“Buy and Hold No More” says A16Z

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jeffh19
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Re: “Buy and Hold No More” says A16Z

Post by jeffh19 »

nedsaid wrote: Sun Apr 11, 2021 2:42 pm
jeffh19 wrote: Sun Apr 11, 2021 2:29 pm I meant to add to my post above, I’m also thinking of moving international index money into VTI/VUG/BTC

Which for a noble head seems counterintuitive as US seems really over valued and vxus isn’t and hasn’t performed for crap compared to US for longer than I’ve been investing, and I don’t know if people really expect that to change maybe ever.

I have to ask myself, is this right or am I just chasing returns?
Yes, you are just chasing returns. I am so old that I remember when standard wisdom was that International Stocks had slightly higher returns than the S&P 500 over the long term with lower correlation. It seemed like a no brainer to include International Stocks in a portfolio. Now that the U.S. has outperformed International since 2009, it is a no brainer to ignore International Stocks.

Boglehead portfolios used to include TIPS and REITs. Both have been largely abandoned. Now we are abandoning International. So we are down to two. Bonds aren't doing well and U.S. Stocks are outperforming bonds, won't be long we will be down to one fund. The next prolonged bear market will bring us to Zero.

I have often joked that we are racing towards the Zero Fund Portfolio, and we will brag about stuffing our cash into mattresses. My best selling book will detail how you can diversify by stuffing your cash into three mattresses, the three mattress portfolio. What could be simpler than stuffing mattresses with cash?

Don't ignore the old principles of diversification. If everything in your portfolio is working well at the same time, it is a sign that you might not be diversified enough. The U.S. Stock Market has done well because the U.S. is regarded as a safe haven, or as I like to say it, the least dirty shirt in the laundry hamper. The U.S. Dollar has been strong since the 2008-2009 financial crisis and this has greatly contributed to the outperformance of the U.S. Stock Market relative to other nations. This condition will not continue forever.
I think its an interesting discussion.

I think we have to look at each asset class and maybe adjust for the current world. I dont know if its a great idea to think we should hold the same assets/diversify in the same way people did 20-50 years ago. I'm also of a mindset of pure growth, and I also havent health with a very prolonged down market like the late 60s to early 80s etc. I think theres a good chance we are headed towards a major economic....something. Will stocks crash, or melt up with inflation etc? I have no idea. I do see the USD getting weaker for sure with all the QE and will they be able to stop the money printer?

I think its not super wise to invest in bonds right now, and I dont see them getting better at all with the current economic situation either. With the debt/money printing how can they afford to raise bonds that much? I think lots of money has seen this and the SP500 has almost turned into a store of value now as people move away from bonds etc. Real Estate I dont think is great either going forward with renters able to rent free for the last year or more and that is going until at least June. Another thing is businesses probably aren't going to be using as much office space as they have found people can work from home just fine, they could save a ton on rent, and also how many businesses didnt/wont survive the pandemic? I'm not saying real estate is a bad investment, and also not that people cant succeed managing real estate themselves either. I have heard of a lot of people wanting/getting out of real estate though. Obviously the vanguard real estate ETF still did very well. I may be 100% wrong in all my thinking. There is real estate exposure in VTSAX, I guess its enough for me. I've never been big into real estate, especially IRL, and its underperformed VTSAX/has more tax enough to where I've never diversified into any REITs.

With international..it seems that market hasn't outperformed US for God knows how long....and it also seems to follow the US market too. US market goes down, International seems to follow it most of the time. Its rare that I see international have a great day and US doesnt. There are some great companies in VXUS sure, and I dont know most of them but it also seems like the most dominant companies in the world are US. I just dont know if I really see international being a great dominant performer in the future especially if the US market tanks a bunch. Also if the USD weakens, a ton of international $ weakens too. Obviously not all, and maybe not the biggest international countries or performers I guess.

I've just heard a lot of people I respect financially say that diversification sometimes is diworsification, and you want most of/only the best and most dominant assets. Obviously its just hard to know what they will be in the future. One billionaire was saying advisors would want him to sell his best asset as it went to the moon, to diversify and buy more of 3 lesser things. He specifically mentioned advisors of his telling him to sell AAPL from 2012 on, or take some profits off the table and reinvest them in 3 medicare tech companies who he knew wouldn't have the return that AAPL would have, and kept it all in Apple and rode the massive wave up.

I think now more than ever things might be more top heavy than they ever have been.

I also am an idiot and dont know what I'm talking about either.
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watchnerd
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

jeffh19 wrote: Sun Apr 11, 2021 4:45 pm I do see the USD getting weaker for sure with all the QE and will they be able to stop the money printer?
Weaker relative to which currency?

The largest major currencies that trade with the USD are also engaging in QE.
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nedsaid
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

watchnerd wrote: Sun Apr 11, 2021 3:09 pm
nedsaid wrote: Sun Apr 11, 2021 2:42 pm Boglehead portfolios used to include TIPS and REITs. Both have been largely abandoned. Now we are abandoning International.
In the case of REITs, I think the de-throning was appropriate, given that studies have since shown it's not a distinct asset class, but, rather, a sector of stocks.

TIPS and international haven't been abandoned by me, but maybe I'm just retro.

MLPs might be due for a comeback, although the future of the carbon economy looks to be fading.
Even I am less enthusiastic about REITs than I was before. First, yield chasing has made REITs expensive. Second, correlation between REITs and the rest of the Stock Market has increased over time. Third, publicly traded REITs are amazingly volatile. That being said, I have kept my holdings but am not adding to them.

I am not abandoning TIPS or International Stocks, I believe both to be important asset classes for a diversified portfolio.
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nedsaid
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

OohLaLa wrote: Sun Apr 11, 2021 3:14 pm
nedsaid wrote: Sun Apr 11, 2021 2:42 pm [...]
The next prolonged bear market will bring us to Zero.
[...]
the three mattress portfolio.
[...]
the least dirty shirt in the laundry hamper.
[...]
hahaha Thanks for the hearty laugh. :beer You should definitely publish the book. Maybe it could be a children's book: "Dirty Shirty and the 3 Money Mattresses".
My gosh, my ideas are so good that the book writes itself. :wink: I particularly liked your suggested title. I got a good chuckle out of it.
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jeffh19
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Re: “Buy and Hold No More” says A16Z

Post by jeffh19 »

watchnerd wrote: Sun Apr 11, 2021 5:19 pm
jeffh19 wrote: Sun Apr 11, 2021 4:45 pm I do see the USD getting weaker for sure with all the QE and will they be able to stop the money printer?
Weaker relative to which currency?

The largest major currencies that trade with the USD are also engaging in QE.
Oh, probably almost zero. There aren't many majorish currencies that havent done QE as you just said. I'm just mentioning the obvious of the insane amount that we have printed, and will probably continue to do so. Hard to shut it off at this point and not many other options.

Just because other countries are printing too doesnt mean the USD isn't losing purchasing power/we aren't having inflation etc etc
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

jeffh19 wrote: Sun Apr 11, 2021 4:45 pm
I think its an interesting discussion.

I think we have to look at each asset class and maybe adjust for the current world. I dont know if its a great idea to think we should hold the same assets/diversify in the same way people did 20-50 years ago. I'm also of a mindset of pure growth, and I also havent health with a very prolonged down market like the late 60s to early 80s etc. I think theres a good chance we are headed towards a major economic....something. Will stocks crash, or melt up with inflation etc? I have no idea. I do see the USD getting weaker for sure with all the QE and will they be able to stop the money printer?

I think its not super wise to invest in bonds right now, and I dont see them getting better at all with the current economic situation either. With the debt/money printing how can they afford to raise bonds that much? I think lots of money has seen this and the SP500 has almost turned into a store of value now as people move away from bonds etc. Real Estate I dont think is great either going forward with renters able to rent free for the last year or more and that is going until at least June. Another thing is businesses probably aren't going to be using as much office space as they have found people can work from home just fine, they could save a ton on rent, and also how many businesses didnt/wont survive the pandemic? I'm not saying real estate is a bad investment, and also not that people cant succeed managing real estate themselves either. I have heard of a lot of people wanting/getting out of real estate though. Obviously the vanguard real estate ETF still did very well. I may be 100% wrong in all my thinking. There is real estate exposure in VTSAX, I guess its enough for me. I've never been big into real estate, especially IRL, and its underperformed VTSAX/has more tax enough to where I've never diversified into any REITs.

With international..it seems that market hasn't outperformed US for God knows how long....and it also seems to follow the US market too. US market goes down, International seems to follow it most of the time. Its rare that I see international have a great day and US doesnt. There are some great companies in VXUS sure, and I dont know most of them but it also seems like the most dominant companies in the world are US. I just dont know if I really see international being a great dominant performer in the future especially if the US market tanks a bunch. Also if the USD weakens, a ton of international $ weakens too. Obviously not all, and maybe not the biggest international countries or performers I guess.

I've just heard a lot of people I respect financially say that diversification sometimes is diworsification, and you want most of/only the best and most dominant assets. Obviously its just hard to know what they will be in the future. One billionaire was saying advisors would want him to sell his best asset as it went to the moon, to diversify and buy more of 3 lesser things. He specifically mentioned advisors of his telling him to sell AAPL from 2012 on, or take some profits off the table and reinvest them in 3 medicare tech companies who he knew wouldn't have the return that AAPL would have, and kept it all in Apple and rode the massive wave up.

I think now more than ever things might be more top heavy than they ever have been.

I also am an idiot and dont know what I'm talking about either.
You are not an idiot, I thought you raised some good points.

Definitely things are changing and we do have to rethink some things. Won't revisit it all here but there are good arguments regarding U.S. only investing, good arguments that Value is dead, good arguments that factors and tilting no longer work, etc. etc. etc. In other words, I might be wrong about a whole lot of things. It seems that I am only right about something here on the forum every six months or so.

As much as a lot of us like to believe we are contrarians, sometimes the crowd is right, your story regarding Apple is a good example.

There are things happening in the world that I am uncomfortable about but I am not certain how to deal with them. Whatever moves I make to deal with a changing world are slow and cautious, partly because I realize that I could be wrong.

By the way, I am not one of those who say that the 3 fund portfolio is obsolete. Any approach to investing seems challenging because of all of the money printing around the world to deal first with the financial crisis of 2008-2009 and later to deal with Covid-19. The prices of a lot of asset classes around the world have been bid up and it seems we are left with the least bad of unattractive options. For example, bonds have very low yields but there still is not a better alternative to diversify away the volatility of stocks.
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telemark
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Re: “Buy and Hold No More” says A16Z

Post by telemark »

I am a below average investor (it has to be someone), but indexing allows me to get average returns despite my complete ignorance of consumer trends. A win!

Also, "things" are always changing, but somehow this time is never different.
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Re: “Buy and Hold No More” says A16Z

Post by nisiprius »

txhill wrote: Sun Apr 11, 2021 8:27 amI don’t know that active investing is actually going to do better in the long term, but it sure seems like it will...
Then why have 80% of actively managed mutual fund underperformed the market over the last ten years?

SPIVA US 2020 year-end scorecard

Image

Do you think that professional mutual fund managers are so stupid that any retail investor with a little gumption can succeed where 80% of the pros have failed?

It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
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Re: “Buy and Hold No More” says A16Z

Post by fwellimort »

nisiprius wrote: Sun Apr 11, 2021 8:48 pm It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
If you notice SPIVA for last year on Small Cap Growth and Mid Cap Growth, then you will notice that only 13.71% and 17.16% underperformed after fees.

In other words, active before fees in (Small Cap and Mid Cap) Growth almost all outperformed the benchmark last year.
Covid did not happen 5 years ago. To use 5 years as 'evidence' is I feel a bit disingenuous.

Also, active mutual funds that track a benchmark have different risk tolerances from everyday retail investors.
Most active mutual funds for instance probably did not (and cannot) take advantage of GME short squeeze back on Jan (which many retail investors could [and the money that could be made for some were life changing]).
And there were many professionals who out of balance sheet did not believe in Tesla. It was the many retail investors on subreddits like WSB that believed in Tesla when professionals on TV would constantly claim that the stock will go to the ground.

And from what I evidenced from my peers (anecdotal), it seems it was mostly the younger generation that tilted heavily towards tech prior to the pandemic.
Many professionals prior to Covid constantly raved about how tech was overvalued and that tech would soon experience the dot com bubble.
I would state that in that case many professionals were very off and it was the younger retail investors that was right.
Professionals would have recommended 'diversifying' into industrials and utilities; anything but health care and tech.
Maybe the younger generation knew a thing or two and the older generation was just outdated and it took the pandemic for the older generation to realize how important tech/health care is becoming.

We know many here tilted towards health care and tech prior to the pandemic. In fact, I have not seen anyone tilt towards materials, utilities, etc. while I have seen plenty of Bogleheaders here focus more to tech/health care through tilting more to the Nasdaq benchmark.
And I know many people here would constantly criticize back that 'no one knows nothing', 'markets are efficient', 'you don't know better than professionals'.
And here we are. We (including me) all look like fools.

Retail investors believed in tech and health care a lot prior to the pandemic. Many professionals didn't.
So there's that.
I'm willing to accept that I was just a fool parroting others about 'efficient market hypothesis'. Tech was advancing right in front of our faces and it took the pandemic for professionals to recognize the change.

Since I'm still a fool and always will be a fool, I'm fine with average returns through the market index.
I expect retail investors to underperform as a net whole. Stock market short term is near a zero sum game and many new retail investors are poor at managing risk.
But I am not going to be in denial by stating that retail investors knew nothing as a whole. No. They might have poor risk managements but they sure do have eyes in things from time to time which balance sheets can't reveal.
As for tech and health care outperforming in the near future, who knows. Maybe tech and health care is relatively overvalued currently over other sectors. But if the tech sector is the place to be for long term innovation, maybe retail investors are right and even for the long run, it makes more sense to tilt towards the tech sector (e.g.: just how much 'creativity' can a sector like the banking sector really bring long term. Blockchain trades isn't going to bring in more 'profits' relative to autonomous vehicles, etc. [and I personally wouldn't want to live in a society in which in my life, the banking sector has greater returns than the tech sector. To me, that signals a failure for the country when traditional banking sectors end up getting more funding than sectors that are constantly trying to better our everyday lives through new innovations.]).
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Re: “Buy and Hold No More” says A16Z

Post by 1210sda »

I read all 59 posts. I am now convinced that this time it's different!!
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

jeffh19 wrote: Sun Apr 11, 2021 6:01 pm Just because other countries are printing too doesnt mean the USD isn't losing purchasing power/we aren't having inflation etc etc
Oh, you mean inflation.

So far, the evidence is that QE doesn't cause noteworthy consumer (CPI-U) inflation, but asset inflation, instead. Japan has been doing QE for decades and, despite trying, failed to cause appreciable consumer inflation. In the US, despite massive QE during the 2008-2009 GFC, CPI failed to break 5% and has been <3% since then, despite the massive QE.

Fiscal stimulus, on the other hand, is an entirely different matter...
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Re: “Buy and Hold No More” says A16Z

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nedsaid wrote: Sun Apr 11, 2021 6:07 pm For example, bonds have very low yields but there still is not a better alternative to diversify away the volatility of stocks.
Must we invest in stocks and bonds?

Our stock/bond portfolio only represents our liquid investments.

We don't put all of our working investment capital into liquid investments.

And, proportionally, we aren't putting as much of our working capital into liquid investments as we did years ago when stocks and bonds were cheaper.

If stocks and bonds aren't attractive under present conditions, why buy them instead of investing in something else?
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

watchnerd wrote: Sun Apr 11, 2021 11:24 pm
nedsaid wrote: Sun Apr 11, 2021 6:07 pm For example, bonds have very low yields but there still is not a better alternative to diversify away the volatility of stocks.
Must we invest in stocks and bonds?

Our stock/bond portfolio only represents our liquid investments.

We don't put all of our working investment capital into liquid investments.

And, proportionally, we aren't putting as much of our working capital into liquid investments as we did years ago when stocks and bonds were cheaper.

If stocks and bonds aren't attractive under present conditions, why buy them instead of investing in something else?
What else is there to invest in? I don't want to run a business and I don't want to manage rentals. I could do private REITs and structured notes and the like through an Advisor but there are pitfalls to that as well. I could buy Certificates of Deposit at the local bank but they also pay very little interest. There has been much discussion regarding the Liquid Alts and Interval Funds and there are issues with them too.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

nedsaid wrote: Sun Apr 11, 2021 11:42 pm What else is there to invest in? I don't want to run a business and I don't want to manage rentals. I could do private REITs and structured notes and the like through an Advisor but there are pitfalls to that as well. I could buy Certificates of Deposit at the local bank but they also pay very little interest. There has been much discussion regarding the Liquid Alts and Interval Funds and there are issues with them too.
Aside from RE, we have investments in private infrastructure, venture capital, private lending, and timber.
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Re: “Buy and Hold No More” says A16Z

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watchnerd wrote: Sun Apr 11, 2021 11:47 pm
nedsaid wrote: Sun Apr 11, 2021 11:42 pm What else is there to invest in? I don't want to run a business and I don't want to manage rentals. I could do private REITs and structured notes and the like through an Advisor but there are pitfalls to that as well. I could buy Certificates of Deposit at the local bank but they also pay very little interest. There has been much discussion regarding the Liquid Alts and Interval Funds and there are issues with them too.
Aside from RE, we have investments in private infrastructure, venture capital, private lending, and timber.
Yes, this is definitely possible. Not all investors can access, many of these require access through an advisor and you often have to be an accredited investor.

I have invested in REIT funds for years and owned a couple of Timber REITs that trade publicly. I have never owned more illiquid investments myself. There are private equity firms that trade publicly like KKR and even Berkshire Hathaway.
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Re: “Buy and Hold No More” says A16Z

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nedsaid wrote: Sun Apr 11, 2021 11:57 pm Yes, this is definitely possible. Not all investors can access, many of these require access through an advisor and you often have to be an accredited investor.

I have invested in REIT funds for years and owned a couple of Timber REITs that trade publicly. I have never owned more illiquid investments myself. There are private equity firms that trade publicly like KKR and even Berkshire Hathaway.
MLPs are another route -- Carlyle, Icahn, etc, on the real estate side.

And, of course, the various energy MLPs, which have high cash payout / dividends.

(although we divested from the energy pipeline space circa 2009 or so, and I haven't researched if time is good to get back in given the beat down prices. i haven't looked in detail at the new crop of renewable MLPs)
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

watchnerd wrote: Mon Apr 12, 2021 12:14 am
nedsaid wrote: Sun Apr 11, 2021 11:57 pm Yes, this is definitely possible. Not all investors can access, many of these require access through an advisor and you often have to be an accredited investor.

I have invested in REIT funds for years and owned a couple of Timber REITs that trade publicly. I have never owned more illiquid investments myself. There are private equity firms that trade publicly like KKR and even Berkshire Hathaway.
MLPs are another route -- Carylyle, Icahn, etc, on the real estate side.

And, of course, the various energy MLPs, which have high cash payout / dividends.

(although we divested from the energy pipeline space circa 2009 or so, and I haven't researched if time is good to get back in given the beat down prices. i haven't looked in detail at the new crop of renewable MLPs)
Master Limited Partnerships have the drawback in that they issue K-1 forms. If held in a taxable account, the K-1 forms are often delayed and you might have to file an extension for your taxes. In tax deferred accounts, there is an issue of UBTI income, the account has to file a Form 990-T if UBTI is over $1,000.

Another drawback is that many of these are energy related and when oil prices collapsed a few years back a few of the MLPs went bust.

This is a worthwhile area to explore for good investments but they have the drawbacks listed above and I have chosen not to invest.
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Re: “Buy and Hold No More” says A16Z

Post by SlowMovingInvestor »

nedsaid wrote: Mon Apr 12, 2021 12:28 am
watchnerd wrote: Mon Apr 12, 2021 12:14 am
nedsaid wrote: Sun Apr 11, 2021 11:57 pm Yes, this is definitely possible. Not all investors can access, many of these require access through an advisor and you often have to be an accredited investor.

I have invested in REIT funds for years and owned a couple of Timber REITs that trade publicly. I have never owned more illiquid investments myself. There are private equity firms that trade publicly like KKR and even Berkshire Hathaway.
MLPs are another route -- Carylyle, Icahn, etc, on the real estate side.

And, of course, the various energy MLPs, which have high cash payout / dividends.

(although we divested from the energy pipeline space circa 2009 or so, and I haven't researched if time is good to get back in given the beat down prices. i haven't looked in detail at the new crop of renewable MLPs)
Master Limited Partnerships have the drawback in that they issue K-1 forms. If held in a taxable account, the K-1 forms are often delayed and you might have to file an extension for your taxes. In tax deferred accounts, there is an issue of UBTI income, the account has to file a Form 990-T if UBTI is over $1,000.

Another drawback is that many of these are energy related and when oil prices collapsed a few years back a few of the MLPs went bust.

This is a worthwhile area to explore for good investments but they have the drawbacks listed above and I have chosen not to invest.
Carlyle is now a C-Corp. Ditto for Blackstone

I own small chunks of various publicly traded private equity firms in my IRA (to avoid dealing with K-1 forms). But I should probably move the ones that are C-Corps to taxable accounts now.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

nedsaid wrote: Mon Apr 12, 2021 12:28 am

Master Limited Partnerships have the drawback in that they issue K-1 forms. If held in a taxable account, the K-1 forms are often delayed and you might have to file an extension for your taxes. In tax deferred accounts, there is an issue of UBTI income, the account has to file a Form 990-T if UBTI is over $1,000.

Another drawback is that many of these are energy related and when oil prices collapsed a few years back a few of the MLPs went bust.

This is a worthwhile area to explore for good investments but they have the drawbacks listed above and I have chosen not to invest.
Yes.

Personally, I've never let extra tax paperwork be a blocker for investing in something if I decided I want to invest in it.

And if it really bothers you, hire a tax prep person.
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Re: “Buy and Hold No More” says A16Z

Post by dziuniek »

Oh, idk.

A trusty 60/40 had a great 2019, 2020, and even 2021 isn't looking too shabby right now.
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Re: “Buy and Hold No More” says A16Z

Post by qwertyjazz »

watchnerd wrote: Mon Apr 12, 2021 12:14 am
nedsaid wrote: Sun Apr 11, 2021 11:57 pm Yes, this is definitely possible. Not all investors can access, many of these require access through an advisor and you often have to be an accredited investor.

I have invested in REIT funds for years and owned a couple of Timber REITs that trade publicly. I have never owned more illiquid investments myself. There are private equity firms that trade publicly like KKR and even Berkshire Hathaway.
MLPs are another route -- Carlyle, Icahn, etc, on the real estate side.

And, of course, the various energy MLPs, which have high cash payout / dividends.

(although we divested from the energy pipeline space circa 2009 or so, and I haven't researched if time is good to get back in given the beat down prices. i haven't looked in detail at the new crop of renewable MLPs)
How long do you spend on ‘due diligence’ per investment? How often do you re-evaluate them? A diversified portfolio and the total market is greater than publicly traded, so I can see theoretical advantages, especially with lower yield world. I do not want to compete against Wall Street directly, so I am not a fan of individual stocks. But the other investments you mention are small enough and illiquid enough to not be of interest to larger players. Personally, trying to decide if worth it. Balancing effort and chance of making mistakes.
G.E. Box "All models are wrong, but some are useful."
ChinchillaWhiplash
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Re: “Buy and Hold No More” says A16Z

Post by ChinchillaWhiplash »

nisiprius wrote: Sun Apr 11, 2021 8:48 pm
txhill wrote: Sun Apr 11, 2021 8:27 amI don’t know that active investing is actually going to do better in the long term, but it sure seems like it will...
Then why have 80% of actively managed mutual fund underperformed the market over the last ten years?

SPIVA US 2020 year-end scorecard

Image

Do you think that professional mutual fund managers are so stupid that any retail investor with a little gumption can succeed where 80% of the pros have failed?

It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
Is this also the case in other asset classes/sectors? Just curious as I have not seen any data other than for the S&P500 benchmark.
txhill
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Re: “Buy and Hold No More” says A16Z

Post by txhill »

nisiprius wrote: Sun Apr 11, 2021 8:48 pm
txhill wrote: Sun Apr 11, 2021 8:27 amI don’t know that active investing is actually going to do better in the long term, but it sure seems like it will...
Then why have 80% of actively managed mutual fund underperformed the market over the last ten years?

SPIVA US 2020 year-end scorecard

Image

Do you think that professional mutual fund managers are so stupid that any retail investor with a little gumption can succeed where 80% of the pros have failed?

It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
I should know better than to fire off some posts early on a Saturday morning. To clarify my personal beliefs: S&P 500 index investing is the best baseline and investing in that prevents an investor from falling behind (and over time ensures getting ahead of most of the pack). That said, there are opportunities out there, and people sometimes have a competitive advantage (direct personal experience, insight into a particular industry, etc.) that exposes them to those opportunities. Think Buffett's "circle of competence." It's a huge waste for someone with a competitive advantage to ignore those opportunities in favor of religious adherence to index investing.

I have been served very well by keeping 70-80% in the S&P 500 (or total US stock) and the rest in investments that I had confidence I understood better than others. I don't have the guts to go 100% into non-index investments, so my upside is limited. But if I'd simply stuck to a 30-30-40 three-fund portfolio, I'd probably be at half my net worth, or less.

Also, opportunities obviously will play out better when the whole market keeps moving up. That was the point I was trying to make earlier; when everything goes up, those who make informed active picks will do really well. And I tend to think that stocks will keep going up, which will benefit those who make strategic active investments. The problem is that some (or most) active investors try to make too many picks and extend beyond their circles of competence. Add hefty fees on top of that, and you get the average fund manager--who yes I agree are not worth the price.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

qwertyjazz wrote: Mon Apr 12, 2021 8:24 am
How long do you spend on ‘due diligence’ per investment? How often do you re-evaluate them?
I've never calculated it per investment.

I spend about 2-3 hours a week, more or less year round, researching, running models, etc.

Comparisons to the Sharpe ratio of our liquid portfolio is one of the first sniff tests.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% crypto & securitized gold || LMP TIPS/STRIPS || RSU + ESPP
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Re: “Buy and Hold No More” says A16Z

Post by qwertyjazz »

watchnerd wrote: Mon Apr 12, 2021 9:40 am
qwertyjazz wrote: Mon Apr 12, 2021 8:24 am
How long do you spend on ‘due diligence’ per investment? How often do you re-evaluate them?
I've never calculated it per investment.

I spend about 2-3 hours a week, more or less year round, researching, running models, etc.

Comparisons to the Sharpe ratio of our liquid portfolio is one of the first sniff tests.
Thank you
G.E. Box "All models are wrong, but some are useful."
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Re: “Buy and Hold No More” says A16Z

Post by dsasdg »

fwellimort wrote: Sun Apr 11, 2021 9:04 pm
nisiprius wrote: Sun Apr 11, 2021 8:48 pm It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
If you notice SPIVA for last year on Small Cap Growth and Mid Cap Growth, then you will notice that only 13.71% and 17.16% underperformed after fees.

In other words, active before fees in (Small Cap and Mid Cap) Growth almost all outperformed the benchmark last year.
Covid did not happen 5 years ago. To use 5 years as 'evidence' is I feel a bit disingenuous.

Also, active mutual funds that track a benchmark have different risk tolerances from everyday retail investors.
Most active mutual funds for instance probably did not (and cannot) take advantage of GME short squeeze back on Jan (which many retail investors could [and the money that could be made for some were life changing]).
And there were many professionals who out of balance sheet did not believe in Tesla. It was the many retail investors on subreddits like WSB that believed in Tesla when professionals on TV would constantly claim that the stock will go to the ground.

And from what I evidenced from my peers (anecdotal), it seems it was mostly the younger generation that tilted heavily towards tech prior to the pandemic.
Many professionals prior to Covid constantly raved about how tech was overvalued and that tech would soon experience the dot com bubble.
I would state that in that case many professionals were very off and it was the younger retail investors that was right.
Professionals would have recommended 'diversifying' into industrials and utilities; anything but health care and tech.
Maybe the younger generation knew a thing or two and the older generation was just outdated and it took the pandemic for the older generation to realize how important tech/health care is becoming.

We know many here tilted towards health care and tech prior to the pandemic. In fact, I have not seen anyone tilt towards materials, utilities, etc. while I have seen plenty of Bogleheaders here focus more to tech/health care through tilting more to the Nasdaq benchmark.
And I know many people here would constantly criticize back that 'no one knows nothing', 'markets are efficient', 'you don't know better than professionals'.
And here we are. We (including me) all look like fools.

Retail investors believed in tech and health care a lot prior to the pandemic. Many professionals didn't.
So there's that.
I'm willing to accept that I was just a fool parroting others about 'efficient market hypothesis'. Tech was advancing right in front of our faces and it took the pandemic for professionals to recognize the change.

Since I'm still a fool and always will be a fool, I'm fine with average returns through the market index.
I expect retail investors to underperform as a net whole. Stock market short term is near a zero sum game and many new retail investors are poor at managing risk.
But I am not going to be in denial by stating that retail investors knew nothing as a whole. No. They might have poor risk managements but they sure do have eyes in things from time to time which balance sheets can't reveal.
As for tech and health care outperforming in the near future, who knows. Maybe tech and health care is relatively overvalued currently over other sectors. But if the tech sector is the place to be for long term innovation, maybe retail investors are right and even for the long run, it makes more sense to tilt towards the tech sector (e.g.: just how much 'creativity' can a sector like the banking sector really bring long term. Blockchain trades isn't going to bring in more 'profits' relative to autonomous vehicles, etc. [and I personally wouldn't want to live in a society in which in my life, the banking sector has greater returns than the tech sector. To me, that signals a failure for the country when traditional banking sectors end up getting more funding than sectors that are constantly trying to better our everyday lives through new innovations.]).
they sure do have eyes in things from time to time which balance sheets can't reveal

- For example, how can they lose money in GME.
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Re: “Buy and Hold No More” says A16Z

Post by dsasdg »

txhill wrote: Mon Apr 12, 2021 9:34 am
nisiprius wrote: Sun Apr 11, 2021 8:48 pm
txhill wrote: Sun Apr 11, 2021 8:27 amI don’t know that active investing is actually going to do better in the long term, but it sure seems like it will...
Then why have 80% of actively managed mutual fund underperformed the market over the last ten years?

SPIVA US 2020 year-end scorecard

Image

Do you think that professional mutual fund managers are so stupid that any retail investor with a little gumption can succeed where 80% of the pros have failed?

It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
I should know better than to fire off some posts early on a Saturday morning. To clarify my personal beliefs: S&P 500 index investing is the best baseline and investing in that prevents an investor from falling behind (and over time ensures getting ahead of most of the pack). That said, there are opportunities out there, and people sometimes have a competitive advantage (direct personal experience, insight into a particular industry, etc.) that exposes them to those opportunities. Think Buffett's "circle of competence." It's a huge waste for someone with a competitive advantage to ignore those opportunities in favor of religious adherence to index investing.

I have been served very well by keeping 70-80% in the S&P 500 (or total US stock) and the rest in investments that I had confidence I understood better than others. I don't have the guts to go 100% into non-index investments, so my upside is limited. But if I'd simply stuck to a 30-30-40 three-fund portfolio, I'd probably be at half my net worth, or less.

Also, opportunities obviously will play out better when the whole market keeps moving up. That was the point I was trying to make earlier; when everything goes up, those who make informed active picks will do really well. And I tend to think that stocks will keep going up, which will benefit those who make strategic active investments. The problem is that some (or most) active investors try to make too many picks and extend beyond their circles of competence. Add hefty fees on top of that, and you get the average fund manager--who yes I agree are not worth the price.
You mean only the worst active traders minus management fees will be worse than index funds 😂

In fact, "when everything goes up", those who buy (like) index funds will do really well.
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Re: “Buy and Hold No More” says A16Z

Post by jarjarM »

fwellimort wrote: Sun Apr 11, 2021 9:04 pm
nisiprius wrote: Sun Apr 11, 2021 8:48 pm It always seems like active investing is going to be better than passive investing, always. But year after year after year the SPIVA reports keep showing the same sorry track record.
If you notice SPIVA for last year on Small Cap Growth and Mid Cap Growth, then you will notice that only 13.71% and 17.16% underperformed after fees.

In other words, active before fees in (Small Cap and Mid Cap) Growth almost all outperformed the benchmark last year.
Covid did not happen 5 years ago. To use 5 years as 'evidence' is I feel a bit disingenuous.

Also, active mutual funds that track a benchmark have different risk tolerances from everyday retail investors.
Most active mutual funds for instance probably did not (and cannot) take advantage of GME short squeeze back on Jan (which many retail investors could [and the money that could be made for some were life changing]).
And there were many professionals who out of balance sheet did not believe in Tesla. It was the many retail investors on subreddits like WSB that believed in Tesla when professionals on TV would constantly claim that the stock will go to the ground.

And from what I evidenced from my peers (anecdotal), it seems it was mostly the younger generation that tilted heavily towards tech prior to the pandemic.
Many professionals prior to Covid constantly raved about how tech was overvalued and that tech would soon experience the dot com bubble.
I would state that in that case many professionals were very off and it was the younger retail investors that was right.
Professionals would have recommended 'diversifying' into industrials and utilities; anything but health care and tech.
Maybe the younger generation knew a thing or two and the older generation was just outdated and it took the pandemic for the older generation to realize how important tech/health care is becoming.

We know many here tilted towards health care and tech prior to the pandemic. In fact, I have not seen anyone tilt towards materials, utilities, etc. while I have seen plenty of Bogleheaders here focus more to tech/health care through tilting more to the Nasdaq benchmark.
And I know many people here would constantly criticize back that 'no one knows nothing', 'markets are efficient', 'you don't know better than professionals'.
And here we are. We (including me) all look like fools.

Retail investors believed in tech and health care a lot prior to the pandemic. Many professionals didn't.
So there's that.
I'm willing to accept that I was just a fool parroting others about 'efficient market hypothesis'. Tech was advancing right in front of our faces and it took the pandemic for professionals to recognize the change.

Since I'm still a fool and always will be a fool, I'm fine with average returns through the market index.
I expect retail investors to underperform as a net whole. Stock market short term is near a zero sum game and many new retail investors are poor at managing risk.
But I am not going to be in denial by stating that retail investors knew nothing as a whole. No. They might have poor risk managements but they sure do have eyes in things from time to time which balance sheets can't reveal.
As for tech and health care outperforming in the near future, who knows. Maybe tech and health care is relatively overvalued currently over other sectors. But if the tech sector is the place to be for long term innovation, maybe retail investors are right and even for the long run, it makes more sense to tilt towards the tech sector (e.g.: just how much 'creativity' can a sector like the banking sector really bring long term. Blockchain trades isn't going to bring in more 'profits' relative to autonomous vehicles, etc. [and I personally wouldn't want to live in a society in which in my life, the banking sector has greater returns than the tech sector. To me, that signals a failure for the country when traditional banking sectors end up getting more funding than sectors that are constantly trying to better our everyday lives through new innovations.]).
Wow, this is exactly the sentiment that was going around my little social circle around 1999/2000. I have few buddies in Cal that were just day trading and make enough to pay for their tuitions + room/board. My grad student instructor, ditched his PhD program and became a day trader, making more $$$ in a few hours than his entire annual stipends. Everyone believes in tech and think internet will change how the world operates (which it did). I'm sure if this forum exists back then, there would be plenty of similar sentiments as well. Let see how the next 10 years turn out before we conclude this time is different.

P.S. I do think this is risk-on time where risk is being rewarded handsomely for the last 1 year (BTC/GME/Smallcap/leveraged funds). We just don't know when will the market sentiment changes and the risk is no longer being rewarded.
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Re: “Buy and Hold No More” says A16Z

Post by mikejuss »

Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.

And honestly, there are enough stories now about IPO, Bitcoin, Tesla millionaires that it *feels* like anybody could do it, if they’d just man up.

As for me, I’m not changing anything. Basically boring old 60/40 me, and doing the BH things has led me to top 5% net worth in America, and a nearly retirement. It’s not get rich quick, but it is get rich.

Unfortunately, the good times will inevitably end. Lots of these people will have to bail out. And they will be very bitter, fee,I guess that they were scammed, and it’s all just a casino anyway. The really sad part is, they will then avoid the market in the future, and they will miss out on the good times. This sets people back permanently.
I couldn't agree more with this. When the market corrects--and it will one day--there's going to be a lot of thirtysomething blood on the floor. The one thing they've got going for them is the time to reset their asset allocations during a recovery.
Last edited by mikejuss on Mon Apr 12, 2021 2:25 pm, edited 1 time in total.
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Re: “Buy and Hold No More” says A16Z

Post by HomerJ »

Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.
I really feel (but I'm just talking here), that the reason we have 20 or 30 year bull\bear market cycles is because every generation has to make the same stupid mistakes for themselves..

I'm in my 50s now, I remember all the dumb moves we all made in 1990s tech-boom... So I gained my wisdom by burning my hand on the stove.

I didn't listen to the older folks who told me about the Nifty-Fifty or the -tronics boom of the 60s and 70s. Instead I thought they were dumb. And no one is going to listen to me either now that I'm the old one.

There will be a crash someday, all these young investors will burn their hands on the stove. Hopefully they recover. Many won't. The ones that come here often might have a better chance.
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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Re: “Buy and Hold No More” says A16Z

Post by HomerJ »

TheoLeo wrote: Sun Apr 11, 2021 9:14 am I think retail traders actually did outperform the market in the last 12 months. There is this BUZZ index which tracks the 75 most popular stocks on social media and this index massively outperformed the market in the last 12 months. It is interesting to check the constituents of this index.
Well sure, and anyone who invested in Lucent or Qualcomm in 1999 out-performed the market as well.

But in the long run?
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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Re: “Buy and Hold No More” says A16Z

Post by txhill »

HomerJ wrote: Mon Apr 12, 2021 2:24 pm
Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.
I really feel (but I'm just talking here), that the reason we have 20 or 30 year bull\bear market cycles is because every generation has to make the same stupid mistakes for themselves..

I'm in my 50s now, I remember all the dumb moves we all made in 1990s tech-boom... So I gained my wisdom by burning my hand on the stove.

I didn't listen to the older folks who told me about the Nifty-Fifty or the -tronics boom of the 60s and 70s. Instead I thought they were dumb. And no one is going to listen to me either now that I'm the old one.

There will be a crash someday, all these young investors will burn their hands on the stove. Hopefully they recover. Many won't. The ones that come here often might have a better chance.
I always feel like the lesson I take away from the dot com boom/bust is quite different from that one. The dot com boom/bust was NOT proof that the internet was a fool's errand; quite the opposite. You're using it now. The most valuable companies in the world are deeply integrated in the tech. If you'd just invested in a Nasdaq-tracking index fund, you'd have experienced a major drop in 2000, but over time seen that 2000 was just a minor dip along the way to exponential growth and substantial outperformance of the S&P 500. I certainly have enjoyed my returns from VGT/QQQ, as has anyone else who didn't ignore "tech" as some sort of fad.

It is a mistake to think only in mean reversionist terms. Some sectors absolutely will experience exponential growth, and some people simply will be better positioned to identify those trends. Even if picking specific stocks is exceedingly hard, investing in the future, especially while one is young and risk tolerant and better informed about new tech, could be the right move. For me, I'm most interested in what Web 3.0 will look like, so I am closely following and investing in cryptocurrencies that I think will form the base layer for that future. Would I suggest going all in on a bunch of random cryptocurrencies? No, that would be like buying a bunch of random dot-coms in the 1990s--most are terrible options and have no market or future--and I don't know of a sound methodology for that approach yet. But I think it makes sense to find some proxies for potential cryptocurrency outperformance as a whole that eventually will track the market generally. For me, that means allocating a reasonable amount to Bitcoin and Ether, and being on the lookout for a QQQ-like vehicle for cryptos someday.
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Re: “Buy and Hold No More” says A16Z

Post by HomerJ »

txhill wrote: Mon Apr 12, 2021 3:34 pm
HomerJ wrote: Mon Apr 12, 2021 2:24 pm
Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.
I really feel (but I'm just talking here), that the reason we have 20 or 30 year bull\bear market cycles is because every generation has to make the same stupid mistakes for themselves..

I'm in my 50s now, I remember all the dumb moves we all made in 1990s tech-boom... So I gained my wisdom by burning my hand on the stove.

I didn't listen to the older folks who told me about the Nifty-Fifty or the -tronics boom of the 60s and 70s. Instead I thought they were dumb. And no one is going to listen to me either now that I'm the old one.

There will be a crash someday, all these young investors will burn their hands on the stove. Hopefully they recover. Many won't. The ones that come here often might have a better chance.
I always feel like the lesson I take away from the dot com boom/bust is quite different from that one. The dot com boom/bust was NOT proof that the internet was a fool's errand; quite the opposite. You're using it now.
That's not the lesson I took. The fool's errand is trying to invest in individual companies and pick the winners that will consistently beat the market.

Lots of companies in the 1990s looked like slam-dunks. I mean, come on, Cisco? How could that one not outperform?

Lots of companies in the 1960s were involved in space and electronics. Those were the obvious future! How could they not out-perform? Electronics is everywhere still today, but picking the individual stocks that outperformed the general market was hard. It LOOKED easy for a bit, just like picking Cisco looked easy for a bit, just like picking Tesla looked easy for a bit.

How about the automobile? We all still use cars and trucks. It was obviously successful and transformative technology.

Yet how many car companies succeeded and how many went bankrupt?*

The lesson is picking individual stocks that outperform the market is hard.

But you won't listen to me or the generation before me or the generation before that. I didn't. You won't.

Not until you burn your hand yourself.


*For fun, here's a partial list of the U.S. automobile manufacturers that went bankrupt - just the Bs!

Those stock pickers in the 1890s and 1900s knew the world was going to change, but picking the individual stock winners was HARD.

(Heck, look at those electric car companies! 100 years too early).

abcock, H.H. Company (1909–1913)[27]
Babcok Electric Carriage Co. (1906–1912)
Baby Moose (1914)
Bachelle Electric (1900–1903)[10]
Bacon (1901, 1919–1920)[10]
Badger (1910–1911)[28]
Based in Wisconsin
Bailey (1907–1910)[10]
Baker Electric (1899–1916)[29]
Based in Cleveland
Balboa (1924–1925)[10]
Baldner (1900–1903)[10]
Baldwin (1899–1901)[10]
Ball Steam (1868, 1902)[10]
Balzer (1894–1900)
Banker (1905)[10]
Bantam (1914)[30]
Distinct from American Bantam
Barbarino (1923–1925)[10]
Barley Motor Car Co. (1916–1929)
Barrows Electric (1895–1899)[31]
Bates Automobile Company (1904–1905)
Bauer (1914–1916)[10][where?]
Bay State (1907–1908)[10]
Bean-Chamberlain Manufacturing Co. (1901–1902)
Hudson model
Beardsley (1914–1917)[10]
Beechcraft (1946)[32]
Beggs (1919–1923)[10]
Belden (1907–1911)[10]
Bell Motor Car Company (1916–1922)[33]
Based in Pennsylvania
Belmont Electric Auto Co. (1909–1910)
Belmont (1916)[34][where?]
Bendix (1908–1909)[10]
Benham Manufacturing Co. (1914)
Ben Hur (1917–1918)[35]
Based in Cleveland
Benner (1909)[10]
Berg (1903–1905)[36]
Based in Cleveland
Bergdoll (1910–1913)[10]
Berwick Auto Car Co. (1904)
Berkshire (1905–1912)[10]
Berliet[10][when?]
Bertolet (1908–1910)[10]
Bethlehem[37][when?]
Beverly (1904)[10]
Bi-Autogo (1908–1912)[38]
Biddle (1915–1922)
Beisel Motorette Company (1914)
Bimel (1916–1917)[10]
Binghamton Electric (1920)
Binney & Burnham (1901–1902)
Birch Motor Cars (1916–1923)[12]
Birmingham Motors (1921–1923)[10]
Black (1893, 1896–1900)[where?]
Black Motor Company (1908–1910))[39] Renamed to 'Black-Crow' in 1909
Blackhawk (1903)[10]
Blackhawk (1929–1930)
Bliss (1906)
B.L.M. (1906–1907)[10]
Blomstrom (C.H.) Motor Co. (1902–1903)[10][where?]
Blomstrom Manufacturing Co. (1907–1908)[10]
Gyroscope model, based in Michigan.
Blood Brothers Auto and Machine Company (1902–1906)
BMC (1952)[40]
Distinct from the British brand
Boardman (1946)[32]
Bobbi-Kar (1945–1947)[32]
Boisselot (1901)[10]
Borbein Electric (1900, 1904–1909)[10]
Borland Electric (1910–1916)[10]
Boss Steam Car (1897–1909)[41]
Boston-Amesbury (1902–1903)[10]
Boston High Wheel (1907)[10]
Bour-Davis Co. (1915–1922)
Bournonville[10][when?]
Bowman Motor Car Company (1921–1922)[10]
Bramwell (1904–1905)[10][where?]
Bramwell-Robinson (1899–1902)[10][where?]
Brasie (1914–1916)[10]
Brazier (1902–1903)[10]
Brecht (1901–1903)[41]
Brennan (1902–1908)[10]
Brew-Hatcher (1904–1905)
Brewster & Co. (1915–1925, 1934–1937)
Briggs and Stratton (1919–1923)[10]
Smith Flyer model
Briggs-Detroiter Motor Car Co. (1912–1917)
Brightwood[10][when?]
Briscoe Motor Co. (1913–1923)
Bristol (1903–1904)[41]
Broc Electric (1909–1916)[42]
Based in Cleveland
Brogan (1946–1950)[32]
Brook (1920–1921)[10]
Brooks Steamer (1927)[10]
Brown (1914)[10]
Brownie (1916)[43]
Browniekar (1908–1911)[43]
Brush Motor Car Company (1907–1912)
Bryan Steam Car (1918–1923)
Buckeye (1895)[44]
Based in Indiana
Buckmobile (1903–1905)
Buffalo Automobile and Auto-Bi Company (1900–1902)[10]
Buffalo Electric (1912–1915)
Buffum (1901–1907)
Buggy Car Company (1908–1909)[10]
Bugmobile (1907–1909)[45]
Based in Chicago
Burdick (1909)[43]
Burg (1910–1913)[43]
Burns (1908–1912)[43]
Burrows (1914–1915)
Burtt Manufacturing Co. (1902–1906)[10]
Cannon model
Bush (1916–1924)
Last edited by HomerJ on Mon Apr 12, 2021 3:53 pm, edited 2 times in total.
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.”
fwellimort
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Re: “Buy and Hold No More” says A16Z

Post by fwellimort »

To me, the dot com bubble signifies that sometimes, people are right. Very right about the future.
However, people as a whole are horrible market timers.

Looking back, Internet WAS the 'future'.
And investing in tech despite all the crazy bubbles would have netted far more than investing in the total market.

The problem is the 'result' might materialize a decade or two after a 'crash'.
If one had the stomach and conviction to keep investing in the Internet, then one would be far ahead over average market.

I would honestly keep close eye in things that the general public talk about.
The topics might be a 'bubble' right now but they might not be in a few decades.

People are very short sighted and compare performance in quarters/years.
But investing should be viewed in a period of long time horizon (decades).

And today, there's no reason to invest in single companies on a sector you believe in long term. Just invest in the sector index for the long run.
What I noticed from today is:
+ Tech sector playing with 'big data' has room for innovation
+ Oil is getting less popular as 'renewable energy' is more and more perpetuated
+ As society becomes better, people are looking for more seemingly healthy options when it comes to fast food: Melt/Super Duper/Dig Inns/Chipotle over Burger Kings/Wendy's
+ Finance sector will have to transform and adopt blockchain technology
+ Electric vehicles are going to become increasingly more popular. Semi autonomous vehicles will become more of a thing in the decades to come.
If I had to invest with decades to come, then ideally, I would want to remove companies like Burger Kings from my index.
In the shorter term, who knows. We are horrible market timers as a whole.
But just cause we are horrible market timers in the short term doesn't mean we as a whole can't 'figure' out certain parts of the future in the long run.
Last edited by fwellimort on Mon Apr 12, 2021 3:57 pm, edited 3 times in total.
txhill
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Re: “Buy and Hold No More” says A16Z

Post by txhill »

HomerJ wrote: Mon Apr 12, 2021 3:45 pm
txhill wrote: Mon Apr 12, 2021 3:34 pm
HomerJ wrote: Mon Apr 12, 2021 2:24 pm
Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.
I really feel (but I'm just talking here), that the reason we have 20 or 30 year bull\bear market cycles is because every generation has to make the same stupid mistakes for themselves..

I'm in my 50s now, I remember all the dumb moves we all made in 1990s tech-boom... So I gained my wisdom by burning my hand on the stove.

I didn't listen to the older folks who told me about the Nifty-Fifty or the -tronics boom of the 60s and 70s. Instead I thought they were dumb. And no one is going to listen to me either now that I'm the old one.

There will be a crash someday, all these young investors will burn their hands on the stove. Hopefully they recover. Many won't. The ones that come here often might have a better chance.
I always feel like the lesson I take away from the dot com boom/bust is quite different from that one. The dot com boom/bust was NOT proof that the internet was a fool's errand; quite the opposite. You're using it now.
That's not the lesson I took. The fool's errand is trying to invest in individual companies and pick the winners that will consistently beat the market.

Lots of companies in the 1990s looked like slam-dunks. I mean, come on, Cisco? How could that one not outperform?

Lots of companies in the 1960s were involved in space and electronics. Those were the obvious future! How could they not out-perform? Electronics is everywhere still today, but picking the individual stocks that outperformed the general market was hard. It LOOKED easy for a bit, just like picking Cisco looked easy for a bit, just like picking Tesla looked easy for a bit.

How about the automobile? We all still use cars and trucks. It was obviously successful and transformative technology.

Yet how many companies succeeded and how many went bankrupt?

The lesson is picking individual stocks that outperform the market is hard.

But you won't listen to me or the generation before me or the generation before that. I didn't. You won't.

Not until you burn your hand yourself.
I agree that it is nearly impossible to pick specific winners, but that's why I advocate sector ETFs for industries that one is confident will do well.
Best if they are ETFs that are self-correcting, like QQQ. I don't know if that counts as active investing or not--we might just be talking past each other--but that's the approach I took and plan on taking for cryptocurrencies. It's also a reason that I'm keeping an eye on ARKK even though I'm not investing in them yet. I think their approach to picking the winning platform might be the right one--I just also think they could face heavy macro headwinds so I view it as a bit too pricy or risky at this time. But I like the idea of it eventually.
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Re: “Buy and Hold No More” says A16Z

Post by fwellimort »

HomerJ wrote: Mon Apr 12, 2021 3:45 pm (Heck, look at those electric car companies! 100 years too early).
Let's be very realistic.
Electric vehicles (and hydrogen vehicles) are cool concepts.
But they (electric vehicles*) weren't practical until very recently.

Did you see people purchase electric vehicles for everyday driving in the past?
I didn't.
It wasn't until the last few years that I started seeing Tesla cars in the road (first Toyota hybrids).

Finally, there's actual charging stations in most places.
And the issue with charging for a whole night is 'fixed' through super charging.

Look, maybe 'decentralized finance' will happen one day.
But let's also be somewhat sane here. That won't be happening anytime in the near future (maybe half a century or more later?).
But adopting the concept of blockchain? That I see in the near future in the financial industry.

It seems the market is slow in noticing changes.
The market first realizes what 'can be the future'. Then it creates a bubble. Then it forgets and is fearful of that very sector even when more and more people start utilizing that sector for everyday purposes. And it is only after a few years of validation that the market finally adapts and acknowledges that very sector.
So just keep an eye in the things the public talks about today. The public as a whole might be horrible market timers but the public might be onto something from time to time.
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Re: “Buy and Hold No More” says A16Z

Post by BlueMoonXD »

I feel as though this article and the discussion here are missing an aspect of passive investing that to me has always been the main attraction -- which is that it's a braindead easy strategy to execute.

I don't think it's ever been the case that index investing is the best performing strategy in absolute terms. You can clearly find examples of folks who outperform the market, some even are able to do it consistently. But as the article notes, most people believe they are better investors then they are -- so is it really worth the risk of finding out that I am in fact an investing buffoon, when I can instead stick to a mostly passive approach that should give me a fine chance to achieve my retirement goals?
SlowMovingInvestor
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Re: “Buy and Hold No More” says A16Z

Post by SlowMovingInvestor »

fwellimort wrote: Mon Apr 12, 2021 3:50 pm
Looking back, Internet WAS the 'future'.
And investing in tech despite all the crazy bubbles would have netted far more than investing in the total market.
Just to be clear -- I think very few skeptics in the dotcom era were saying that the Internet was not the future. Or that home broadband and voice/video over IP wouldn't happen in the future. What people were saying was that the tech sector was very overvalued, and included some companies with dubious business models (theglobe, pets etc.). And a lot of the tech giants from that era faded away or underperformed (telcos, Cisco, Juniper, etc.). Even MSFT underperformed for over a decade.

And there was also a biotech boom when the genome was sequenced. And a fuel cell boom (Ballard and Plug). Those sectors didn't do well, and although they have picked up right now, it took even longer.
Portfolio: 50% DOGE, 10% SPACs, 10% Frozen OJ futures, 10% MOON ETF, 10% NFTs , 5% FOMO ETF, 5% New Jersey Delis with $100M market cap :)
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watchnerd
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

fwellimort wrote: Mon Apr 12, 2021 3:50 pm
If one had the stomach and conviction to keep investing in the Internet, then one would be far ahead over average market.
I've been in high tech since 1995, both at publicly traded companies and VC.

I have no idea how to invest in "the internet".

I only know specific technology companies which have thrived or died.

It would be like trying to invest in "food."
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fwellimort
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Re: “Buy and Hold No More” says A16Z

Post by fwellimort »

watchnerd wrote: Mon Apr 12, 2021 5:29 pm I've been in high tech since 1995, both at publicly traded companies and VC.
I have no idea how to invest in "the internet".
I only know specific technology companies which have thrived or died.
It would be like trying to invest in "food."
I was thinking more of tilting one's investment to more of the technology sector like many others do.
The tech sector isn't all 'the Internet' but it's something.
And ya, 'the Internet' is pretty broad. Pretty much as broad as investing in 'food'.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

BlueMoonXD wrote: Mon Apr 12, 2021 4:13 pm I feel as though this article and the discussion here are missing an aspect of passive investing that to me has always been the main attraction -- which is that it's a braindead easy strategy to execute.
+1

(although that's not my attraction)

However, that's a bit of a double-edged sword.

One of the things that surprises me sometimes on BH is how little people understand about certain aspects of investing.

Or what they're buying.

I can't count how many threads I've seen of people who jumped on the LTT wagon after a batch of outperformance in a stock crash, only to later complain how NAV is going down (due to high duration) with rising interest rates....
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