through these income distributions and perhaps you can do some rebalancing. So you definitely have to have a plan for refilling that bucket one, because the last thing you want to do is, you know, sort of come through here to a retirement and find that you haven't done anything to refill that bucket one you need to have a strategy in place for keeping this whole thing up and running. It won't manage itself, but the income distributions for most retirees get them at least halfway or maybe even more to whatever withdrawal they're seeking from their portfolio. Are you physically setting up three separate accounts.How does that work.

I don't think you need to. I think you could easily just hold a single account but it does get more complicated because most of us are bringing necessarily multiple accounts into retirement. Right, so we might have Roth accounts, we might have our company retirement plan assets which might be all traditional tax deferred, we might also have a taxable account so it's not quite as simple as it seems at first blush when we talk about this three bucket system. Because you are sort of overlaying the bucket strategy over whatever accounts that you have to maintain because of your tax situation.

??????
It gets a little more complex but I don't think you need to set up three separate accounts for each bucket. I think that that's probably unnecessarily cumbersome.I like the word you used in overlay, because that to me that, that's a great way of presenting it because you've got all this stuff underneath. You've got Roth accounts, IRA accounts, you've got 401k baby rollover IRAs- traditional IRAs, you've got trust account print. You've got all this stuff, all these different accounts. If you've got a married couple you might have all of that stuff times two so it's not as simple as just three buckets, unfortunately. Oh and then the asset location portion of it you know, these types of securities would go better in these accounts, and those types of securities go better in those accounts; and so you've got all this stuff and to be able to put in a simple overlay over the top of it where it using the bucket approach and saying really this is what you've got from a very simple standpoint you've got three buckets you've got this one this one and this one yes within the buckets there are things everywhere within each bucket perhaps, but really this is what you've got: one, two, three. I think that would be very comforting for a lot of people.

I think it is and another point I would make on this topic is from a practical standpoint many of us are coming into retirement with most of our assets in traditional tax deferred accounts and so by the time we hit 70 and a half and we're subject to required minimum distributions. It's a good bet that those withdrawals that we have to take from that account are going to meet most of our living expenses, so I think for most people if they want to think about enacting a bucket strategy concentrating on those traditional tax deferred accounts is a good place to do it because by the time you have hit 70 and a half most of your withdrawals will probably be coming from those accounts anyway.

Rick Ferri: Very good information. I'm going to ask a question here about hiring an advisor to do this for you. What are your views on hiring an advisor to do this.

Christine Benz: Yeah, the more I focus on retirement planning, the more I am convinced that this is an area where most investors would benefit from some element of professional advice. So as much as I try to write about retirement planning concepts and do it in a straightforward and easy to digest way, I ,they're just so many moving parts to all of this, and it also requires a certain amount of comfort with tax matters. So I do think that most people would benefit from at least some element of advice. So, for I would say for the super comfortable, you know, sort of the Boglehead super-users, maybe it's just a check on their plan with a good hourly certified financial planner where you just kind of say well here are the assumptions I'm making, here's the withdrawal rate I'm looking at. Just get another set of eyes on your plan. And another advantage of hooking up with someone like that is that you have someone who can serve as kind of a receptacle for all of your information so they're sort of a backup source for what accounts you have. If something should happen. you've got sort of a back-up plan in place, so I think that that is just sort of a baseline type of advice that I think almost anyone embarking on retirement should consider.

If someone feels like they need more hand-holding and more ongoing advice, maybe they have something really complicated going on, perhaps a family business or something like that, perhaps paying someone in a different way-- we are paying ongoing advice either through some type of retainer fee or a fee that is based on your assets under management--that might be money well spent. So it's very individual dependent, but I do think that most people would benefit from some type of advice and I would use myself as an example. There are a couple of areas where my husband and I just felt like we needed a little extra help. One was in a tax issue and the other was in relation to long-term care insurance, whether we should buy it, whether we had assets to support ourselves for long-term care, whether we needed the insurance, so we sought out an hourly advisor this past summer and it was a tremendously beneficial relationship. It was not cheap, I will say that, and writing the check for service is definitely something that you feel viscerally when you write the check for that advisor. But for us it was money well-spent and I think many individuals could benefit from some type of advice. I also think it's crucial to distinguish between whether you're looking for financial planning guidance or whether you want investment advice. A lot of people I think embark on some sort of a quest for advice without really being clear about where their need is. So I think that introspection, sort of stepping back and saying where the areas where I'm super comfortable, where the areas where I'm less comfortable, I think that's a necessary step too.

Rick Ferri: I've used financial planners and I've used tax planners personally, as well I don't have knowledge about the various healthcare plans before I went on the military TRICARE system. I did I had to buy my own insurance so I I used the services of a financial planner to help me ferret out what's available and what's not available. Same thing with tax planning. I pay a tax consultant to help me with my taxes above and beyond doing my taxes. So we the people in the investment industry or in the financial services industry use a lot of the same people that we're recommending people out there use.

Christine Benz: Great. You definitely want your your portfolio manager to be conversing in tax matters and planning matters but it's very rare to find someone who does all of those things, soI think it's important to identify where your potential issues are and make sure you're seeking out the right type of advice.

Rick Ferri: Christine I put a post up on bogleheads.org that I was going to be speaking with you and I asked people for their input if they had questions for you and I got a number of responses and I'm gonna go over some of those questions now and some of them are a little bit of what we talked about already and maybe you can elaborate on them, and others are new so the first question I had was about aging parents and there are those of us who are dealing with our aging parents or becoming aging parents ourselves what specific financial advice can you offer people who have aging parents or they're becoming aging parents. And I have to tell you I'm I'm right there in the middle of this right now with my parents. My mother is in her late 80s and my father is in his early 90s and we're right in the middle of that. What words of wisdom can you give us about aging parents?

Christine Benz: Yeah this is something I've talked about at the Bogleheads conference. I was the youngest of six girls and actually always loved having older parents because they were so battle-tested.They really had seen it all. They've been through it all and they were very laid-back fun parents and great friends. I could not have adored them more and I had the great good fortune of living very close by and seeing them through their last years. My dad passed away in 2014 and my mom in 2016.

And so there are so many different dimensions of caring for aging parents.There's just a hands-on dimension for some of us who are our families first responders, where we're doing kind of basic blocking and tackling for the second household in addition to our own. You know where we're making sure that the grocery shopping gets done and that our parents are should still be driving cars and all of that kind of stuff, and then there's the whole aspect of watching their finances.

The story I sometimes tell is of my own mom and dad who I think had been advised to not purchase long term care insurance and ultimately they didn't they didn't run out of money, but they did need long-term care toward the end of their lives, where my dad developed dementia and had in home caregivers for several years, and then we ultimately moved him to a facility for care. But in the meantime my mom had more physical ailments and she needed full-time in-home caregivers. So for a period of time we actually had the two situations going where we are paying for the care and the facility as well as paying for the 24 hour caregivers at home for my mom, and as you can imagine that gets very costly in our...

Yes so I guess one thing I gleaned from that is when you hear of sort of these one-size-fits-all asset thresholds, that if you have two million dollars you don't need to worry about self funding long-term care, or you don't have to worry about purchasing insurance for long-term care. I think that's an open question. It depends on how much you're spending from your portfolio from when you're well. It depends on variables like the ones I just discussed where if you're part of a married couple both of whom need long-term care, that that can be very costly as well.

So helping parents oversee their finances later in life is a challenge If you don't feel like you're, if you're someone who's watching your parents and trying to help but don't feel like you can give that the hands-on attention that it needs, helping them identify a financial advisor who can work with them I think is a great service that you can provide. As an adult child of aging parents I often speak to groups of people who love overseeing their portfolios, they're really into their investments, it's a hobby for them and often times they're the main person in their household who's interested in this particular hobby. They've got a spouse perhaps who isn't at all interested. So I always tell people that they need to develop some sort of back-up plan in case they can't manage their money themselves. I always think about how I was my dad's sort of de facto back-up plan because he and I had always talked about investments. He was the person who got me interested in investments in the first place. And I was there to oversee his investments. I was on all of his accounts and could watch what was going on.

But if you don't have an adult child or a spouse who's particularly interested in financial matters I think having a financial advisor is particularly appropriate in that situation as well.

Rick Ferri: Let me speak to that because I've been in the advisor for thirty years. That relationship with the advisor has to be solidified, has to take place before there's an issue. Where the person who managing the portfolio can't manage it anymore, isn't around to manage it anymore, the relationship with the advisor has to already be in place and I'll tell you why.

I have had countless number of people come up to me and say to me, “If something happens to me my spouse is going to call you.” Well I always say too groups of people, “Before you leave the room today you should come up and say that to me because everyone who has ever said that to me, no one has ever called me.” There is no relationship there. So even though something happened to a lot of these people over the last thirty years, their spouse or their children are not going to call somebody they don't know. Somebody they were where there's not already relationship.There has to already be a relationship established or they're not going to call.

Christine Benz: So even though there's a lot of good intentions that you pick out the advisor that you want your spouse or your children to work with when you're gone, if that relationship isn't already in place it's not going to happen. You made that point at a Bogleheads conference and I have repeated it. The importance of solidifying that relationship if you've selected an investment advisor for your spouse to who's going to handle things when you're gone. Well go ahead and make that introduction. Make sure that your spouse has a comfort level with that person.Because you're exactly right and oftentimes the surviving spouse who's not that into financial management might meet someone in the interim. Someone will show up, or as recommended by another person that he or she knows, and maybe it's a person who has great soft skills but is not great on the investment front. For whatever reason and that, that relationship will get solidified before the one, you know, the intended one.

Rick Ferri: Well so I think that's such an important point because oftentimes the person who isn't particularly investment savvy will respond to softer skills, so the person has to be kind of the complete package or at least know that you have a comfort level with them. I'm going to jump to another topic. I'm gonna lump three different questions from Bogleheads together and has to do with active management. You appear to be an advocate for mixing active and passive funds together. Could you elaborate on why you like both active and passive. And well maybe one or the other, maybe you like all active because I've noticed you have talked about that a lot.


on you a lot of your a lot of what
43:14 your right is about active management so
43:15 if you could get into is Christine Benz
43:18 active and believer a passive believer
43:20 are you down the middle


Christine Benz: Yeah good question. I think it depends on the investor. I would, if I had to put myself into one of those three camps I would probably say down the middle. Certainly the data are compelling for index funds. Where we look at our active/passive barometer that my colleague Ben Johnson and his fellow passive strategies researchers put together every quarter,certainly the case is very compelling for index funds outperforming the average active fund, but I will say that I have some active funds in my portfolio. I also have passive funds.

The reason I have a comfort with active funds is that I think I'm a pretty good selector of active funds. All of the active funds that I've owned I have owned for many, many years. So I think I'm good at choosing them and I think I'm also good at staying on board through their inevitable performance weakness. So I do think that if someone wants to own active funds they need to have that an understanding of the strategy and be understanding that there will be periods when an active fund underperforms. But a key point I would make about active funds is all of the data we have about active fund performance points to low cost being very, very important. So to the extent that you have active con from your portfolio you want them to be good and cheap. As well so you'd want to focus on say the cheapest quartile subset of active funds to give your fund a fighting shot about performing.

But I don't think that it's something that investors Nessus. Certainly if they are dogmatic about it, about having only index funds, that's absolutely fine and I think that that's certainly a great tax efficient way to build a portfolio. But I'm not disturbed if investors want to have a component of active funds in their portfolios as well. Low-cost is low cost is that the key point I would make.

Rick Ferri: On that front a couple more questions with the time we have left and these have to do with your job over at Morningstar. One of the Bogleheads was interested to know about all of the interviews that you gave on that cave . But actually you interviewed people like me. You've interviewed me several times. Yeah, Bogle several times and a lot of other folks.They wanted to know in your interviewing experience what has been Some of your favorite interviews and what have been some of your not so favorite interviews, and if it's me then don't say the name, but if it's good you are just asking about interviewing and your favorite interviews and your most challenging interviews over the years because you've done so many.

Christine Benz: Oh gosh, that's a good question. Well certainly my annual sit-down with Jack Bogle rates is one of the highlights of every year for me, and one of the highlights of my career is just feeling like I've gotten to know Jack a little bit, and I love interviewing him. He's very much on message as every everyone would not be surprised to hear he tends to be quite consistent in terms of his thinking, but I just find to his sober thoughts on the markets, his honest take on the industry, to be just so refreshing. I think of him as the conscience of the financial services industry. So that's been a consistent highlight for me.

In terms of things that haven't gone so well one that ultimately did go well but was a little bit stressful was I was interviewing the author Michael Lewis at our investment conference a couple of years ago and my colleagues know me as the Michael Lewis superfan. So when I heard that we had hired Michael Lewis to appear at the conference I think they felt sheepish about asking anyone else do the, be with him, it had to be me. So I had been preparing for this interview for a long time you know. I get out of the shower and turn on a Michael Lewis podcast. It was just like a couple of months leading up to non-stop Michael Lewis, so I had this short list of questions that I had written on a piece of paper and he and I were getting miked up and set to go on the stage and I think there were you know well over a thousand people in the audience and I walked out and I had something in front of me that was not my list of questions. It was, I don't know what it was. It was a grocery list or something like that and I looked down and thankfully I had spent enough time prepping for this that it worked out fine but it was just a moment of panic as it will live forever in my memory.

I would say a consistent group of people who are tough to interview are college professors. Not all of them. Some of them are great. I got to interview Richard Thaler once. Nobel laureate now and he was absolutely linear and on message and just a wonderful person to talk to. But sometimes college professors, I think, are used to not being in that format and so used to having a lot of time to ramble and they tend just to not lend themselves super well to video interviews. Kind of those seven to ten minute videos that we do from Morningstar calm. So I would put the whole category of college professors into my less successful video interviews.

Rick Ferri: Anyway I would agree. Listening to some of those interviews that Nobel laureates interview, and some of them are very good and some of them should just stick to writing. Right okay. One last question. Have one Boglehead who is interested through, because of you and because of your work and a lot of the things that you've done it has interview interested now in getting into the financial planning field and switching careers and helping people like you've helped so many people. Could you give them some words of advice.

Christine Benz: Yeah I think it's a great field. I don't work with clients in a hands-on one-on-one way but I love the idea of, you know, helping people in that fashion and I do think that it's a field that affords a lot of flexibility to go in many different directions. One sort of blanket piece of advice is to check out Michael Kitces's blog, Kitces:Nerd's Eye View blog. He's written a lot of stuff about specializing in growing careers in the
planning industry and I do believe based on some of his writing that coming into the field with some sort of a specialty I think can be incredibly powerful. So trying to think hard about what subsets of investors you would most like to help.

I've latched on to pre-retirees and pre-retirees as a key area of interest for me simply because I recognize that people at that life stage really need the help.They're so receptive to getting advice and I think the experience of helping my parents through their last year's sort of crystallized my interest in working on that topic and with people at that life stage.

But I think it's helpful to think about what segments of the population do I want to work with. Do I want to help my fellow young Millennials who are just start in careers sort out their financial priorities. Do I want to work with a specific maybe occupation, where perhaps that was the field that I worked in and I'm transitioning from so I want to help that particular population. I think that specialization can be very important in terms of trying to build your brand and also just trying to home in on what you're going to pay attention to and what you're going to tune out. I think that that's one thing since I focus more on planning and retirement planning. There's a whole part of the Wall Street Journal that I really don't spend much time with anymore. So the whole area of corporate actions and what's going on at the management at X Y & Z company I might be interested personally, but it doesn't it's not must-read for me in terms of things that I need to stay up on on my work. So I think that focusing can also be helpful from that standpoint.

Rick Ferri: What about the person who is changing gym. So they might have been an engineer or a dentist even and now as a second career they want to become a financial planner. what advice would you give to them.

Christine Benz: I think the key thing is to find out what you need to do to get the right credentials and also make sure that you are hooking up with the good guys in the industry. Because I think you might find that it's easiest to get a job with a firm where in hindsight, if you've worked there for a couple of years, you don't love the business model, you might not think it's serving consumer particularly well, and Rick, I know that was kind of your personal experience, your your own trajectory. But I think it's important to do your due diligence at the outset of what sort of business model do I want to align myself with, do I want to work in a commission based firm, or do I want to be in a fee-only firm that more directly aligns my incentives with those of the people I'm trying to serve. So I think doing your homework on that front can be really important before you make the leap out of your industry.

And the other thing I would make before we leave the topic of credentialing is the CFP, the certified financial planner program is extraordinarily flexible in terms of allowing you to do self-study so you should be able to work in the CFP program alongside your regular work before you make the leap into the position and into the career.

Rick Ferri: Christine, you've been very helpful. Thank you so much for this interview. Wish you a Merry Christmas, a happy holiday, whichever you choose and thank you so much. We're at...

Christine Benz: Happy Holidays to you. Thank you so much for including me and all the best to you and your family in 2019. Thank you.

Rick Ferri: This concludes the fourth episode of Bogleheads on Investing. We hope that you are enjoying these podcasts and are able to visit bogleheads.org and pass the word to help other folks as well.

[Applause]
[Music]
Additional administrative tasks: Financial Page affiliate blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; Wiki Bogleheads® España.

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by neurosphere » Sun Nov 10, 2019 7:17 pm

Barry Barnitz wrote:
Sun Nov 10, 2019 6:22 pm
Hi:

Here is a first go at a transcription of Episode 004 with Christine Benz.
Working on this now.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by neurosphere » Sun Nov 10, 2019 8:14 pm

Barry Barnitz wrote:
Sun Nov 10, 2019 6:22 pm
Hi:

Here is a first go at a transcription of Episode 004 with Christine Benz.
Done! Ready to publish.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Sun Nov 10, 2019 8:46 pm

Thanks,

Published on the Bogle Center for Financial Literacy site, and ancillary pages. Link: Bogleheads on Investing – Episode 004 transcript.

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Additional administrative tasks: Financial Page affiliate blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; Wiki Bogleheads® España.

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Re: Boglehead Podcasts: Volunteers needed to convert the audio into text

Post by Barry Barnitz » Mon Nov 11, 2019 8:05 pm

Here is a first pass transcript of Episode 003 with Jonathan Clements. The accent from across the pond can be tricky. I have highlighted some words and passages in red. Speaker transitions may also need editing. And since I have no audio, this needs to checked and validated by hearing the podcast. The google docs translation version is here.

Episode 003 with Jonathan Clements

[Music]
[Applause]
[Music]

Rick Ferri: Welcome everyone to the third episode of Bogleheads on Investing. In this episode we will be speaking with Jonathan Clements, founder and editor of Humble Dollar. He's also the author of several investing books and a former Wall Street Journal personal financial columnist.

[Applause]
[Music]

Rick Ferri: Hi everyone my name is Rick Ferri and I'm the host of Bogleheads on Investing. This program is brought to you by the John C. Bogle Center for Financial Literacy a 501(c)(3) corporation. Today my special guest is Jonathan Clements the founder and editor of Humble Dollar. He's also the author of eight personal finance books, including How to Think About Money and his newest book, From Here to Financial Happiness. Jonathan also sits on the advisory board and investment committee of Creative Planning, one of the country's largest independent financial advisors. None of them was born in London, England and graduated from Cambridge University before coming to New York. In 1986 his first job was covering mutual funds for Forbes magazine and then he went to work for The Wall Street Journal. He worked at the Journal for almost twenty years, wrote over 1,000 columns for the Journal and The Wall Street Journal Sunday edition. He also worked for six years at Citigroup where he was the director of financial education for Citi Personal Wealth Management, before returning to the Journal for an additional fifteen months stint as a columnist. Today I'll be talking with Jonathan about his career and his new book, From Here to Financial Happiness, plus a lot of other interesting topics that we'll get into.

Right now let me introduce Jonathan Clements. Welcome Jonathan

Jonathan Clements: Rick thanks so much for having me on your show I really appreciate it.

Rick Ferri: Jonathan you've got an interesting background You've worked at some of the big financial media companies including Forbes and the Wall Street Journal for 20 years It didn't take you long. It doesn't seem that you were immediately started looking at what makes performance of mutual funds tick, and what makes the performance of accounts tick, and it seemed like you caught on right away in your writing to this idea that the Bogleheads believed, low fees and indexing. Can you talk about when you first started as a financial writer. But what that process was that got you to that point so quickly.

Jonathan Clements: So as you can probably tell from the funny accent curricula, I wasn't born in the US. I was born in England and I had most of my education there and when I got out of university I started working in the UK, and I very quickly discovered that the standard of living for financial journalists, particularly young financial journalists, in London totally sucked and so I decided that, you know, I wanted to
ownership and upgrade ,so I moved to New York and I got a job as a fact checker of Forbes magazine which was the lowest form of life. And the goal as a fact checker was to get yourself promoted and the way I got myself promoted was stock writing about mutual funds. And after almost two years of Forbes I was promoted to a staff writer and given the job of writing. So for every issue about mutual funds and the standard way at Forbes to write about funds was to do these fund manager profiles. Fly to Boston; fly out to Los Angeles; sit down with a money manager, have him or her
describe their investment philosophy and usually they'd give you three or four or five stock picks you would describe in that particular article and what quickly became apparent to me was that, you know,most of these guys who I considered to be top fund managers because that's why I was interviewing them, more often than not they, their moment of glory faded. The past performance was definitely no guide to future results.

I got hired away by the Wall Street Journal in early 1990 to write about mutual funds for them and I continue to see the same phenomenon. So you went there and you actually met with these top money managers, these top mutual fund managers and you were looking at the performance and having this discussion and you're realizing then very soon after that that it was then the performance started to go down.

Rick Ferri: You said their glory faded years afterwards.

Jonathan Clements: You know these fund managers who had been at the top of their game when I spoke to them often knew the reason was interviewing them was because they had been identified as being top managers and what you know, it's called the Forbes honor roll. You know they had good performance in up markets and down markets. They seem like consistent winners. More often than not, you know, those that hot performance didn't last, and, and we know that right. I mean we know past performances are no guide to future results, and so the question arises, “Well what is a guide to future result?” And it's the researchers conclusion, the best predictor of future performance isn't past performance, the best predictor of future performance is low costs.If you want a manager who's really brilliant you want to find a manager who is smart enough to get hired by a fund company with low annual expenses because that's what's going to give them a performance edge.

Rick Ferri: I want to go back though to that one point about the glory faded. So you're seeing this time and time again, where the glory faded of the top managers that you went out to interview. You must at some point in your mind, did you come up with reasons why the glory faded. I mean what was it that you found that caused the outperforming managers to underperform. Going forward was there something about just the dynamics of the mutual fund industry as a whole?

Jonathan Clements: Well I think a couple of things go on. Obviously we have this issue with successful managers tend to attract assets and the more assets amanager is overseeing the harder it is for him or her to continue the good performance.

But also the reason that managers tend to stand out is because they are in a sense cheating within their style box. If you have a good period for growth stocks the value managers that look good are those who sneak a few growth stops into their portfolio so you have this value manager that's done well. And a period for growth stocks you say okay this is a guy who really knows his stuff. He's been able to pick superior stocks and shine in a period when his investment’s out of favor. But of course what happens when styles for at Aten, when value stocks come into favor, the guy who's been cheating, who's been sneaking some growth stocks into his portfolio suddenly finds it hard to keep up with the other value managers because he's not a true value investor.

I saw that repeatedly in the managers I looked at. I'd be trying to benchmark funds and compare them to their peers and figure fund would look good even if you know his or her style was out of favor. But then when the stunner returns the favor they were out of step because they owned the wrong sort of pull throws and I think a lot of that cheating goes on and that's a lot of a reason why we think managers are good and it just turns out they weren't true.True to their mandate. So at some point you came to the epiphany or the “aha” moment that you maybe forget about active management and we're just going to use index funds.

Rick Ferri: When did that occur?

Jonathan Clements: It would have been in the early 1990s. At that point there weren't a whole lot of index funds out there. But those do were out there were regularly performing better than the typical actively managed fund, so they were competing against and, you know, wasn't just that you know. I started writing about this stuff. It was also that I started investing my money in these funds. You know I became a big believer, and in indexing particularly, you know, in an index fund if they were offered by Vanguard. And the good performance of those funds coupled with me personally benefiting with what helped to cement my view that chasing actively managed funds, they're trying to actively manage your portfolio, is really a fool's errand.

Rick Ferri: And the early ‘90s you went to the Wall Street Journal and you picked up the Getting Going column.

Jonathan Clements: 1994. The Wall Street Journal, which at the time had very few, had no columnist outside of the editorial page. The managing editor announced that he was willing to experiment with columns within the news pages, and you know being you know, uppity 31 year old raised my hand and said a cola might you know I'd like to have one of those. And shockingly really the journal gave me a column at age 31.

So in 1994 it was the end of the year I started writing. This column was dubbed Getting Going, and I did it for another thirteen and a half years. Write in that column both the regular Wall Street Journal and also, once it was launched, for Wall Street Journal Sunday.

Rick Ferri:
The first time you actually wrote about index funds in the Getting Going column, do you remember approximately what year that was, and was it part of the sort of Getting Going philosophy from the start.

Jonathan Clements: I would have been writing about index funds even before the Getting Going column was launched in 1994, but precisely when I couldn't tell you Rick.

Rick Ferri: Did you get any blowback from the Journal because they're all, is a lot of advertisers in the Journal. I mean these mutual fund companies advertise in the Wall Street Journal and when you start talking about, you know, indexing and low fees and you know, how that is the reason why index funds outperform most active managers. And you started talking about active managers.Did you get a talking-to by anyone or were you allowed to pretty much say what you wanted?

Jonathan Clements: I gotta tell you right back in the 1990s, indeed throughout my period of the Journal, from a point of view of advertisers being allowed to influence the copy that appeared in the news pages. It was verboten. In fact advertising reps to the Wall Street Journal could be fired for calling up a reporter. On a few occasions I was called by one of the advertising guys and asked to speak at some particular event. And whenever they called the only called officer, they cleared with their boss and they called very tentatively. It was,really it was a magnificent organization from that point of view I can't swear that it's like that today, but back then, you know, there was a church and state separation between the news department and the advertising department

But it, I know that I've spoken with a lot of other journalists over my time and it's not that way at a lot of publications. I mean that that Chinese wall if you will has got a lot of holes in it, and I couldn't believe that and, you know, there were occasion executives would come in and complain about my coverage. I remember one particular meeting there were if some guy who came in from Merrill Lynch to complain about my commentary on actively managed funds and there was a big meeting in the main news conference room on the ninth floor of the Journal building and I was down there and there's some other people were down there and the managing editor was down there. The guy from Merrill Lynch spoke his piece and then I responded, and as I, we walked out after the meeting the managing editor sidled up to me and he whispered in my ear “He didn't lay a punch on you.”

There,that was, that was pretty much the attitude of the Journal. You know they were gonna, you know unless you, unless you were making factual errors, you know they were gonna defend you to the hilt. But again I can't say whether it's that way today you know.

Rick Ferri: I understand thank you. It wasn't only mutual funds. I mean the way I met you where you were taking investment advisors to tasks as well. And that's how you first, you and I first talked. I think it was in 2001, because I had started the company and I was charging low advisory fees and I think you were really onto this idea of you know, what is that 1% AUM fee buying you. And she caught on to that very quickly as well.

Jonathan Clements: Well generally I would say that the world of investing has become much friendlier to the average investor over the course of my career. But you think about all the things that have happened. You know we've seen the collapse of brokerage commissions, we've seen tighter bid-ask spreads. We've seen this proliferation of low-cost index funds and we've seen a total change in the advisory model. So that while there are still financial advisors out there who are charging 1% and simply, you know, giving you a bunch of expensive mutual funds, that is less and less the case.

You know people are paying 1%, they're often getting a very low cost portfolio, and they're getting help with their broader financial eyes. So they're getting help not just with the choice of stocks and bonds and which funds they're gonna buy and so on, but they're also getting help with a financial plan, they're getting help with our estate plan, and help with tax management, help with insurance. I mean today for that 1%, if you're with the right feeling a financial advisor, you're getting much more than you would have got twenty years ago. And of course, you know, as we know, you can go if all you want is portfolio management, you can you can go out and you can get portfolio management for 25 basis points these days. And you'll get a portfolio for that 25 basis points that is as good as the portfolio you would have got twenty years ago, probably better in fact and be paying 1% back then.

And there are a lot of other models that have come out too like flat fee portfolio models, subscription-based organizations like XY planning, and then hourly fee advisors as well. So it seems like it's much more diverse way in which you can pay for this advice rather than just AUM and I think one of the benefits of this is the tutor you go back twenty years and people really believe that you know if you went to Merrill Lynch, if you went to Morgan Stanley, you were somehow investing with the best and the brightest. I think the messages got through that going to the big wirehouse. is these big brokerage firms is actually bad for your financial health. And you're all better off, you know, looking elsewhere to some of these smaller financial planning outfits, looking to the robo-advisors, trying out an hourly planner. And it's that the stranglehold of the big brokerage firms had on the way, you know, advised clients manage their money is over and that is definitely a plus.

Rick Ferri: So let's talk about the brokerage firms and such because both of us worked for Citigroup for a while. You changed jobs and you actually went over to what I call the dark side. I was on the dark side so I'm just saying that facetiously. You went to work for Citigroup and it, almost at the time when you did that there was some of us who have been following you were kind of questioning, scratching our head saying you, you wrote about these companies for four years and now you're going to work for one. I mean was that an experiment or could you tell us about that.

Jonathan Clements: Sure back in 2008 I was pretty burned out on writing the column. I've been doing it for thirteen and a half years and I was casting around for something new to do and I didn't want to become an editor of the Journal. I didn't really want to start writing about something else. So I would add a total change, and I was approached by Citigroup to be involved in a financial startup that they were working on. And financial start up was this.Their plan was to create an advisory service for the everyday American that would deliver financial advice in return for a flat monthly fee.

And so I joined City in April of 2008 and and that's indeed what we worked on. We were working on this black tea advisory program.They actually launched a pilot version of it in January 2009. If people remember what things were like in January in 2009. There was a worse time to launch a new financial advisory service I'm not sure when it would have been. I mean January 2009 and probably wasn't quite as bad as 1932 but we were at the height of the financial crisis and this thing went nowhere. You know in the months that followed every Citigroup was in turmoil. Smith Barney was sold off. This startup I was working on fell apart and Citigroup had to make a call.

They needed some sort of advisory offering for you know regular retail investors with Smith Barney gone. What they decided was they were going to take this startup that you know I was involved in the time was called my thigh and then what was left which was the bank based brokers. This for us together and said figure out, we hope, what you want to do.

They brought in a woman called Debbie McQuoddy who'd been at Schwab and had overseen their RIA business, and Debbie announced that what you wanted was all these bank base brokers to become fee-only financial advisors and you know this innovative group of people from who are part of the startup we're sort of put in charge of this group of bank based brokers and if you max might imagine it was complete well that's alright but that is indeed sort of what happened. And that's how I ended up going from being part of the startup to being you know as I like to put it in this of the main street in the mainstream of Citibank. You know I stayed on because they were having this experiment, you know, trying to turn these bank-based brokers into the only financial advisors and it work to a degree. But just from a purely, from an economics point of view and and you'll probably appreciate this, Rick, I mean to go from charging commissions every time you buy and sell, you know you might be getting a four or five percent commission on a product sell to charging one percent a year. What you effectively do is you give up right away three quarters of your year annual revenue and so this business went from being profitable to be an extremely unprofitable. Still after a year or so of this there was yet another u-turn and they move towards a seeing commissioned model but they still continue to try to favor the fee-based business, so I serve I hung on there. I actually ended up spending six years at Citigroup. Towards the end I had got to the point where I had enough money that, you know, I didn't sort of salary I was owning there, and just decided I was sick of dealing with lawyers and dealing, sick of dealing with compliance people. So I quit.

Rick Ferri: And you went back to the Wall Street Journal for a little while.

Jonathan Clements: I went back to the Wall Street Journal and I had to say, even though I can't claim that I didn't much good when I was on the dark side, I'm so glad I did it. I learned a lot about the business that I never would have learned purely being on the outside. I mean once, as you know yourself Rick, once you've been on the inside you see how it works, it you know, you understand much better the culture of these institutions and why they do the screwed up things that they do for the benefit of the shareholders, whatever it is. It is for the benefit of the everyday investor who walks into the bank branch. Well not that but not for that. I haven't heard that one yet but that's what the most ami, but it's not what I what I saw anyway.

Rick Ferri: So you went to the Wall Street Journal and you were there for about a year and a half, and then you decided to go out on your own and start your own business, The Humble Dollar in 2017, which is a great blog and a lot of good advice there. And you continue to author books.In fact you wrote How to Think About Money, and you're, also your latest book, From Here to Financial Happiness. Can you talk about the transition to starting your own business and going from a paycheck, if you will, to starting from scratch and seeing how it goes.

Jonathan Clements: So I wouldn't claim that I've been the most courageous person in the world. At least not courageous financially. So I wouldn't have ended up in the position I am now as I depended on the income I earn today in order to you know, to cover the bills.That it's essentially, you know, this is my retirement job. It just happens I'm working harder than ever. If I know that goes, if the books don't sell and the website doesn't make any money, it's okay. Nobody's good, nobody's gonna starve tonight. So I do this more than anything at this point, have a sense of public service. I know this stuff backwards and forwards. I love writing about it and I love being part of the conversation. And that's what the books and the website allow me to do.

Rick Ferri: Well I read From Here to Financial Happiness recently. Thank you for sending me the copy. I appreciate that. In typical Boglehead fashion if I can get a free book of course I'll get one for free, and I I did here so thank you. I started reading the book, and a few weeks ago, and the subtitle is: Enrich Your Life in Just 77 Days, and it occurred to me, as I was reading the book, I need a much longer than 77 days to enrich my life.The book is only, let me see how many pages it is. It's got 77 chapters, it's 240 pages roughly. But as I began to work through the book, and it's not just a book, it's a workbook and a book. And looking day 1, day 2, day 3, day 4. There are some of these days where I was reading about, where my god, I mean I had to put the. book down I mean I literally had to say, I really have to think about that. That's gonna take a long time for me to process.

What, what you just wrote now, some of the days went by pretty easy, but some of them were much more difficult. In fact, it was I found it aggravating in some ways to have to think about some of the things you wrote about in the book. But as I kept on going through it,I realized it was a method to the madness, and then I read about why you did it this way, why you wrote the book this way. Could you talk about that. you're thinking of how you put this book together as opposed to all your other books.


Jonathan Clements: The book grew out of a couple of different things I've been thinking about and one of the ones ways I describe the book to people is that I like to think that it's the conversation that you should be having with a really good financial advisor. A really good financial advisor isn't going to be purely concerned with making sure that you end up with the right mutual funds. A really good financial advisor should be trying to figure out you know what it is that you really want from your financial life. You know what's going to improve it today. What's going to make you happy in the future. What are the goals that truly care about, not simply that you want to retire, but what sort of retirement you want. What is it you're gonna do with this last twenty or thirty years of your life. So a good financial advisor is gonna figure out that stuff, and then he or she is gonna help you figure out how to get there, and it's not just about building the right portfolio. And there's so much more to managing money than having those six or seven mutual funds. You need to figure out your estate planning, you need to figure out whether you should be paying down your debt faster than it is required. You need to be figuring out insurance. You need to be figuring out what's their house you can afford to buy. You know what you should be doing with your cars. All of this stuff is part of building a robust financial life and that's what the seventy seven days are about. It's about figuring out where you stand. What you want and how you're going to get there, and the premise is that you know you can do it with these seventy seven steps. The seventy seven steps are a mix. Some days it is about information gathering. Some days it's about teasing out what you want. Some days it's giving you a brief financial lesson about some topic that I think is crucial to understanding money, and some days it's setting up specific steps they ought to take.

Rick Ferri: The book gets deep into call it behavioral finance without calling it behavioral finance. What I find is that you're able to describe things in laymen terms without having to put a hundred footnotes in there and the reference is to you know behavioral finance studies and such. But you're able to take a lot of the biases and behavioral finance things that we know in academia and you're able to very efficiently and very cleanly use it to describe what people should do or shouldn't do, or at least get people to think about their behavior and how their behavior affects their finances. And that's what I found very interesting about the book. Most of the time when you read a book like this you're constantly seeing footnote,footnote,footnote,footnote, footnote. You know this study, that study, this study, that study. You've avoided all of that in the book and I commend you for that. I think that's great. But this is a very well researched and very well-written book that accomplishes just so much, and I think you really hit what you were trying to do here with this book.

Jonathan Clements: Well in many ways Rick, and thank you for your kind words, but in many ways you the book is is a product of the decades I spent you know thinking about money and one of the challenges of writing regularly about money is the basics R&D; pretty basic you know the basics of putting together a portfolio, of figuring out how much insurance you need, what you need to do in terms of estate planning, you know paying down debt and so on.This stuff is really not that complicated and if you're gonna survive as a financial writer you need to have some intellectual curiosity and start to delve into other areas of finance. And I've been the beneficiary, at least in terms of my longevity as a financial writer, of some of the great research that has come out of academia. The research on behavioral finance, on neuroeconomics, on evolutionary psychology, on money and happiness. All of these four areas have produced incredible insights that are so useful to us as managers of our own money. And I've had and really the pleasure of swimming in this research for the past 20 plus years and so, well the book reflects that research. It's not like I sat down and read it, although you know in the year running up to the book's publication, I have been absorbing this for years and years and it's sort of become part of the way I think about money. I'm not an original thinker but you know I am pretty good at synthesizing what's out there and that's what that book represents.

Rick Ferri: There's a few things you wrote in here which caught my attention very quickly. You have these great little quotes at the end of every chapter is but it's not this is what you've learned in this chapter it's,it's a saying or it's something that you put together, and I want to read you one of them because I found that very interesting. It's actually from day forty four. You've said, if our net worth was displayed on our foreheads for all to see libraries would be mobbed and used cars would be status symbols, and it took me a second to think about that.

Saying libraries would be mobbed and used cars would be status symbol as well. Of course, yeah, I started thinking about it saying sure, you, you wouldn't buy a book you'd go to the library, get one for free, and you wouldn't buy a new car you'd go out and buy a used car, and that would be a status symbol because what would be on your forehead is a big number. You're probably the most influential books I think that any of us have read over the past twenty years is The Millionaire Next Door, and this notion that it's not the money that you see, it's the money that you don't see, right.

Jonathan Clements: It's, it's the the millionaire next door living in the modest term, wearing clothes from JC Penney, and driving the second-hand car. That the millionaire, the millionaire isn't you know, the big house with his or her European sedan and the beautifully landscaped lawn. That's, that's not money, that's money that is gone. There's money that is spent. And yet the money that is still there often isn't visible. You see this on the Bogleheads forum. The book, that forum isn't just about low-cost investing it's about having sensible habits when it comes to spending money. I think this is one of the reasons why you see so much overlap between the Bogleheads and what's become a very hot topic in recent months, which is the FIRE movement, you know financial independence retire early. That frugality cuts not just across investing but across our entire financial life and being frugal about how we handle our money is the key to wealth. And that's why I came up with that we all knew how much everybody was worth, and you saw somebody driving a BMW with a negative net worth you just laugh out loud.

Rick Ferri: I’II get it that's true, because was on their forehead. We don't get the chance to laugh of them. Great, yeah that's perfect, that's great. And you in fact, you followed up with that and another day, day fifty-two. You talked about want to hurt your happiness by a big house involving lots of upkeep, and a long commute. Yeah I think a lot of us have, are guilty of that. You know, as soon as you buy the big house you're now, you've got big bills to keep it up and it might be nice to show off for a while, but after a while people stop coming and you just have bigger bills. You had one more thing in here I want to talk about and that is something you wrote on day seventy, which talked about limiting yourself to one financial advisor, one mag, and one brokerage firm or mutual fund family. And I want to talk about that because it always comes up on the Bogleheads where people say oh I have three or four banks because I want to diversify. I have two or three different advisors because I want to diversify. I don't want to keep all my money at one particular firm, call it Vanguard or Schwab or TD or wherever. I want to diversify because what happens if one of those companies go under. You're actually saying no don't worry about that here.

So in terms of what I call naive diversification, multiple financial advisors, multiple banks,multiple mutual fund companies, multiple brokerage firms, yeah I don't see that there is much benefit to this, with one narrow exception. I mean I do appreciate that you know there is this FDIC limit of two hundred and fifty thousand, and if you have a ton of money in the bank in order to make sure that you're covered by that two hundred and fifty, you know you may need to use multiple banks.

But other than that, I mean why would you use two financial advisors. What you're going to end up probably is two portfolios that have massive amounts of overlap, for which you're paying excessive cost. You know you're not getting anything, any added value if you can't find one financial advisor who's doing the job. To you, you know you've got a big problem.

I'm simulator You go to a brokerage firm, you're getting diversification not from the brokerage firm but from the investments that you buy. If you have ten different ETs that's your diversification. The fact, though they're all held at one brokerage firm is of no import. It's not like the brokerage firm is, you know, gonna go under and suddenly all your assets are gone. I mean those assets are held by a separate custodian. You have no reason to worry about that.

Difficult ditto for using multiple mutual fund companies. I mean I don't see any point in that. You know you can have all your mutual funds at one company. Each fund is a separate company. Each of those investments is held by separate, by a, by the outside custodian. There should be no extra risk involved.

It's, it's true it is that way. But some people still have this belief that they need to be diversified amongst where they keep their money and I'm glad you wrote that in the book because just not true. I personally have all my money at Vanguard and I don't have any reason to put it anywhere else. Even if I wanted to buy an exchange-traded fund that was traded by iShares I could buy it through Vanguard, so I don't need to have multiple custodians. Now if somebody has a 401k of course they have to have the money in that 401k, but once they retire they can roll that into an IRA account at the one custodian that they choose, and I'm not saying Vanguard's the place. It could be Schwab, it could be wherever, but why complicate it. Why have a number ofaccounts at a number of custodians. That not only does it make it complicated for you the investor, but if you should happen to pass away it becomes ten times more complicated for the person who has to pick all this up.

Jonathan Clements: Yeah. No absolutely. I mean I do as you do Rick, I have all of my investment dollars, thank God, and in fact this may surprise people, I don't own any ETs, I just purely mutual funds. And the goal is simplicity here. You know when I pass away, you know my kids should be able to settle my, my estate in a couple hours.

Rick Ferri: Yeah I think that that's the whole idea of simplicity is the next phase of what's going on with financial writers. I mean know personally, me, I'm-- I just launched a binder website, Core Four Investing, and it's all about being simple and simplicity. And so I think that the next phase, at least baby boomers like me need to make things much more simple, need to make their portfolio simple, or need to make their estate simpler. Need to, need not to have five different IRA rollover accounts. You know if you're not going to go back to work put them all together into one. There's no reason to have five anymore. And if you have 401ks all over the place from different jobs, you don't need that, bring them all together into one IRA.,make it simple. So I think simplicity and how we manage our money is important and not just for us, but for the future generations.

Jonathan Clements: And I would just add the corollary to that, which is that Wall Street battles this notion fiercely.They want investors to believe that there is some correlation between sophistication, complexity, and investment returns and this simply isn't the case. I know so many high net worth individuals who end up in complicated investment products because they think they're getting something special and they are. What they're getting is a complicated investment product. There's an excuse for charging high fees.If you want to be truly sophisticated you should have a simple portfolio.

Rick Ferri: Very well put. Let's get back to one more item before I come to questions by the Bogleheads forum, Yout talked about FIRE, financial independent and retire early. This is getting to be quite a phenomenon especially among Millennials and first of all, could you elaborate a little bit more on what FIRE is, and then talk more about your viewpoint of these different facets of FIRE.

Jonathan Clelments: So the financial independence retire early movement is really about the extremely frugal early in your career, quickly buying yourself some financial freedom, so that, you know, you can potentially retire at a roughly early age. Now, you know, let's unpack that a little bit. When we talk about retirement it's really not about retiring in the sense of, you know, you're going to go and live in Florida and spend your, all your days doing nothing. It's really about buying yourself the freedom suspend your doing what you love most. You know for many people this idea of being frugal, buying yourself financial freedom quickly and then you know using that freedom to spend your days doing what you love. Then Lucia has been around for many decades. I mean actually drove a lot of my financial behavior. I was a prodigious saver when I was in my 20s and 30s and that's what allows me today not to worry about earning a paycheck. What the financial independence retire early movement, the FIRE movement has done is its conceptualized in a single word, FIRE, and it became a rallying cry for a certain group of devotees. But ,you know it's, it's not that different for anything that we've known before. It's simply that it has coalesced around this one phrase and it has become something of a movement. I think it's to be applauded. I mean in a country where far too many people save way too little, the idea that you're celebrating people who are being smart about their money and saving diligently. What's wrong with that. Not a thing. And purling that there are big companies out there are being formed and have been around now for a while, companies like Betterment, where they're teaching young people right from the beginning, use low-cost index funds, don't try to beat the market, just put a simple portfolio together of low-cost index funds. They're granted, the using ETFs because their their custody in the assets at a brokerage firm but I always applauded companies like Wealthfront and Betterment and other robo- advisors because they're teaching young people right from the beginning and don't bother trying to beat the market, just have a consistent investment strategy, a consistent saving strategy, just put the money away. It's all part of the same movement and I think it's all very good.

Rick Ferri: Yeah, I think anything that focuses on holding down costs, whether it's you know the costs and your day-to-day living, the costs in your investment portfolio, the cost of your insurance, the cost to put together your estate plan, as long as you're being smart in the choices you make. What's wrong with that. You know the less money that goes to these, you know financial service providers, the small money that ends up in your pocket.In the last part of the interview today I'm going to go to the Bogleheads forum. I asked the Bogleheads on bogleheads.org to come up with some questions for you and a lot of people had a lot of great comments for you, saying how they followed you for years and it gave you a lot of kudos, but there were a few questions so I'm going to go through a few of those questions now and, you know, sort of wrap them off one, two, three, four. So here was the first question and this was by Rosemary11. She asked you; actually she asked you three questions. so I'll - one, two, three and then you can put them all together if you'd like.

I am in retirement. What is an acceptable asset allocation in retirement? So that was her first question, what is an acceptable asset allocation of retirement. Her second one was, What international allocation? I think she's talking about stocks as a percentage of the asset allocation, and thirdly, What is the safe withdrawal rate in a retirement. So some three broad general questions and one, two, three. if you can hit them.

Jonathan Clements: So in terms of the right asset allocation that's got to vary for one person to the next. You know much depends on how much of your expenses are going to be covered by Social Security. It's going to depend on whether you have a traditional cut employer pension. It also might depend on whether you have anything else that's generating income, for instance for rental real estate. You know there's a rule of thumb. You know 50 to 60 percent in stocks is probably a reasonable target. Whether I would say a sort of upper limit on that is you should know exactly where you're gonna get your next five years of portfolio withdrawals from and that money at a minimum should be invested in something conservative: CDs short-term bonds a high-yield savings accounts, some something like that.

So to get your third question, Rick, you know if you're using the 4% withdrawal rate, which I think is a fine number, at a bare minimum you should have at least 20% of your portfolio in cash or near cash investments so that you can cover those next five years of portfolio withdrawals, Now that suggested potentially you could at 80 percent in stock. I think that's way too much I would probably go for 50 or 60 percent in stocks at a minimum you want that 20 percent or 5 years of four percent withdrawal rates stacked in cash or cash like investments so that you're covered in case the market goes down steeply.

In terms of the second question about international allocation on a stock portfolio, my view on this is shifted over the years and personally I now had a market weighted portfolio when it comes to stocks, which means actually that I have half my money in US stocks and half of my money in foreign stocks. And I done that for one simple reason which is Who am I to think that I know better than all other investors. Collectively, all other investors worldwide collectively believe that half a global stock market value is in the US and half is outside the US. Shouldn't I, as a hardcore indexer replicate that.

Those percentages the can be add and that is of course you know you are introducing a fair amount of currency risk into a portfolio. If you're uncomfortable with that the grip currency risk I would say either hold less in international stocks or potentially seek out a fund that hedges its currency exposure but as things then I'm not sure of a fund that would give you low-cost foreign stock exposure with a currency hedge.

Rick Ferri: Well thank you Jonathan, that was a good answer. Let me go to another question which is something to do with what you just talked about so we can hit this one - this is from CW radio, who asks as a safety-first investor that is in retirement. What investment should I put my safe money in and I think you already touched on this with the 20%, but I think he looking for SPIA, which is a single premium insurance annuity, a bond ladder, TIPSs, and so forth. He's asking if these are also acceptable places to put safe money.

Jonathan Clements: I think all of those are acceptable places to put safe money. If you're gonna buy an immediate annuity I would buy from more than one insurance company and I would buy from insurance companies with a high rating for financial strength. An immediate fixed annuity is a great way to hedge longevity risk and ensure that you have a stable stream of monthly income you just don't want to get it derailed because you buy from a single shaky insurance company, and the insurance company goes goes under.

In terms of the bond portfolio I've always stated you're taking risk on the stock side of a folio and playing it safe with bonds. In my own portfolio I own pretty much a sort of 50/50 splits the bond portfolio between inflation index Treasury bonds and high quality short term corporates, but you know if you want to go for added, you know safety, you might add in a mix of high quality short term Treasuries as well,rather than taking the credit risk that comes even with high quality corporates.

Rick Ferri: This is from a poster by the name of beanie. Says, Jonathan Clements used to recommend putting fifteen to twenty percent of one's stock allocation in diversifiers such as merger- arbitrage funds, commodity funds, gold funds and REITs. I haven't seen him talking about this in a long time,maybe ten years or more. Have his views changed, if so why.

Jonathan Clements: So I never recommended as much as 20%. I do remember writing a column for The Wall Street Journal when people were all hot and bothered about alternative investments and this was a question I was getting a lot and I did indeed say that, you know if you really want alternatives exposure in your portfolio I could see allocating 10% of a portfolio in no more than two alternative investments, and in terms of alternative investments it was the list that you recommended, real estate investment trust, gold stocks, commodity funds, and precious metals funds. I mean, I still think that you know, that's a reasonable allocation. I have to say dope if you like merger- arbitrage funds because they involved active management and I have soured on commodities funds as those become more actually traded. It's gone from being a market where companies and farmers hedge to being a market dominated by investors. The historic impressive returns from the commodity indexes hasn't been replicated and in all like it will not be replicated so I'm not that crazy about commodities. Tons you know I still have a soft spot for gold stock funds and I still have a soft spot for real estate investment trusts but I probably wouldn't put more than a couple percent of a portfolio in each.

Rick Ferri: Well what if nobody did any of that and just bought the three fund portfolio. I think three fund portfolio is a great portfolio to own.

Jonathan Clements: I'm you and I have had this discussion. Rick you know people tend to mess around way too much with their portfolios.I think I've done too much of that myself over the years. If you simply buy the three fund portfolio: total US market, total international and total bond, I think that that's a great mix.

I mean you may even want to consider the two fund portfolio. You know you can now go to Vanguard and buy the total world index fund, add the total bond market fund onto that and you could have an incredibly diversified portfolio with an asset allocation of your choice with just two mutual funds. Incredible. It wasn't that way years ago though things have gotten so much better in indexing space where you can really reduce the number of holdings that you need nowadays to be diversified globally. It's really gotten a lot better and the fees have come down so much. I mean that total world index fund I believe has something in the range of 8,000 stocks in that fund. You know for a three thousand dollar investment, or you can buy the ETF and invest even less. You can buy a portfolio with eight thousand different stocks in it. Think about that. I mean that is a da
machine. Today the everyday investor with ten or twenty thousand dollars in debt can build a portfolio that many institutional investors two decades ago would have died to have. It would be lower cost and better diversified. It's astonishing what ordinary investors can do with their money today, really astonishing.

Rick Ferri: So the last question has to do with buying happiness. This is from tom10 and I'm gonna just paraphrase what he's saying. You've always talked about, and one of the things that make you unique, is the spending side of happiness. If spending
actually makes people happy. So he was wondering about your thoughts on spending. No, we talked an awful lot about investing and saving, but he wants to know specifically your thoughts about spending and how to spend correctly to make you happier.

Jonathan Clements: As I've written in numerous places I believe that money can buy happiness in three ways. First you know money can buy happiness simply by eliminating financial worries. I mean so many people in America pursue happiness of the shopping mall, rack up the credit cards and end up miserable because they leave themselves in a financially perilous state and whatever they managed to buy, them all is no solace when they wake in the middle of night worrying about what happened if they lose their job or how are they going to pay the credit card bill. So simply being smart about money, having little money in the bank, saving for the future, avoiding debt except for mortgage debt, that alone is gonna buy you substantial happiness. So that's the first way that money can buy happiness.

Second, you know money can buy happiness if you can reach the point where you can spend your days doing what you love. There is few things in life that bring greater happiness and working hard as something you care passionately about so if you can get yourself to that point, you know like the FIRE people talk about. Where you don't need a regular paycheck, or you need a much smaller paycheck and you can spend your days doing what you love, that is the second way that money can buy happiness.

But the third way and this is probably what the question is getting at is I believe thethird way that money can buy happiness is we can use it to create special times with friends and and family and there are a couple of different elements to this. I mean first you know we know that spending time with friends and family gives an enormous boost to happiness. A research suggests that that is indeed the case. In fact the research suggests that having a robust network of friends and family not only makes you happier but it also gives a boost to have to longevity equal in effect to not smoking. So having a robust network of families, there's nothing good for happiness but it's also good for your health.

So in terms of using money what you want to do is spend it not on material goods which are often enjoyed on your own, but on experiences. You know taking the family on vacation, organizing the family reunion, going out to dinner with friends, going to the theater with a colleague. Those experiences enjoyed with friends and family can give a big boost to happiness. But there's another element to this, which is if you really want to get a lot of happiness out of your spend on experiences with friends and family you should arrange these things far ahead of time so that you have a long period of eager anticipation that way. You'll get a lot more happiness out of dollars you're about to spend and you should make sure that you keep mementos to remind you of the event in question. When you go on vacation you should take photographs and then you should put them up around your house so that the months afterwards you can think, wow that was such a great trip, I had such a good time. And here every day when I walk to the living room is that photograph that reminds me of what a special time in my life that was. so that in terms of actually spending money would be my number one tip.

Rick Ferri: Well that's great. Jonathan I want to thank you so much. You've made us all very happy by being on our program today. Well good luck with the book and again the name of your new book is From Here to Financial Happiness: Enrich Your Life in Just 77 Days. Jonathan thank you so much for being our guest on Bogleheads on Investing

Jonathan Clements: Oh, thanks so much to Rick. It's been a pleasure talking to you.

Rick Ferri: This concludes the third episode of Bogleheads on Investing. I'm your host Rick Ferri. Join us each month to hear a new special guest. in the meantime visit bogleheads.org and the Bogleheads wiki, participate in the forum and help others find the forum. Thanks for listening.

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