How do Bogleheads cope with not beating the market?

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rkhusky
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Re: How do Bogleheads cope with not beating the market?

Post by rkhusky »

I don’t care about beating the market. I just want enough money to maintain my lifestyle and give the kids a little nest egg.
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firebirdparts
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Re: How do Bogleheads cope with not beating the market?

Post by firebirdparts »

It's pretty easy to underperform the market, and that's pretty good training for being happy that you're following the market. If you just keep accurate results and are honest with yourself, you can learn.
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David Jay
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Re: How do Bogleheads cope with not beating the market?

Post by David Jay »

cos wrote: Wed Oct 14, 2020 12:08 am
David Jay wrote: Tue Oct 13, 2020 11:37 am Are you a golfer? Bogleheads is scratch golf. But it is not simply averaging par, it is par on every hole. No birdies. No bogies. Par every hole.

Which is better than most professionals. You probably "make the cut" on tour most weekends.

I can live with that. But if indexing isn't exciting enough for you, take up wake boarding or extreme skiing.
So if Bogleheads indexing is scratch golf, what are wake boarding and extreme skiing?
I meant literal wake boarding or extreme skiing. Get your excitement someplace other than in your finances.
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1210sda
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Re: How do Bogleheads cope with not beating the market?

Post by 1210sda »

Register44 wrote: Tue Oct 13, 2020 10:52 pm
acegolfer wrote: Tue Oct 13, 2020 2:31 pm
Register44 wrote: Tue Oct 13, 2020 2:23 pm They all are brilliant no question, but are there other brilliant people that actually lost money as they may have not had as much "luck"? How much of it is skill vs luck? It has to be a combination. You need skills to have a chance, but probably still need some luck.
2 University of Chicago finance professors discuss this question here: https://www.youtube.com/watch?v=hlGdW8K94mI
This video inspired me to look for more on this topic. I found this video by Michael Mauboussin. It was incredible.
https://youtu.be/1JLfqBsX5Lc?t=59

With these two videos and all the wisdom on the board I am feeling much better about things. As Mauboussin says it should feel liberating to accept the role of luck and it really does.

I think I may still need to hold a real small "play" account when I can't help it. But 95% I feel I can stick to the bogleheads approach now and feel good about having the time to try new endeavors and live life. Thank you all again so much. This thread has been amazing! :sharebeer
Thnak you for the links.
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tadamsmar
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Re: How do Bogleheads cope with not beating the market?

Post by tadamsmar »

Register44 wrote: Mon Oct 12, 2020 11:12 pm I realize I am finally becoming an investor instead of a speculator. I felt really good and less stressed when I finally completed a buy and hold asset allocation portoflio. But then I got a little bored and thought I have all this free time to fill.

Shouldn't I apply it to optimizing / tweaking the portfolio? Well I did and I made it worse. So I swore that off and went back to the set allocations.

Then a few months go by and I tweak it again, and I am already regretting it. I feel so much less stressed and happy when I have the static asset allocation set and forget. But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I don't think I could convince myself that active trading is worthwhile, so I don't have that voice.

Perhaps there are areas where you could work harder:

1. Project your future financial needs and investment performance and make sure your financial plan is sound.

2. Tax avoidance (that involves projections too).

Both those can take a lot of work.

I suppose you could even look at increasing your equity allocation with out risking your goals. That should beat your current AA on average, but you need to avoid jeopardizing reaching your your goals.
Tamalak
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Re: How do Bogleheads cope with not beating the market?

Post by Tamalak »

I cope with a 2 step process

1. Be angry all the time because I'm not beating the market

2. Continue to not beat the market
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familythriftmd
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Re: How do Bogleheads cope with not beating the market?

Post by familythriftmd »

Isn't it nearly impossible to not beat the market over the long haul with a good Bogle-style 3-fund portfolio? Keeping costs low and staying diversified and limiting transactions allows for great compounding. In fact, if what you own is index funds, then you are owning the market, anyway.

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Re: How do Bogleheads cope with not beating the market?

Post by hudson »

Register44 wrote: Mon Oct 12, 2020 11:12 pm So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I just think back to 2008.
I also believe that living below your means and socking away savings could be better than relying on big gains in stocks.
Last edited by hudson on Wed Oct 14, 2020 3:13 pm, edited 1 time in total.
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Brianmcg321
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Re: How do Bogleheads cope with not beating the market?

Post by Brianmcg321 »

I wonder how 80% of investors, hedge fund managers and brokers that don’t beat my returns feel. :moneybag
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Re: How do Bogleheads cope with not beating the market?

Post by Chicken Little »

JustinR wrote: Tue Oct 13, 2020 10:48 pmHow is what I said false? I didn't say someone couldn't outperform.

It's obvious that I attribute what you're talking about to the last part of my sentence: "other than luck."
Obviously I disagree, but it’s more than that.

Many come here through the strength of the realization that they can’t beat the market.

If you’re here because of a false rationalization that nobody can beat the market (outside of luck), then you arrived through weakness.
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Re: How do Bogleheads cope with not beating the market?

Post by Independent George »

Do you get angry that you're not making as much money as one of your classmates from high school? That your spouse is not as attractive, that your house is smaller than your neighbors?

If no, then why does it matter if you "only" get market returns?

If yes, then perhaps coping with your portfolio only getting market returns is merely a symptom of another problem, and not the cause.
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Re: How do Bogleheads cope with not beating the market?

Post by Dottie57 »

I cope with not beating the market by not expecting to beat the market. In fact I am delighted with market returns. I wish I had been smarter earlier. I had a mutual fund fold - got money back, but it had stinky returns. Other funds were sub par too.

Stop looking for the dream of winning the investment lottery. Instead get out and have fun in your life. Focus on you career. Make new friendships.
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Register44
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Re: How do Bogleheads cope with not beating the market?

Post by Register44 »

Dottie57 wrote: Wed Oct 14, 2020 3:19 pm I cope with not beating the market by not expecting to beat the market. In fact I am delighted with market returns. I wish I had been smarter earlier. I had a mutual fund fold - got money back, but it had stinky returns. Other funds were sub par too.

Stop looking for the dream of winning the investment lottery. Instead get out and have fun in your life. Focus on you career. Make new friendships.
Well said. I think I have this Lottery feeling. Like watching the big short how amazing it must have felt for them to get it right. But truth is things were so bad they almost lost everything still being right. In a weird way it took luck for them just to get paid what they were owed.

But yes getting past the lottery, I feel much better today just to live life and be free of worry of all this finance stuff now.
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HomerJ
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Re: How do Bogleheads cope with not beating the market?

Post by HomerJ »

jakehefty17 wrote: Tue Oct 13, 2020 1:41 pm I don't care to beat the market my friend... I AM THE MARKET.
This.

Look at it this way... Imagine you run a Casino... You don't need to beat the house. You ARE the house.

Let the suckers work hard to beat the odds. You just sit there and rake in the money.
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Re: How do Bogleheads cope with not beating the market?

Post by KlangFool »

Register44 wrote: Wed Oct 14, 2020 4:18 pm
Dottie57 wrote: Wed Oct 14, 2020 3:19 pm I cope with not beating the market by not expecting to beat the market. In fact I am delighted with market returns. I wish I had been smarter earlier. I had a mutual fund fold - got money back, but it had stinky returns. Other funds were sub par too.

Stop looking for the dream of winning the investment lottery. Instead get out and have fun in your life. Focus on you career. Make new friendships.
Well said. I think I have this Lottery feeling. Like watching the big short how amazing it must have felt for them to get it right. But truth is things were so bad they almost lost everything still being right. In a weird way it took luck for them just to get paid what they were owed.

But yes getting past the lottery, I feel much better today just to live life and be free of worry of all this finance stuff now.
Register44,


If you think you are that lucky, buy a lottery ticket. That will fix your lottery feeling. My uncle strikes the lottery three times. I know that I am not my uncle. I have my lottery tickets to prove that.

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Re: How do Bogleheads cope with not beating the market?

Post by 000 »

"The greatest enemy of a good plan is the dream of a perfect plan." -- Karl von Clausewitz

The Dream of A Perfect Plan
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Re: How do Bogleheads cope with not beating the market?

Post by Dottie57 »

KlangFool wrote: Wed Oct 14, 2020 5:26 pm
Register44 wrote: Wed Oct 14, 2020 4:18 pm
Dottie57 wrote: Wed Oct 14, 2020 3:19 pm I cope with not beating the market by not expecting to beat the market. In fact I am delighted with market returns. I wish I had been smarter earlier. I had a mutual fund fold - got money back, but it had stinky returns. Other funds were sub par too.

Stop looking for the dream of winning the investment lottery. Instead get out and have fun in your life. Focus on you career. Make new friendships.
Well said. I think I have this Lottery feeling. Like watching the big short how amazing it must have felt for them to get it right. But truth is things were so bad they almost lost everything still being right. In a weird way it took luck for them just to get paid what they were owed.

But yes getting past the lottery, I feel much better today just to live life and be free of worry of all this finance stuff now.
Register44,


If you think you are that lucky, buy a lottery ticket. That will fix your lottery feeling. My uncle strikes the lottery three times. I know that I am not my uncle. I have my lottery tickets to prove that.

KlangFool
Haven’t bought a lottery ticket for almost a year. Maybe I will start buying my once a month ticket again.
palaheel
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Re: How do Bogleheads cope with not beating the market?

Post by palaheel »

You first choose your "market." Is it the S&P 500? Or the total Us market? Or does it have some international component? The global market cap is roughly 50-50. If you select a smaller market than the largest investable collection of companies available, go ahead. But you're making a bet that your smaller haystack will outperform the largest haystack when you do that. That's ok, just realize what you're doing, and don't fool yourself (or anyone else).

In an Intro to Programming course I used to teach, we had a coin flip program. I once saw a correct program flip the same value around 7 times in a row. The student and I were both going crazy to find the bug, but there wasn't one; the pseudo random number generator was just giving unfortunate values. The same thing can happen with the market. If you don't understand that a sequence of events can yield bad results for an extended time, or if you can't take the stress of that happening, accept you index and don't look elsewhere.

Then decide if you're going to tilt. If so, you have to be prepared for a significant period where the tilt underperforms. Again, realize what you're doing, and don't fool yourself.

Personally, I am 50/50 US/Int'l for equities and tilt modestly to SCV.

I view this tilt as loading the dice a very modest amount. I expect that I might lose for several rolls of those dice, but if I live long enough, the loaded dice should give me slight overperformance. But there are no guarantees.

It's been a rough several years for people like me. But I see nothing indicating that "it's different now." I believe the math.
Markets crash. Markets recover. Inflation takes your money FOREVER.
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Re: How do Bogleheads cope with not beating the market?

Post by sixtyforty »

Because I'm beating at least 80% of the professional money managers and 90% of the average investors.
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jojay
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Re: How do Bogleheads cope with not beating the market?

Post by jojay »

I cope with not beating the market by not competing with it. I look at investing as a means to achieve my goals - the market is simply a tool. It's like a saw or a rake - something I need in order to get the job done.
sandan
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Re: How do Bogleheads cope with not beating the market?

Post by sandan »

Super easy. I go to the bogleheads forums to keep learning about ways to save costs. Its really astounding how much there is to learn about tax laws and how they interact with lifecycle strategies. So much seems to depend on advanced planning.
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Re: How do Bogleheads cope with not beating the market?

Post by cinghiale »

sixtyforty wrote,

Because I'm beating at least 80% of the professional money managers and 90% of the average investors.
I would edit the above to read “...and 90% of all individual investors.” And with that minor adjustment, you have a near-perfect one sentence reply to the question posed by the OP.
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Re: How do Bogleheads cope with not beating the market?

Post by pascalwager »

GoldenGoose wrote: Tue Oct 13, 2020 4:12 am Easy for you guys to say to ignore the market and stay the course. You follow the market and see the rally. You look at the individual stocks and see some of them gaining 10% 20%. You read BH forum and see others up YTD 30% 40%. You look at your passive index funds and you see they are up 1% or 2%. No wonder people have anxiety. If you are a firm believer in passive investing, just plow your money in an index fund, turn off the tv, stop reading and posting in the BH forums and resist the urge of checking your returns. Can you do all that?
Yes, don't follow the mid-cap growth New Horizons fund performance (ten-year 21% annualized return) which one BH investor adopted in 2012 and then left the forum. Also, ignore articles on innovative company ARK funds with five-year outperformance. You're right, I do need to stop learning about highly successful active stock funds in articles by authors who were probably already invested in other high-performing growth funds for the last several-to-ten years.

But I just allow myself some vicarious pleasure and then forget about it until the next "forbidden" thread appears, which I need to start ignoring and hopefully will. And, my belief in the need to avoid "performance-chasing" prevents my going to the Vanguard trading screen and easily typing the ticker "ARKK" or tickers for any of the many Vanguard growth funds, index or active.

So, I don't know if I need to leave the forums, but should probably be more thread-selective. But I could leave as an experiment as I'm satisfied with my asset allocation.
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Re: How do Bogleheads cope with not beating the market?

Post by GoldenGoose »

cinghiale wrote: Thu Oct 15, 2020 1:08 pm
sixtyforty wrote,

Because I'm beating at least 80% of the professional money managers and 90% of the average investors.
I would edit the above to read “...and 90% of all individual investors.” And with that minor adjustment, you have a near-perfect one sentence reply to the question posed by the OP.
Do you have a number on the "90% individual investors"? How many people are we talking about here? 100k?
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Re: How do Bogleheads cope with not beating the market?

Post by GoldenGoose »

I suspect that as much as BH-ers like to fancy themselves of "beating average investors and professional managers", the true fact MIGHT be that the majority of investors is in fund investing and a handful is in non fund investing. So the reality is that you get about the same average return like most everyone else. You beat some people and you lose to some people. Nothing to crow about. It is just an ordinary day in the investment universe.
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Re: How do Bogleheads cope with not beating the market?

Post by flaccidsteele »

hudson wrote: Wed Oct 14, 2020 1:39 pm
Register44 wrote: Mon Oct 12, 2020 11:12 pm So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I just think back to 2008.
I also believe that living below your means and socking away savings could be better than relying on big gains in stocks.
Best time ever

Buying more during that particular bear set me up for beating the market for the next decade
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: How do Bogleheads cope with not beating the market?

Post by Normchad »

Luckily there are studies out there examine the real world results of typical investors. The results are not good. Just buying and holding a simp,e index fund absolutely crushes the typical investor.

If you just never sell, you will dominate your peers and be very happy in the end.

Dalbar does the analysis. Here is an article summarizing the results.

http://www.investingparexc.com/2017/12/ ... ck-market/

The amount of underperformance is staggering. And “trying to beat the market” is the surest path to that underperformance.

A nugget to whet the appetite:
No matter what the state of the mutual fund industry, boom or bust: Investment results are more dependent on investor behavior than on fund performance. Mutual fund investors who hold on to their investments have been more successful than those who try to time the market.”
protagonist
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Re: How do Bogleheads cope with not beating the market?

Post by protagonist »

Register44 wrote: Mon Oct 12, 2020 11:12 pm But then there is the nagging feeling that I am being lazy, need to work harder, and that I am missing off on 20% per year returns that I could have if I just "put in the work." Yet enough research tells me I am far better off accepting the market return.

So tried and true Bogleheads how do you squelch that voice in your head that wants you to actively trade and convince yourself that less is more?
I used to think I was smart enough to beat the market, but over the long term I didn't beat it. I just spent a lot of time pouring over financial data instead of doing things that are intrinsically a lot more fun and valuable.

Since I got into index funds around 20 years ago I have been doing better in the long run, I have freed up a lot of time for hobbies, friends, family, sleep and just goofing off , and the only time I ever bother to read the WSJ is when it is the only thing available on an airplane and I am a captive audience. I'm pretty sure the Dow is floating somewhere between 25K and 30K these days, but I don't really care. I'm still doing better than I used to do with my investments.

The thing to remember is that with every trade there is a winner and a loser. As smart as you think you are, when you pick a stock you are betting against institutions like Goldman-Sachs, with billions of dollars of computer power and communications networks, access to information that you could only dream of , and the brightest graduates of places like MIT whose entire livelihood depends on beating people like you. Even the vast majority of mutual fund managers lose in the long run. It's like playing chess against Kasparov.
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Re: How do Bogleheads cope with not beating the market?

Post by Doctor Rhythm »

There's an old joke about two hikers who encounter an enraged grizzly bear. As the bear chases and closes in on them, one hiker stops to change his hiking boots for running shoes. The second hiker says, "It doesn't matter what kind of shoes you're wearing, you'll never outrun the bear." To which, the first hiker replies, "I don't need to outrun the bear as long as I can outrun you."

That's sort of my attitude about trying to beat the market. It's very hard to do this over long periods of time, and a Boglehead strategy makes it nearly impossible. However using such a strategy that emphasizes diversification, low costs, and avoidance of market timing or emotional decisions, I believe I will outperform the majority of investors.

Why-average-investors-earn-below-average-market-returns

That's all my ego requires.
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Re: How do Bogleheads cope with not beating the market?

Post by Fallible »

Dottie57 wrote: Wed Oct 14, 2020 3:19 pm I cope with not beating the market by not expecting to beat the market. ...
:thumbsup
And I'll take it one further: if one doesn't expect to beat the market, one is free from having to cope. That's the freedom the OP is striving for.
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cinghiale
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Re: How do Bogleheads cope with not beating the market?

Post by cinghiale »

GoldenGoose wrote,
I suspect that as much as BH-ers like to fancy themselves of "beating average investors and professional managers", the true fact MIGHT be that the majority of investors is in fund investing and a handful is in non fund investing. So the reality is that you get about the same average return like most everyone else. You beat some people and you lose to some people. Nothing to crow about. It is just an ordinary day in the investment universe.
First, take a look at the article that poster Doctor Rhythm linked to a few posts up on individual investor returns.

Then, do a search through what Mark Hulbert has researched and written. He’s been at this for decades, and has devoted himself to analyzing investor returns versus the benchmarks.

Finally, give John Bogle’s classic speech, “The Relentless Rules of Humble Arithmetic” a careful reading. You can find the PDF for it with an easy Google search.

Decades of comprehensive, painstaking, and peer-reviewed research (the kinds that receive Nobel prizes) have demonstrated that a soberingly high majority of individual investors fail to receive returns over and above what the market as a whole delivers. It would only take you a few hours of reading to verify this.

As an aside, this board is rich with variety. There aren’t that many lockstep three-fund investors, though many (most) posters on this board accept the above-referenced evidence and build a foundation of low-cost index funds. I hold a gold fund and have been a long-time investor in the actively managed Wellesley Income fund. Wellesley fills a niche for me, though I have no overconfidence that it will beat its equity and fixed-income benchmarks. And I’m not alone on that (note the almost 600 posts in the “Vanguard’s Wellesley Income fun is incredible” thread initiated by poster willthrill81).

And with 13 years of posting here, I’ve never detected any crowing, arrogance, or condescension on the part of the Bogleheads. My take is that it’s a rather humble and grateful group, and most everyone who posts has had long seasons of chasing performance via working with “financial advisors” or self-directed active trading. The main feeling that comes through on this board is one of relief, not of fist-pumping. But as one poster has recently quoted, “You are entitled to your opinion, you are not entitled to your own facts.” The reality is index investors get the averages, but that does not mean “getting the same average return like most everyone else.” Everyone else is competing with fund managers, hedge fund teams, university endowments, and other dedicated professionals. Everyone else is highly subject to the twin demons of greed and fear. Over a 10, 15, 20 year time span, some significant minority, estimated around 15% or so, of those individual investors will beat the averages. The rest will not. That’s not just a comforting bedtime story that Bogleheads tell one another. That’s the evidence, based on the quantifiable and verifiable facts.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell
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cinghiale
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Re: How do Bogleheads cope with not beating the market?

Post by cinghiale »

Here’s an excellent article from Mark Hulbert on the Harvard endowment that both substantiates and illustrates the points made above.

https://www.marketwatch.com/story/what- ... 2020-10-09
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell
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Re: How do Bogleheads cope with not beating the market?

Post by HomerJ »

cinghiale wrote: Fri Oct 16, 2020 2:17 amThe reality is index investors get the averages, but that does not mean “getting the same average return like most everyone else.” Everyone else is competing with fund managers, hedge fund teams, university endowments, and other dedicated professionals. Everyone else is highly subject to the twin demons of greed and fear. Over a 10, 15, 20 year time span, some significant minority, estimated around 15% or so, of those individual investors will beat the averages. The rest will not. That’s not just a comforting bedtime story that Bogleheads tell one another. That’s the evidence, based on the quantifiable and verifiable facts.
This.

Actually getting the market return is a huge win.

Sure 15% of investors beat the market over the long run.

But without even trying, we can be the top 20% of investors.

15% beat the market returns
5% get the market returns
80% trail the market returns.

It's a lot of work to get in the top 15%.

It's super easy to get into the top 20%.

Don't tell yourself that investing in index funds means you can't beat the market (even though that's true).

Tell yourself that investing in index funds means you can't TRAIL the market.

A plan where you get rich and don't have to do a lot of work? What's not to like?
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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"The Dream of a Perfect Plan"

Post by Taylor Larimore »

000 wrote: Wed Oct 14, 2020 5:41 pm "The greatest enemy of a good plan is the dream of a perfect plan." -- Karl von Clausewitz

The Dream of A Perfect Plan
000:

Every investor will benefit by reading this wonderful speech by Jack Bogle.

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: How do Bogleheads cope with not beating the market?

Post by galawdawg »

It takes a complete change in your perspective. Investing is NOT a competition.

Investing is a process that enables your money to grow over time. Much like growing an oak tree from a seedling. You plant it and ensure it has sufficient sunlight, nutrients and water. If you over-water or over-fertilize, it won't grow any faster, bigger or stronger...instead you'll kill it. Think you can dig it up and move it every few months to get faster growth...not a good idea.

However, if you have planted the seedling in a good location with the right amount of food and water, it will eventually grow on its own without the need for any action on your part, other than perhaps some very judicious pruning (rebalancing) when required to maintain the health of the tree. After twenty years you'll have a large, strong and robust oak tree.

The same holds true for your portfolio!

:sharebeer
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Rowan Oak
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Re: How do Bogleheads cope with not beating the market?

Post by Rowan Oak »

I invest in total market index funds (buy and hold) which means I don't have to worry about beating the market. I probably will beat the returns of most individual stock pickers, active fund managers, market timers, etc..
Last edited by Rowan Oak on Fri Oct 16, 2020 9:08 pm, edited 1 time in total.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger
Outer Marker
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Re: How do Bogleheads cope with not beating the market?

Post by Outer Marker »

I cope well knowing that my index funds beat 80% of actively managed funds, and that by having a strong stomach and aggressively rebalancing, I probably outperform 90% of retail investors.
Texanbybirth
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Re: How do Bogleheads cope with not beating the market?

Post by Texanbybirth »

I go play with my kids, read a book, take a walk with my wife, build/fix something around the house, workout. Seriously, the point of my Target Date Fund (our only retirement asset) is that I don't have to worry about this kind of stuff because people who are smarter than me are working on it.

Worrying about money is so...boring. I hope you find a more peaceful outlet for your energy/motivation, OP! :beer
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
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1789
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Re: How do Bogleheads cope with not beating the market?

Post by 1789 »

Texanbybirth wrote: Fri Oct 16, 2020 11:24 am I go play with my kids, read a book, take a walk with my wife, build/fix something around the house, workout. Seriously, the point of my Target Date Fund (our only retirement asset) is that I don't have to worry about this kind of stuff because people who are smarter than me are working on it.

Worrying about money is so...boring. I hope you find a more peaceful outlet for your energy/motivation, OP! :beer
+1. Well said.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
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Random Musings
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Re: How do Bogleheads cope with not beating the market?

Post by Random Musings »

I take nice vacations, have no debt, don't worry too much if a serious economic downturn will cause me to lose my job and so on..... Living within your means, saving for retirement and rainy days, and realizing that being "average" by investing in low cost passive/index funds (which is counterintuitive to most things in life) makes you a winner.

Don't worry about the minority that will have higher returns than you when comparing similar asset allocations, it's the 85% you beat in the long run that is key. With that sort of record, you are in the playoffs of financial success.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
acegolfer
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Re: How do Bogleheads cope with not beating the market?

Post by acegolfer »

I understand that not everyone agrees with efficient market hypothesis. But if you are in this camp, you won't be thinking like OP does. One of many implications of EMH is one cannot beat the market on a risk-adjusted return basis.
L82GAME
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Re: How do Bogleheads cope with not beating the market?

Post by L82GAME »

acegolfer wrote: Sat Oct 17, 2020 6:16 pm I understand that not everyone agrees with efficient market hypothesis. But if you are in this camp, you won't be thinking like OP does. One of many implications of EMH is one cannot beat the market on a risk-adjusted return basis.
+1. It’s about probabilities. When Fama and French determined in their 2010 study “Luck versus Skill in the Cross-Section of Mutual Fund Returns” that only managers in the 98th and 99th percentiles showed evidence of statistically significant skill, and that as of 2011, the percentage of managers with sufficient skill to “net alpha” in excess of costs was a measly 1.6%*, the deck is stacked against us for consistently beating the market for years and decades. I’ll take market returns minus a few basis points, thank you very much.

*“The Incredible Shrinking Alpha...”, 2nd ed., Berkin and Swedroe.
GoldenGoose
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Re: How do Bogleheads cope with not beating the market?

Post by GoldenGoose »

I kept seeing poster after poster claiming to beat 80% of this and 90% of that. If you still have the thought of "beating others", then subconsciously you still have that jealousy of not beating everyone else. Why not be a bit more philosophical like some other posters and think what you got is enough for yourself and be happy with it? Keep saying "I beat X% of people" tells me that you are just trying to reassure yourself and denying your inferiority. Would it make you feel much better to know that you already beat 99% of the population out there who don't even make enough money to save for a 401k?
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