Jack Bogle - Two Fund Portfolio

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absolute zero
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Re: Jack Bogle - Two Fund Portfolio

Post by absolute zero »

abuss368 wrote: Sun Apr 25, 2021 4:43 pm
absolute zero wrote: Sun Apr 25, 2021 3:22 pm
DB2 wrote: Sun Apr 25, 2021 1:02 pm
Alchemist wrote: Sat Apr 24, 2021 7:14 pm
absolute zero wrote: Sat Apr 24, 2021 5:33 pm But it’s sad that this thread promotes lack of regional diversification, and that certain posters continuously link within the forum back to this thread. The last thing newbie investors should be taught is to ignore mainstream portfolio recommendations, like those that are created by Vanguard, Fidelity, State Street, Schwab, etc.
I think the first thing newbie investors should be taught is to ignore mainstream portfolio recommendations. They are often higher cost and higher complexity. Additionally for the entire 25 years that international index funds have been available the only thing they would have provided anyone’s portfolio is higher cost, higher risk, and lower returns.

Any ‘newbie’ coming to the bogleheads forum since it started in 2007 (or even the Morningstar Diehard forums) would have been better off with a two fund portfolio than a three fund or much less four fund that Vanguard now recommends.

When are the supposed experts going to admit their advice has been bad for 14 or 23 or even 25 years?

Cry not for the two fund newbies
Backtesting doesn't predict the future though. If International would have outperformed U.S. over the last 20 years, would you have done something differently? Also, Jack Bogle lived in a different era and time period. The world is a lot different now and will continue to look differently than it did during Jack's lifetime.
Jack Bogle changed the investing landscape. But he truly was from a different era. To those who blindly follow his every piece of advice, I wonder, will they advise their grandchildren and great grandchildren to do the same?

If so, do they follow similar practices in other aspects of life? Perhaps they take their auto-maintenance recommendations from the late Henry Ford, dutifully changing their oil every 500 miles. Because after all, their great-grandfather preached to them when they were young about how wise a man Henry Ford once was. To steal a line from abuss - "He knew more about [cars] than any of us ever will!"
Interesting part is Warren Buffett is very much making investment decisions today. While Berkshire Hathaway has investments around the world, he tells us to “own index funds” and just “buy the S&P 500”.

Tony
That's not relevant (at all) to my comment. It's also not very interesting to me, but I understand why Buffet's opinion would be extremely interesting to you. Confirmation bias is a powerful thing.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

absolute zero wrote: Sun Apr 25, 2021 5:08 pm
abuss368 wrote: Sun Apr 25, 2021 4:43 pm
absolute zero wrote: Sun Apr 25, 2021 3:22 pm
DB2 wrote: Sun Apr 25, 2021 1:02 pm
Alchemist wrote: Sat Apr 24, 2021 7:14 pm

I think the first thing newbie investors should be taught is to ignore mainstream portfolio recommendations. They are often higher cost and higher complexity. Additionally for the entire 25 years that international index funds have been available the only thing they would have provided anyone’s portfolio is higher cost, higher risk, and lower returns.

Any ‘newbie’ coming to the bogleheads forum since it started in 2007 (or even the Morningstar Diehard forums) would have been better off with a two fund portfolio than a three fund or much less four fund that Vanguard now recommends.

When are the supposed experts going to admit their advice has been bad for 14 or 23 or even 25 years?

Cry not for the two fund newbies
Backtesting doesn't predict the future though. If International would have outperformed U.S. over the last 20 years, would you have done something differently? Also, Jack Bogle lived in a different era and time period. The world is a lot different now and will continue to look differently than it did during Jack's lifetime.
Jack Bogle changed the investing landscape. But he truly was from a different era. To those who blindly follow his every piece of advice, I wonder, will they advise their grandchildren and great grandchildren to do the same?

If so, do they follow similar practices in other aspects of life? Perhaps they take their auto-maintenance recommendations from the late Henry Ford, dutifully changing their oil every 500 miles. Because after all, their great-grandfather preached to them when they were young about how wise a man Henry Ford once was. To steal a line from abuss - "He knew more about [cars] than any of us ever will!"
Interesting part is Warren Buffett is very much making investment decisions today. While Berkshire Hathaway has investments around the world, he tells us to “own index funds” and just “buy the S&P 500”.

Tony
That's not relevant (at all) to my comment. It's also not very interesting to me, but I understand why Buffet's opinion would be extremely interesting to you. Confirmation bias is a powerful thing.
Absolutely! We all seek investment experts to learn from. Opinions and strategies vary.

I have learned that when investment experts disagree it probably will not make much difference.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

abuss368 wrote: Sun Apr 25, 2021 3:11 pm
anon_investor wrote: Sun Apr 25, 2021 3:05 pm
abuss368 wrote: Sun Apr 25, 2021 2:50 pm
anon_investor wrote: Sun Apr 25, 2021 2:19 pm
Triple digit golfer wrote: Sun Apr 25, 2021 2:16 pm

You are not counting the fact that international companies get revenue here in the U.S. as well.
Which is why the correlation between US stock market index and international stock market index is pretty close when the US stock market crashes. And why it is always good to have an emergency fund! :twisted:
In my opinion (and I see both perspectives) this has a lot of merit. It fees like every pullback anymore invokes both US and International dropping (international often more).

Holding enough in cash and bonds is part of the Two Fund Portfolio.

Tony
Cash truly king for a few days March 2020. All bonds and equities were down.
I type that old saying a lot on the forum.

Cash truly is King.

Tony
Cash is king, except during the all the times that cash is trash.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

abuss368 wrote: Sun Apr 25, 2021 5:08 pm
Triple digit golfer wrote: Sun Apr 25, 2021 4:56 pm
abuss368 wrote: Sun Apr 25, 2021 4:43 pm
absolute zero wrote: Sun Apr 25, 2021 3:22 pm
DB2 wrote: Sun Apr 25, 2021 1:02 pm

Backtesting doesn't predict the future though. If International would have outperformed U.S. over the last 20 years, would you have done something differently? Also, Jack Bogle lived in a different era and time period. The world is a lot different now and will continue to look differently than it did during Jack's lifetime.
Jack Bogle changed the investing landscape. But he truly was from a different era. To those who blindly follow his every piece of advice, I wonder, will they advise their grandchildren and great grandchildren to do the same?

If so, do they follow similar practices in other aspects of life? Perhaps they take their auto-maintenance recommendations from the late Henry Ford, dutifully changing their oil every 500 miles. Because after all, their great-grandfather preached to them when they were young about how wise a man Henry Ford once was. To steal a line from abuss - "He knew more about [cars] than any of us ever will!"
Interesting part is Warren Buffett is very much making investment decisions today. While Berkshire Hathaway has investments around the world, he tells us to “own index funds” and just “buy the S&P 500”.

Tony
Why will you listen to Bogle and Buffett but not other experts with as much or more knowledge and experience who disagree with them about international equities?
As Robert De Niro would say “There is a flip side to that coin”. Why listen to investment experts who recommend international investing and not to the investment experts who don’t?

In the long term it probably will not make a difference. That is unless international goes another 30 years with unfortunate returns.

The most important aspect is not the strategy but rather the philosophy. Rick Ferri often points this out. Each investor is different and must be able to stay the course with their strategy over the long term.

I have family and friends who are retired and living from dividends provided by Total Stock, High Dividend, and REITs. One friend retired young and has a huge amount of REITs in taxable and tax advantaged. Should I tell him that is not allowed in taxable or you that there is no international? Of course not and it would not go well. But he stuck with that strategy and it paid off. Real life family and friends right in front of me. It works. So yeah I really don’t take the arguments seriously.

Best.
Tony
That's a lot of not answering the question.

I asked up above why you purposely exclude half the world's equity markets. I also asked why you listen to two experts but not the majority, who happen to disagree with the two you listen to.

As the creator of this thread and your regular encouragement of forum members, novice and advanced, to purposely exclude international equities, I think the forum deserves an answer. You must have a reason for doing it and it must be a really good one since you push it so hard, regularly direct people to this thread, and bump this thread often even after it has appeared to die.
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Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

Alchemist wrote: Sun Apr 25, 2021 4:09 am
Nathan Drake wrote: Sat Apr 24, 2021 8:04 pm Much simpler to have just owned apple stock for this period. Much better returns, less cost to own, less complexity.

The one stock portfolio.
If you had been both recommending such a move and actually followed through with it yourself 10 or 15 or 20 years ago then you would deserve a lot of credit for an amazing investment strategy.

But you didn't....so this is just a silly straw man argument.

Jack Bogle was recommending U.S. only since the 1990's when international investing was first becoming mainstream and Vanguard (among others) were launching international index funds. He remained consistent over the decades. Myself and most people posting in this thread have had a two fund portfolio and have been recommending it on this forum for years.

I know you have a big bet on ex-U.S. stocks. This causes me no offense and I understand the valuation based arguments for that position. It is perfectly fine for reasonable people to disagree on this topic. What is not called for is the vitriolic attacks against those of us investing like Jack Bogle advised. Especially since this is the Bogleheads forum.
Right. And there's a reason I didn't hold just Apple stock, and that is because the future is unknowable and holding all of your eggs in one basket is risky. This is the same reason I don't just hold US stocks, regardless of the "outcome" over the last 10-20 years which you are confusing with "strategy". Because the risk of a prolonged downturn in the US stock market when valuations are much higher relative to international means that there's a high risk of mean reversion and poor outcomes during my investment horizon if I were to stake my entire portfolio in just that asset class.

2000-2009 was a depressing time to invest in US stocks, but how quickly that is forgotten in this past decade of outsized returns for US equities.

Jack Bogle was a pioneer who invented the greatest financial instrument for the common man ever created, but he's not without criticism. There's a lot of American exceptionalism baked into his thought process, and given the era that he lived it's certainly understandable, but it's not something actionable for tomorrow's investor class. "Own the haystack" he says, but excludes all international equities. "Nobody knows nothing", yet knows that US exceptionalism is a fundamental law of physics. "Reversion to the Mean" doesn't appear to ever happen with international stocks, who will always be dogs. "Valuations matter" Except for International because we should avoid that class even when valuations look reasonable.

Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?

https://www.marketwatch.com/story/would ... 1613677597
https://www.cnbc.com/2019/01/16/in-his- ... arket.html
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm
Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?
I am not so sure that is completely accurate. I recall Morningstar interviews with Jack Bogle where he moved a large percentage of his portfolio to bonds during the early technology years of 2000. I believe this was also compounded by his health and heart operation correct?

I do not recall any interviews (I have read a lot of them over the years) where Mr. Bogle completely exited all stocks.

Do you have a reference or link to an interview as this caught my attention and now I am curious.

Thanks.
Tony
Last edited by abuss368 on Sun Apr 25, 2021 8:05 pm, edited 1 time in total.
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Re: Jack Bogle - Two Fund Portfolio

Post by tradri »

Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm
Right. And there's a reason I didn't hold just Apple stock, and that is because the future is unknowable and holding all of your eggs in one basket is risky. This is the same reason I don't just hold US stocks, regardless of the "outcome" over the last 10-20 years which you are confusing with "strategy". Because the risk of a prolonged downturn in the US stock market when valuations are much higher relative to international means that there's a high risk of mean reversion and poor outcomes during my investment horizon if I were to stake my entire portfolio in just that asset class.

2000-2009 was a depressing time to invest in US stocks, but how quickly that is forgotten in this past decade of outsized returns for US equities.

Jack Bogle was a pioneer who invented the greatest financial instrument for the common man ever created, but he's not without criticism. There's a lot of American exceptionalism baked into his thought process, and given the era that he lived it's certainly understandable, but it's not something actionable for tomorrow's investor class. "Own the haystack" he says, but excludes all international equities. "Nobody knows nothing", yet knows that US exceptionalism is a fundamental law of physics. "Reversion to the Mean" doesn't appear to ever happen with international stocks, who will always be dogs. "Valuations matter" Except for International because we should avoid that class even when valuations look reasonable.

Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?

https://www.marketwatch.com/story/would ... 1613677597
https://www.cnbc.com/2019/01/16/in-his- ... arket.html
I totally understand where you are coming from and I'm not American myself so I have no (psychological) problem investing in global stocks.

However, I have to admit that there are niche strategies (like factor or leveraged ETFs) where global diversification isn't easily achievable. Therefore, I think it's sometimes justified to use the US market as a proxy for the equity premium in general.
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Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

abuss368 wrote: Sun Apr 25, 2021 6:03 pm
Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm
Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?
I am not so sure that is completely accurate. I recall Morningstar interviews with Jack Bogle where he moved a large percentage of his portfolio to bonds during the early technology years of 2000. I believe this was also compounded by his health and heart operation correct?

I do not recall any interviews (I have ready a lot of them over the years) where Mr. Bogle completely exited all stocks.

Do you have a reference or link to an interview as this caught my attention and now I am curious.

Thanks.
Tony
I'm having difficulty finding the interview, but you may be right that it wasn't completely out of stocks. But it was a huge market timing move that happened to pay off.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Nathan Drake wrote: Sun Apr 25, 2021 6:26 pm
abuss368 wrote: Sun Apr 25, 2021 6:03 pm
Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm
Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?
I am not so sure that is completely accurate. I recall Morningstar interviews with Jack Bogle where he moved a large percentage of his portfolio to bonds during the early technology years of 2000. I believe this was also compounded by his health and heart operation correct?

I do not recall any interviews (I have ready a lot of them over the years) where Mr. Bogle completely exited all stocks.

Do you have a reference or link to an interview as this caught my attention and now I am curious.

Thanks.
Tony
I'm having difficulty finding the interview, but you may be right that it wasn't completely out of stocks. But it was a huge market timing move that happened to pay off.
He said he did it because his heart was failing and he wanted to make sure his family was taken care of. That is more of an AA change than pure market timing.
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Re: Jack Bogle - Two Fund Portfolio

Post by txhill »

On US v. Total World, I’m glad the horse I picked (US) was the right one. But I know it was merely luck. In terms of what is the soundest approach philosophically, I think total world makes plenty of sense—- but I’m not about to rebalance to include international. Seems to me that during our lifetimes, the US is a good enough proxy for equity performance given its size, and there are reasons to suspect it has durable systemic advantages.

I hope someday folks are choosing between Total Solar System or Total Galactic. There might be reasons to pick one over the other then too.
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Re: Jack Bogle - Two Fund Portfolio

Post by tradri »

txhill wrote: Sun Apr 25, 2021 7:07 pm
I hope someday folks are choosing between Total Solar System or Total Galactic. There might be reasons to pick one over the other then too.
Just go with Total Universe.
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Re: Jack Bogle - Two Fund Portfolio

Post by lostdog »

It's good for young novice investors to see the other side of the coin in this thread.

Just need an honest answer here from the U.S. only folks "because Jack said so".

If the international index destroys the U.S index for for an extended period of time, can you honestly sit tight in this two fund portfolio and watch and beat your chest and stay the course while the other half of the world stocks are soaring?
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Every Portfolio Should Include Internationals!!!

Post by BabaWawa »

I've held the same allocation to Internationals for over 35 years. It's worked out well through rebalancing when called for. I believe Rick Ferri says the main driver of portfolio performance and risk management starts with your equity/fixed income decision. How you dice it up after that is icing on the cake.

I love how some of the same folks who are critical of SCV tilters for not owning market weight, are also the ones that have no issue when it comes to excluding 40% of world's economy. Go figure.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

lostdog wrote: Sun Apr 25, 2021 7:11 pm It's good for young novice investors to see the other side of the coin in this thread.

Just need an honest answer here from the U.S. only folks "because Jack said so".

If the international index destroys the U.S index for for an extended period of time, can you honestly sit tight in this two fund portfolio and watch and beat your chest and stay the course while the other half of the world stocks are soaring?
Yep, just like international advocates have done the last decade, right?
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Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

anon_investor wrote: Sun Apr 25, 2021 8:01 pm
lostdog wrote: Sun Apr 25, 2021 7:11 pm It's good for young novice investors to see the other side of the coin in this thread.

Just need an honest answer here from the U.S. only folks "because Jack said so".

If the international index destroys the U.S index for for an extended period of time, can you honestly sit tight in this two fund portfolio and watch and beat your chest and stay the course while the other half of the world stocks are soaring?
Yep, just like international advocates have done the last decade, right?
International advocates aren’t 100% international
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Re: Jack Bogle - Two Fund Portfolio

Post by txhill »

lostdog wrote: Sun Apr 25, 2021 7:11 pm It's good for young novice investors to see the other side of the coin in this thread.

Just need an honest answer here from the U.S. only folks "because Jack said so".

If the international index destroys the U.S index for for an extended period of time, can you honestly sit tight in this two fund portfolio and watch and beat your chest and stay the course while the other half of the world stocks are soaring?
I suspect that one would do better sticking to their US/Int'l allocation (even if 100% US) than they would if they changed horses in midstream, just because US or international happened to have a good decade. It would turn one investment decision into several, which seems unwise to me in this context (i.e., where US and World are both tried and true fine options over the long run).
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Re: Jack Bogle - Two Fund Portfolio

Post by txhill »

tradri wrote: Sun Apr 25, 2021 7:11 pm
txhill wrote: Sun Apr 25, 2021 7:07 pm
I hope someday folks are choosing between Total Solar System or Total Galactic. There might be reasons to pick one over the other then too.
Just go with Total Universe.
Why not Total Multiverse?
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

txhill wrote: Sun Apr 25, 2021 8:24 pm
lostdog wrote: Sun Apr 25, 2021 7:11 pm It's good for young novice investors to see the other side of the coin in this thread.

Just need an honest answer here from the U.S. only folks "because Jack said so".

If the international index destroys the U.S index for for an extended period of time, can you honestly sit tight in this two fund portfolio and watch and beat your chest and stay the course while the other half of the world stocks are soaring?
I suspect that one would do better sticking to their US/Int'l allocation (even if 100% US) than they would if they changed horses in midstream, just because US or international happened to have a good decade. It would turn one investment decision into several, which seems unwise to me in this context (i.e., where US and World are both tried and true fine options over the long run).
That is part of why I am not changing from 100% US, it has been working for me for a couple of decades.
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Re: Every Portfolio Should Include Internationals!!!

Post by LunarOpal »

BabaWawa wrote: Sun Apr 25, 2021 7:48 pm I've held the same allocation to Internationals for over 35 years. It's worked out well through rebalancing when called for. I believe Rick Ferri says the main driver of portfolio performance and risk management starts with your equity/fixed income decision. How you dice it up after that is icing on the cake.

I love how some of the same folks who are critical of SCV tilters for not owning market weight, are also the ones that have no issue when it comes to excluding 40% of world's economy. Go figure.
The "40% of the world's economy" argument seems to want to make the analogy: VFINX is to VTSAX as VTSAX is to VTWAX.

But that's a not-great to bad analogy because ex-US includes hundreds of countries, all with very different laws governing markets. US securities laws are focused on protecting investors and making sure that insiders, etc. don't benefit at the expense of regular investors.

Some developed countries have similar rules...but many many other countries (including some highly developed countries) have a very different focus. Germany only recently outlawed insider trading (well, in the 90's), and companies there have have labor representatives on their boards of directors. I won't argue that that isn't a reasonable way to run a market. Or a country. But if you are a stockholder looking for gains...well, you're in second or third place. Both Germany and France also have companies where the government owns a substantial portion of the stock...France more than Germany, but the state of Lower Saxony in Germany owns 10% of VW, for example. Japan and Korea have laws focused on not getting in the way of Keiretsu/Chaebols. Other countries have laws designed to protect their national champions *from* shareholders.

Most countries don't play the game by the same rules as the US. That doesn't mean that their rules are bad. But they are *different*, and if you expect the same results you'll get playing the US game, you may be disappointed. Or not; I can't predict the future. But I do think that international proponents tend to ignore that different countries do things differently, sometimes very differently, and you can't expect that just because "they" have companies and "we" have companies, that the returns from the companies are going to be similar.
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Re: Every Portfolio Should Include Internationals!!!

Post by Nathan Drake »

LunarOpal wrote: Sun Apr 25, 2021 11:41 pm
BabaWawa wrote: Sun Apr 25, 2021 7:48 pm I've held the same allocation to Internationals for over 35 years. It's worked out well through rebalancing when called for. I believe Rick Ferri says the main driver of portfolio performance and risk management starts with your equity/fixed income decision. How you dice it up after that is icing on the cake.

I love how some of the same folks who are critical of SCV tilters for not owning market weight, are also the ones that have no issue when it comes to excluding 40% of world's economy. Go figure.
The "40% of the world's economy" argument seems to want to make the analogy: VFINX is to VTSAX as VTSAX is to VTWAX.

But that's a not-great to bad analogy because ex-US includes hundreds of countries, all with very different laws governing markets. US securities laws are focused on protecting investors and making sure that insiders, etc. don't benefit at the expense of regular investors.

Some developed countries have similar rules...but many many other countries (including some highly developed countries) have a very different focus. Germany only recently outlawed insider trading (well, in the 90's), and companies there have have labor representatives on their boards of directors. I won't argue that that isn't a reasonable way to run a market. Or a country. But if you are a stockholder looking for gains...well, you're in second or third place. Both Germany and France also have companies where the government owns a substantial portion of the stock...France more than Germany, but the state of Lower Saxony in Germany owns 10% of VW, for example. Japan and Korea have laws focused on not getting in the way of Keiretsu/Chaebols. Other countries have laws designed to protect their national champions *from* shareholders.

Most countries don't play the game by the same rules as the US. That doesn't mean that their rules are bad. But they are *different*, and if you expect the same results you'll get playing the US game, you may be disappointed. Or not; I can't predict the future. But I do think that international proponents tend to ignore that different countries do things differently, sometimes very differently, and you can't expect that just because "they" have companies and "we" have companies, that the returns from the companies are going to be similar.
On the flip side, China is a large portion of international and emerging markets.

The situation of their workers is far worse than that of the average US citizen in terms of pay/hours worked, how will the US compete with such a nation that had very little regard for anything but massive growth?
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Re: Jack Bogle - Two Fund Portfolio

Post by TropikThunder »

abuss368 wrote: Sun Apr 25, 2021 2:51 pm
I do not have a separate and low yielding “emergency fund”. No percentage or allocation.
Yea you do.
abuss368 wrote: Sun Apr 25, 2021 2:51 pm Just one checking and one money market fund.

Cash. Plain and simple. It builds. We use it. It is there when needed.

Simple.
Tony
Yeah, that’s an emergency fund.
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Re: Jack Bogle - Two Fund Portfolio

Post by Alchemist »

Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm Right. And there's a reason I didn't hold just Apple stock, and that is because the future is unknowable and holding all of your eggs in one basket is risky. This is the same reason I don't just hold US stocks, regardless of the "outcome" over the last 10-20 years which you are confusing with "strategy". Because the risk of a prolonged downturn in the US stock market when valuations are much higher relative to international means that there's a high risk of mean reversion and poor outcomes during my investment horizon if I were to stake my entire portfolio in just that asset class.
There are a lot of things to unpack here but I will try to instead focus on a couple of the most important to clarify our discussion and keep it productive. First I understand your argument about buying everything so as to avoid any sort of bet. If that is how you approach investing, a true 'know-nothing' philosophy, then thats fine. I take a different approach but that strategy is perfectly reasonable. But you kind of undercut that idea by then immediately referring to valuations....so do you know something about the future from valuations? What is the point of bringing them up in this context?

Also a strategy must be judged by its outcome compared to its intended goal. When the top investing advisors were recommending international allocations in 1996 they promised a reduction in risk with no reduction in return. Instead US investors got deeper drawdowns and significantly handicapped returns. The strategy failed to perform according to its own intended purpose.
Nathan Drake wrote:2000-2009 was a depressing time to invest in US stocks, but how quickly that is forgotten in this past decade of outsized returns for US equities.
Funny you mention that. I began investing at the end of that decade, when 10 year backtests for US stocks looked pretty bad. But I did not then, nor do I now, invest based on backtests. The best use of backtests is to evaluate predictions made in the past. Not to be used in order to make predictions about the future.

So that brings me to my last point, the primary reason I am 100% US is because I think most of the developed world is already well into the process of Japanification. As in economic stagnation and the accompanying equity market stagnation. The cause of this is demographic trends as Europe, Japan, Taiwan, South Korea, and even China are already experiencing contracting working age populations with absolute population decline occurring or about to. The US is one of the few exceptions among developed markets and the only large developed market to be an exception (others include massive markets like...New Zealand). Our working age population is and will continue to grow. Slower than historical norms but still quite positive. This is something that simply isn't captured in any historical graph because it is an event (demographic inversion across much of the global economy) that simply has never happened.

Robot Monster already linked it but many seem to have ignored his reference to a thread I started a while ago deep diving this viewpoint:
viewtopic.php?t=322407

Sadly it was closed but for the life of me can't figure out why. Perhaps if there is any interest I will petition the mods to re-open it. Oh and I offered a specific, measurable predictions on equity performance that I will hold myself accountable to come 2030.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

txhill wrote: Sun Apr 25, 2021 8:25 pm
tradri wrote: Sun Apr 25, 2021 7:11 pm
txhill wrote: Sun Apr 25, 2021 7:07 pm
I hope someday folks are choosing between Total Solar System or Total Galactic. There might be reasons to pick one over the other then too.
Just go with Total Universe.
Why not Total Multiverse?
Would there be some BHs that advocate a miniverse value tilt?
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Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

txhill wrote: Sun Apr 25, 2021 8:25 pm
tradri wrote: Sun Apr 25, 2021 7:11 pm
txhill wrote: Sun Apr 25, 2021 7:07 pm
I hope someday folks are choosing between Total Solar System or Total Galactic. There might be reasons to pick one over the other then too.
Just go with Total Universe.
Why not Total Multiverse?
I don't believe in multiverses.
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Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

Alchemist wrote: Mon Apr 26, 2021 6:13 am
Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm Right. And there's a reason I didn't hold just Apple stock, and that is because the future is unknowable and holding all of your eggs in one basket is risky. This is the same reason I don't just hold US stocks, regardless of the "outcome" over the last 10-20 years which you are confusing with "strategy". Because the risk of a prolonged downturn in the US stock market when valuations are much higher relative to international means that there's a high risk of mean reversion and poor outcomes during my investment horizon if I were to stake my entire portfolio in just that asset class.
There are a lot of things to unpack here but I will try to instead focus on a couple of the most important to clarify our discussion and keep it productive. First I understand your argument about buying everything so as to avoid any sort of bet. If that is how you approach investing, a true 'know-nothing' philosophy, then thats fine. I take a different approach but that strategy is perfectly reasonable. But you kind of undercut that idea by then immediately referring to valuations....so do you know something about the future from valuations? What is the point of bringing them up in this context?

Also a strategy must be judged by its outcome compared to its intended goal. When the top investing advisors were recommending international allocations in 1996 they promised a reduction in risk with no reduction in return. Instead US investors got deeper drawdowns and significantly handicapped returns. The strategy failed to perform according to its own intended purpose.
Nathan Drake wrote:2000-2009 was a depressing time to invest in US stocks, but how quickly that is forgotten in this past decade of outsized returns for US equities.
Funny you mention that. I began investing at the end of that decade, when 10 year backtests for US stocks looked pretty bad. But I did not then, nor do I now, invest based on backtests. The best use of backtests is to evaluate predictions made in the past. Not to be used in order to make predictions about the future.

So that brings me to my last point, the primary reason I am 100% US is because I think most of the developed world is already well into the process of Japanification. As in economic stagnation and the accompanying equity market stagnation. The cause of this is demographic trends as Europe, Japan, Taiwan, South Korea, and even China are already experiencing contracting working age populations with absolute population decline occurring or about to. The US is one of the few exceptions among developed markets and the only large developed market to be an exception (others include massive markets like...New Zealand). Our working age population is and will continue to grow. Slower than historical norms but still quite positive. This is something that simply isn't captured in any historical graph because it is an event (demographic inversion across much of the global economy) that simply has never happened.

Robot Monster already linked it but many seem to have ignored his reference to a thread I started a while ago deep diving this viewpoint:
viewtopic.php?t=322407

Sadly it was closed but for the life of me can't figure out why. Perhaps if there is any interest I will petition the mods to re-open it. Oh and I offered a specific, measurable predictions on equity performance that I will hold myself accountable to come 2030.
Valuations absolutely matter. They were sky high in 2000 like they are now, and returns were poor the following decade. They were far better for international, EM, and SCV.

Could valuations continue rising for US TSM? Yes. I am not counting on the spreads to continue in perpetuity, however. Which is why US LCG is still part of my portfolio but I’m only limiting it to around 20%.

The demographics argument holds very little weight with me. Developed markets receive an even greater share of revenues from emerging markets with much better demographic growth rates. So strictly viewing investment opportunities through the lens of the region a company is headquartered isn’t seeing the bigger picture.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Impressive thread with a lot of items to consider.

Thanks Bogleheads!

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Re: Jack Bogle - Two Fund Portfolio

Post by Astones »

Is there a thread where people discuss total US vs All-World?
I mean there must be. It's as hot as dividends as a topic.
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Re: Jack Bogle - Two Fund Portfolio

Post by snailderby »

Astones wrote: Mon Apr 26, 2021 6:38 pm Is there a thread where people discuss total US vs All-World?
I mean there must be. It's as hot as dividends as a topic.
Yes. Run a search for "international" or a similar term and you'll find dozens of posts on the topic. Here are just a few, for starters. (Post counts might be outdated.)

viewtopic.php?t=196956 (755 posts);
viewtopic.php?t=243785 (225 posts);
viewtopic.php?t=255757 (538 posts);
viewtopic.php?t=256423 (1248 posts);
viewtopic.php?t=270186 (43 posts);
viewtopic.php?t=278133 (205 posts);
viewtopic.php?t=279564 (229 posts);
viewtopic.php?t=280524 (105 posts);
viewtopic.php?t=283603 (114 posts);
viewtopic.php?t=283844 (83 posts);
viewtopic.php?t=296055 (213 posts);
viewtopic.php?t=297364 (65 posts); and
viewtopic.php?t=318974 (353 posts and counting).

On one hand, diversifying outside the United States hedges against the risk that the U.S. stock market might stagnate for several decades, like Japan. Siamond has a great post on the Bogleheads blog on this called "50 Years of Investing in the World," or something similar. You should "own the entire (investable stock market) haystack," the argument goes.

On the other hand, some of the arguments I've seen against holding international stocks at their global market weight include (i) currency risk, (ii) the higher expense ratios of some international funds (especially in the past, and especially for factor or specialty funds), (iii) the fact that many large U.S. companies already derive a significant portion of their revenue from international sales, (iv) the less transparent and free regulatory structures of some foreign countries, arguably making it harder to accurately price investments in those countries, and (v) the argument that you historically could have achieved much of the diversification benefit of international stocks by holding them at something less than global market cap weight, like 20% or 30%.
Last edited by snailderby on Mon Apr 26, 2021 8:02 pm, edited 2 times in total.
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Re: Jack Bogle - Two Fund Portfolio

Post by Astones »

Nice.
Yeah, I expected many discussions about it. After all, it's one of the most unconventional opinions Bogle had.
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Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

Astones wrote: Mon Apr 26, 2021 7:54 pm Nice.
Yeah, I expected many discussions about it. After all, it's one of the most unconventional opinions Bogle had.
Many of Mr.Bogle's opinions were unconventional until they became conventional.
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Re: Jack Bogle - Two Fund Portfolio

Post by Astones »

ruralavalon wrote: Tue Apr 27, 2021 9:48 am Many of Mr.Bogle's opinions were unconventional until they became conventional.
Sure. However, this sounded kind of unexpected from him due to the fact that investing in a world index appears to be a fairly logical conclusion from the premise at the basis of his thought.
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Re: Jack Bogle - Two Fund Portfolio

Post by AlwaysLearningMore »

Astones wrote: Tue Apr 27, 2021 9:55 am
ruralavalon wrote: Tue Apr 27, 2021 9:48 am Many of Mr.Bogle's opinions were unconventional until they became conventional.
Sure. However, this sounded kind of unexpected from him due to the fact that investing in a world index appears to be a fairly logical conclusion from the premise at the basis of his thought.
Given currency, legal and political differences among the US and other countries (esp. emerging markets), investing globally if far from frictionless. Mr. Bogle had his reasons. YMMV.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

ruralavalon wrote: Tue Apr 27, 2021 9:48 am
Astones wrote: Mon Apr 26, 2021 7:54 pm Nice.
Yeah, I expected many discussions about it. After all, it's one of the most unconventional opinions Bogle had.
Many of Mr.Bogle's opinions were unconventional until they became conventional.
And vice versa: many of his opinions have, over time, become less and less defensible.
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Re: Jack Bogle - Two Fund Portfolio

Post by Taylor Larimore »

vineviz wrote:Many of his (Mr. Bogle's) opinions have, over time, become less and less defensible.
vineviz:

Which of Mr. Bogle's opinions have become "less and less defensible?"

Thank you.
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Re: Jack Bogle - Two Fund Portfolio

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Don't feed the trolls.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Taylor Larimore wrote: Tue Apr 27, 2021 2:08 pm
vineviz wrote:Many of his (Mr. Bogle's) opinions have, over time, become less and less defensible.
vineviz:

Which of Mr. Bogle's opinions have become "less and less defensible?"

Thank you.
Taylor
Jack Bogle's Words of Wisdom: "Fund marketers favor the fads that are in the momentary limelight, with the expectation that investors will take the bait."
You know the list as well as I do: "age in bonds", "you don't need international stocks", "ETFs are bad", and "target date funds are bad" all come quickly to mind.
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Re: Jack Bogle - Two Fund Portfolio

Post by Taylor Larimore »

vineviz wrote:Many of his (Mr. Bogle's) opinions have, over time, become less and less defensible.
Taylor wrote: Which of Mr. Bogle's opinions have become "less and less defensible?"
vineviz wrote: You know the list as well as I do: "age in bonds", "you don't need international stocks", "ETFs are bad", and "target date funds are bad" all come quickly to mind.
vineviz:

Mr. Bogle Wrote:

"Age in Bonds"

"I recommended as a crude starting point that an investor's bond position should equal his or her age.--Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position" Common Sense on Mutual Funds. page 88

"You don't need international stocks"

Mr. Bogle wrote: "Since 1994 (publishing date of "Bogle on Mutual Funds") as it was to happen, the U.S. S&P 500 Index was to rise by 743%, while the EAFE Index of non-U.S. stocks rose by 237%." The Bogleheads' Guide to The Three-Fund Portfolio. page xiii

"ETFs are bad"

Mr. Bogle wrote: "TDFs can be an excellent choice, not only for investors who are just getting started with their investment programs, but also for investors who decide to adopt a simple strategy for funding their retirement." The Little Book of Common Sense Investing page 248

"target date funds are bad"

Mr. Bogle wrote: "I recommended--as a crude starting point--that an investor's bond position should equal his or her age. -- Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position. Common Sense on Mutual Funds page 88

Best wishes
Taylor
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Taylor Larimore wrote: Wed Apr 28, 2021 11:56 am
vineviz wrote:Many of his (Mr. Bogle's) opinions have, over time, become less and less defensible.
Taylor wrote: Which of Mr. Bogle's opinions have become "less and less defensible?"
vineviz wrote: You know the list as well as I do: "age in bonds", "you don't need international stocks", "ETFs are bad", and "target date funds are bad" all come quickly to mind.
vineviz:

Mr. Bogle Wrote:

"Age in Bonds"

"I recommended as a crude starting point that an investor's bond position should equal his or her age.--Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position" Common Sense on Mutual Funds. page 88

"You don't need international stocks"

Mr. Bogle wrote: "Since 1994 (publishing date of "Bogle on Mutual Funds") as it was to happen, the U.S. S&P 500 Index was to rise by 743%, while the EAFE Index of non-U.S. stocks rose by 237%." The Bogleheads' Guide to The Three-Fund Portfolio. page xiii

"ETFs are bad"

Mr. Bogle wrote: "TDFs can be an excellent choice, not only for investors who are just getting started with their investment programs, but also for investors who decide to adopt a simple strategy for funding their retirement." The Little Book of Common Sense Investing page 248

"target date funds are bad"

Mr. Bogle wrote: "I recommended--as a crude starting point--that an investor's bond position should equal his or her age. -- Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position. Common Sense on Mutual Funds page 88

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "One of our most important values is candor--tell the whole truth and nothing but the truth, with no strings attached, and let the chips fall where they may."
Taylor -

Thank you for setting the ship straight with references to Jack Bogle’s books!

That helps.
Tony
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

abuss368 wrote: Wed Apr 28, 2021 6:16 pm

Thank you for setting the ship straight with references to Jack Bogle’s books!
Repeating a fallacy doesn’t make it less fallacious.
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Re: Jack Bogle - Two Fund Portfolio

Post by LadyGeek »

The discussion is getting contentious. The points have been made, let's move on.
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Re: Jack Bogle - Two Fund Portfolio

Post by moontower »

[Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
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Re: A time to EVALUATE your jitters

Post by climber2020 »

moontower wrote: Sat May 01, 2021 9:00 pm Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.
1) VEDTX only goes back to 2007.

2) A portfolio of 100% AAPL demolished that portfolio during that time span.
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Re: Jack Bogle - Two Fund Portfolio

Post by LadyGeek »

I merged moontower's thread into the ongoing discussion. (Moved from A time to EVALUATE your jitters)
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Re: A time to EVALUATE your jitters

Post by bertilak »

moontower wrote: Sat May 01, 2021 9:00 pm [Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
So, essentially you too have 60/40 portfolio using index funds for stocks and bonds. It's about the same as other two-fund portfolios except you happen to focus on growth stocks which happen to have done quite well for the past 2 or 3 years.

Both growth stocks and long term bonds are reasonable investments but their ability to "beat EVERYTHING" can be fleeting.

The point of broader indexes is that particular "flavors" of stocks (e.g. growth vs value) are not consistent in their relative performances over the years. Perhaps it is best to hold them all -- unless you really do "know when to hold 'em and know when to fold 'em." Note that the name of Kenny Rogers famous song is "The Gambler," not the "The Investor."
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Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

The 13 years since the inception of Vanguard Growth ETF (VUG) is not very long, and doesn't prove much. Invest for the long-term, not for the short-term.

moontower wrote: Sat May 01, 2021 9:00 pm [Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
Vanguard Growth ETF (VUG) is not as diversified as a total stock market index fund or a S&P 500 index fund, which include both growth and value stocks.

Past performance is not an indication of future performance, growth stocks will not always give better performance, the top performers change constantly.

In fact year to date (YTD) Vanguard Small-Cap Value ETF (VBR) is up 21.55% and so has crushed Vanguard Growth ETF (VUG) which is at just 8.48% YTD. In general over the long haul growth stocks have not done as well as value stocks. Larry Swedroe, etf.com (10/11/2013), "The ‘Black Hole Of Investing’ ", link.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

ruralavalon wrote: Sun May 02, 2021 10:17 am In general over the long haul growth stocks have not done as well as value stocks. Larry Swedroe, etf.com (10/11/2013), "The ‘Black Hole Of Investing’ ", link.
I would expect all styles and sectors to have their day in the sun at any given point in time. The table of asset classes provides for that.

If investors focus on owning the haystack then there is no need to add additional complexity with styles and sectors.

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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

moontower wrote: Sat May 01, 2021 9:00 pm [Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
Why VUG? Why not VGT?
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

anon_investor wrote: Sun May 02, 2021 2:10 pm
moontower wrote: Sat May 01, 2021 9:00 pm [Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
Why VUG? Why not VGT?
As much as technology has shot to the sky (and hard to watch from sidelines sometimes) I remind myself that technology has been approximately 25% of TSM lately.

I have watched IGM which is interesting as a pure tech play as it includes Google, Facebook, and Amazon which are classified differently in many technology funds.

I will stay the course.
Tony
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

abuss368 wrote: Sun May 02, 2021 2:21 pm
anon_investor wrote: Sun May 02, 2021 2:10 pm
moontower wrote: Sat May 01, 2021 9:00 pm [Thread merged into here --admin LadyGeek]

TWO FUND porfolio

Show me i'm wrong, but just a 60/40 porfolio of VUG 60% and VEDTX (now EDV) 40% beats EVERYTHING back to early 2000s.

Can it really be that simple going forward, just 60% VUG/40% VEDTX and you beat S&P index by 1 to 2 full points with one third of the drawdown?
Why VUG? Why not VGT?
As much as technology has shot to the sky (and hard to watch from sidelines sometimes) I remind myself that technology has been approximately 25% of TSM lately.

I have watched IGM which is interesting as a pure tech play as it includes Google, Facebook, and Amazon which are classified differently in many technology funds.

I will stay the course.
Tony
For my main portfolio I stick with VTSAX. I admit I have some VUG and VGT, but not presently buying more.
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Re: Jack Bogle - Two Fund Portfolio

Post by Brianmcg321 »

Nathan Drake wrote: Sun Apr 25, 2021 6:26 pm
abuss368 wrote: Sun Apr 25, 2021 6:03 pm
Nathan Drake wrote: Sun Apr 25, 2021 5:57 pm
Jack also infamously "got out" of the US market completely before the tech bubble, citing valuations. Interesting thoughts on Jack Bogle regarding US Stock Market valuations - should give the Two Funders pause, No?
I am not so sure that is completely accurate. I recall Morningstar interviews with Jack Bogle where he moved a large percentage of his portfolio to bonds during the early technology years of 2000. I believe this was also compounded by his health and heart operation correct?

I do not recall any interviews (I have ready a lot of them over the years) where Mr. Bogle completely exited all stocks.

Do you have a reference or link to an interview as this caught my attention and now I am curious.

Thanks.
Tony
I'm having difficulty finding the interview, but you may be right that it wasn't completely out of stocks. But it was a huge market timing move that happened to pay off.
He wasn’t timing the market. He thought he was going to die.
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