"Just Stand There" vs. incorporating new info

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burritoLover
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"Just Stand There" vs. incorporating new info

Post by burritoLover »

Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information? I find that I have evolved my portfolio as I learn about different concepts. For example, I once had all TDFs in all accounts, including taxable, until I realized that TDFs can have very high capital gain distributions so I went with a 3-funder in taxable. Then I learned about small cap value, researched it, and felt that I wanted to take on that additional risk so I added an allocation there. Then Avantis came out with a new EM value fund and I want to now add that. And I kind of want to add an allocation to gold as well just so that money is not all tied up in equity/bonds.

I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
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Sandtrap
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Re: "Just Stand There" vs. incorporating new info

Post by Sandtrap »

Sort of a "grass is greener", "new car-itis", thing maybe.

Actionable solutions:
1
Do you have a well thought out IPS?

Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
IPS Statement Worksheet PDF at Morningstar
http://news.morningstar.com/pdfs/inves ... pr2016.pdf

2
Don't watch the news, tv, media, financial news, etc.
Tune out the noise, all of it.
It's made for one thing, "carrot or stick" (fear)
to make you buy, or think, or do, or not do or be or not to be.
That is the question.

3
Search the forum archives for "Taylor's" posts on "simplicity". Read. Read. Do.

Buy and hold, then keep it simple.
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
sailaway
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Re: "Just Stand There" vs. incorporating new info

Post by sailaway »

Tax efficiency is learning, the rest is just realizing that there are many more complicated investment opportunities our there and jumping onboard. There will always be other investment opportunities, doesn't mean they are better. How is that small cap working for you? DH actually had a bond fund that performed better than his small cap fund in the same account over the last six months.
asif408
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Re: "Just Stand There" vs. incorporating new info

Post by asif408 »

I think the question is how long have you been doing it, and to what degree have you changed? If you are just learning this information now and plan to incorporate as part of a long term strategy and not making major allocation changes, that's fine.

But if you are just doing it because you get bored "standing there" and these moves are temporary or not part of a long term plan that's not good. I'd consider letting someone else manage it if this is the issue. Because, as someone once said, the enemy of a good plan is the dream of a perfect plan. Be boring and accept good enough, or let someone else do this for you.
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JoMoney
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Re: "Just Stand There" vs. incorporating new info

Post by JoMoney »

Tax placement is one thing, but if you're being sold into new products what you're calling "info" I call "marketing".
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
ML 59
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Re: "Just Stand There" vs. incorporating new info

Post by ML 59 »

In keeping with Vanguard’s nautical terminology, it sounds like you’re adrift without a compass.

Develop a plan. A long term plan. It takes time and study, but an IPS is perhaps the single most important document you will ever write regarding your financial success.

When markets get weird – and they are always somewhat weird – you will be comforted by knowing that you have a plan to guide your decisions rather than day to day reactions to the latest thing you’ve heard or read.

Best wishes...
stan1
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Re: "Just Stand There" vs. incorporating new info

Post by stan1 »

I think its all about being confident in your decisions. Doing nothing is a decision, too.
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burritoLover
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

All this has progressed over a year and half. I've been heavily influenced by the "Rational Reminder" podcast and Larry Swedroe's writings. Not just about SCV. I always think the latest iteration is the last (and I do have an IPS each time), but, inevitably, I end up changing it. Sometimes that does involve selling but primarily I try to do it with new contributions.
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Re: "Just Stand There" vs. incorporating new info

Post by Nowizard »

One key is age of the investor. There is definitely much easier access to information for new investors than there was when older folks like myself, well into retirement, were starting out. However, there is a constant learning curve for even the most sophisticated investors that I suspect includes a feeling of naivete for some earlier approaches. That may be a correct evaluation but may also reflect "new information" that adds to time-tested adages. For example, there were no index funds when some of us started out, and most funds had a front-end fee to invest. If you are young and have a beginning discipline of regular investing combined with analysis based on current knowledge, then you are not necessarily making an error by incorporating new knowledge. You will get responses based on the combination of bias and knowledge of any financial site's posters. This one will, of course, support index funds and staying the course. Those are great suggestions, but individual circumstances are a key variable whose impact is not always discussed. It would be quite a rarity for someone to start out with the same investments they held many years later. Many of those changes would be based on "new information."

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Re: "Just Stand There" vs. incorporating new info

Post by roth evangelist »

IMO there's a huge difference between saying, "This this is up 50% this year, I need this in my portfolio," and then constantly going back and forth with asset classes based on this logic and thinking "The academic research says these factors deliver a premium over the long-term, so I'm going to adjust my IPS to include them permanently."
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
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Re: "Just Stand There" vs. incorporating new info

Post by mervinj7 »

burritoLover wrote: Mon Dec 06, 2021 8:42 am I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
Why not invest 90% of your funds in a three fund portfolio, then set aside 10% for "fun" money that you can use to invest in any new stuff you are interested in?
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Re: "Just Stand There" vs. incorporating new info

Post by asif408 »

burritoLover wrote: Mon Dec 06, 2021 8:42 am I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
Maybe if you didn't mind you could post your allocation when you first started vs now, then we can see how much has changed.
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Re: "Just Stand There" vs. incorporating new info

Post by pizzy »

burritoLover wrote: Mon Dec 06, 2021 8:42 am I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
Are you changing your high level stock/bond ratio each time? or just the sub-asset classes? I don't think either method is a good idea, but i think changing sub-asset allocations is the lesser of the two evils.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
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Re: "Just Stand There" vs. incorporating new info

Post by SevenBridgesRoad »

Your subject line offers a false dichotomy.

Learn about the DIKW model: Data, Information, Knowledge, Wisdom. There is a hierarchy of stuff that enters your brain. You can consider new information, but do so against other accumulated information. "Just Stand There" is wisdom.
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Re: "Just Stand There" vs. incorporating new info

Post by Carguy85 »

You may honestly be better off paying 1% to let someone else manage your money. You have to come to grips that that the odds are significantly stacked against you to earn better than market returns over the long haul. The information one has as a non insider (we can pretend this isn’t true but it is) is already too old/outdated to make meaningful plays consistently. Sp500 or total market and listen/read for entertainment purposes only if you must unless if you are much more in-depth in a specific industry with much more sophisticated ways to decipher “buried” public information than I assume. Trust the old guys that have been there, done that, and learned the hard way....at least that’s what I choose to do. Good luck
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Re: "Just Stand There" vs. incorporating new info

Post by iceport »

burritoLover wrote: Mon Dec 06, 2021 8:35 am All this has progressed over a year and half. I've been heavily influenced by the "Rational Reminder" podcast and Larry Swedroe's writings. Not just about SCV. I always think the latest iteration is the last (and I do have an IPS each time), but, inevitably, I end up changing it. Sometimes that does involve selling but primarily I try to do it with new contributions.
Hmmm... I really like reading what Larry has to say, but his articles should come with a warning label. While it's interesting to learn new things — and Larry certainly has a wealth of knowledge to share — after reading Larry's thoughts on various topics I am almost always left with a nagging sense that there is something I need to do to take advantage of the information. And that's where the danger lies.

It's all interesting stuff to know, but ultimately unactionable. At least that's the way I treat it, and I think I'm better off for it. :wink:
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

asif408 wrote: Mon Dec 06, 2021 8:44 am
burritoLover wrote: Mon Dec 06, 2021 8:42 am I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
Maybe if you didn't mind you could post your allocation when you first started vs now, then we can see how much has changed.
portfolio #1 - TDFs in all accounts (something like 90/10)
portfolio #2 - 3-funder in taxable replaces TDF (95/5)
portfolio #3 - 15% US SCV allocation (95/5)
portfolio #4 - 25% SCV allocation split 60/40 US/ex-US developed (95/5)
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Re: "Just Stand There" vs. incorporating new info

Post by goingup »

I like Rick Ferri's observation:

The Education of an Index Investor:
1. Born in darkness;
2. Finds indexing enlightenment;
3. Over-complicates everything;
4. Embraces simplicity.

Maybe you're at #3? :D
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burritoLover
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

goingup wrote: Mon Dec 06, 2021 9:08 am I like Rick Ferri's observation:

The Education of an Index Investor:
1. Born in darkness;
2. Finds indexing enlightenment;
3. Over-complicates everything;
4. Embraces simplicity.

Maybe you're at #3? :D
I've seen that before and I'm probably a bit of a hypocrite in that I tell others the same thing when they are adopting the latest fad. But I try to think that I'm adopting evidenced-based info into these changes, not something that has back-tested well recently. But maybe I'm deluding myself.
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Re: "Just Stand There" vs. incorporating new info

Post by Northern Flicker »

burritoLover wrote: Mon Dec 06, 2021 8:20 am Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information? I find that I have evolved my portfolio as I learn about different concepts. For example, I once had all TDFs in all accounts, including taxable, until I realized that TDFs can have very high capital gain distributions so I went with a 3-funder in taxable. Then I learned about small cap value, researched it, and felt that I wanted to take on that additional risk so I added an allocation there. Then Avantis came out with a new EM value fund and I want to now add that. And I kind of want to add an allocation to gold as well just so that money is not all tied up in equity/bonds.

I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
When you make a change, you take timing risk. On average, they should balance out so you get no additional expected return. This means that the timing risk you take is uncompensated-- you take the risk of underperforming, but are not rewarded with additional expected return.

Just because an asset class exists does not mean you have to incorporate it into your asset allocation. Many are best left out.
Last edited by Northern Flicker on Mon Dec 06, 2021 9:20 am, edited 1 time in total.
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Re: "Just Stand There" vs. incorporating new info

Post by pizzy »

burritoLover wrote: Mon Dec 06, 2021 9:12 am I'm deluding myself.
Yes, but we've all done it. You just can't keep doing it.
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

pizzy wrote: Mon Dec 06, 2021 9:19 am
burritoLover wrote: Mon Dec 06, 2021 9:12 am I'm deluding myself.
Yes, but we've all done it. You just can't keep doing it.
Yeah, I always tell myself - this is the last time. I'm like an addict.
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Re: "Just Stand There" vs. incorporating new info

Post by lostdog »

Rick Ferri came out with a great concept about several stages investors goes through in order to achieve enlightenment.

From Rick's signature:

"The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity."
Last edited by lostdog on Mon Dec 06, 2021 9:30 am, edited 4 times in total.
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Re: "Just Stand There" vs. incorporating new info

Post by asif408 »

burritoLover wrote: Mon Dec 06, 2021 9:04 am
asif408 wrote: Mon Dec 06, 2021 8:44 am
burritoLover wrote: Mon Dec 06, 2021 8:42 am I had a late start to retirement investing - in my late 40's. I'm not influenced by financial news such as CNBC but I do read a number of white papers, blogs, etc about evidenced-based investing and that is usually where I end up learning something interesting and making changes.
Maybe if you didn't mind you could post your allocation when you first started vs now, then we can see how much has changed.
portfolio #1 - TDFs in all accounts (something like 90/10)
portfolio #2 - 3-funder in taxable replaces TDF (95/5)
portfolio #3 - 15% US SCV allocation (95/5)
portfolio #4 - 25% SCV allocation split 60/40 US/ex-US developed (95/5)
Those don't seem like unreasonable or dramatic shifts. I made shifts like you did when I first started learning in 2014/2015 or so for tax efficiency/simplicity purposes, but got to the point several years ago where I stopped making any big shifts. I do use valuations among my stock allocation to make changes, but those are part of my long term strategy and not things I do more than once a decade or so.

I say reassess in a year or two and if you are still tinkering you might be doing too much. Certainly there should come a point where the most exciting thing you do is rebalance every couple of years.
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Re: "Just Stand There" vs. incorporating new info

Post by sureshoe »

Here's something I think every investor needs to decide:
Do you think you can outperform the market?

If the answer to this is "yes", then I can't help you because I don't believe it.

If the answer to this is "no", then I would take some time to identify a basic lazy portfolio and begin migrating. Then, there are only a few simple questions you have to answer.
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

sureshoe wrote: Mon Dec 06, 2021 9:28 am Here's something I think every investor needs to decide:
Do you think you can outperform the market?

If the answer to this is "yes", then I can't help you because I don't believe it.

If the answer to this is "no", then I would take some time to identify a basic lazy portfolio and begin migrating. Then, there are only a few simple questions you have to answer.
I would say I am not seeking alpha - I'm taking on additional risk (by investing in SCV) that may outperform the "market". I think there's a distinction there. Just like saying, can you potentially outperform a 60/40 portfolio by investing 100/0?
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Re: "Just Stand There" vs. incorporating new info

Post by bertilak »

Yes, it is OK to become wiser and better educated and let that guide your investments, but remember, there is always another investment idea with a better salesman, who is usually masquerading as an impartial, independent, expert.

Learn the (relatively few) important concepts from someone/someplace that does not have something to sell. Many times, the thing being sold is you, or your eyeballs, looking at advertisements or at one of those masquerading "experts." Often what you read is just something shiny to hold your attention while (often subtle) sales pitches are tossed your way.

OK, that's my curmudgeonly side! One occasionally needs a dose of that.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: "Just Stand There" vs. incorporating new info

Post by sailaway »

burritoLover wrote: Mon Dec 06, 2021 9:33 am
sureshoe wrote: Mon Dec 06, 2021 9:28 am Here's something I think every investor needs to decide:
Do you think you can outperform the market?

If the answer to this is "yes", then I can't help you because I don't believe it.

If the answer to this is "no", then I would take some time to identify a basic lazy portfolio and begin migrating. Then, there are only a few simple questions you have to answer.
I would say I am not seeking alpha - I'm taking on additional risk (by investing in SCV) that may outperform the "market". I think there's a distinction there. Just like saying, can you potentially outperform a 60/40 portfolio by investing 100/0?
I think you are very good at justifying what you want to do...
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

bertilak wrote: Mon Dec 06, 2021 9:33 am Yes, it is OK to become wiser and better educated and let that guide your investments, but remember, there is always another investment idea with a better salesman, who is usually masquerading as an impartial, independent, expert.

Learn the (relatively few) important concepts from someone/someplace that does not have something to sell. Many times, the thing being sold is you, or your eyeballs, looking at advertisements or at one of those masquerading "experts." Often what you read is just something shiny to hold your attention while (often subtle) sales pitches are tossed your way.

OK, that's my curmudgeonly side! One occasionally needs a dose of that.
I try to look at the academic side of things as well. Larry probably has something to sell - he doesn't come across that way, but I wouldn't just rely on one person's viewpoint when making changes.
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Re: "Just Stand There" vs. incorporating new info

Post by Ramjet »

Unpopular opinion: I personally think the "nobody knows nuthin'" (similar to "just stand there") replies are largely silly and gives people a reason to turn their brain off and not think through challenges to conventional wisdom or new information
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Re: "Just Stand There" vs. incorporating new info

Post by exoilman »

Sandtrap wrote: Mon Dec 06, 2021 8:25 am Sort of a "grass is greener", "new car-itis", thing maybe.

Actionable solutions:
1
Do you have a well thought out IPS?

Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
IPS Statement Worksheet PDF at Morningstar
http://news.morningstar.com/pdfs/inves ... pr2016.pdf

2
Don't watch the news, tv, media, financial news, etc.
Tune out the noise, all of it.
It's made for one thing, "carrot or stick" (fear)
to make you buy, or think, or do, or not do or be or not to be.
That is the question.

3
Search the forum archives for "Taylor's" posts on "simplicity". Read. Read. Do.

Buy and hold, then keep it simple.
j :D
:sharebeer
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Re: "Just Stand There" vs. incorporating new info

Post by Robot Monster »

burritoLover wrote: Mon Dec 06, 2021 8:20 am Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information?
I changed my portfolio radically based on new information i.e. what I've learned here. My portfolio was monumentally tilted into cash, and if I just "stood there" I would have been run over by the inflation train. I diversified heavily into TIPS, and to a lesser extent, stocks, based on the advice of others here. Not a mistake.
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Re: "Just Stand There" vs. incorporating new info

Post by bertilak »

burritoLover wrote: Mon Dec 06, 2021 9:38 am
bertilak wrote: Mon Dec 06, 2021 9:33 am Yes, it is OK to become wiser and better educated and let that guide your investments, but remember, there is always another investment idea with a better salesman, who is usually masquerading as an impartial, independent, expert.

Learn the (relatively few) important concepts from someone/someplace that does not have something to sell. Many times, the thing being sold is you, or your eyeballs, looking at advertisements or at one of those masquerading "experts." Often what you read is just something shiny to hold your attention while (often subtle) sales pitches are tossed your way.

OK, that's my curmudgeonly side! One occasionally needs a dose of that.
I try to look at the academic side of things as well. Larry probably has something to sell - he doesn't come across that way, but I wouldn't just rely on one person's viewpoint when making changes.
I probably should have added "academic" to my first sentence! (But Larry Swedroe is worth listening to.)
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: "Just Stand There" vs. incorporating new info

Post by KlangFool »

OP,

What "new information"? Have you done enough research to justify the changes?

A) TDF -> you know how much taxes that you would save. Hence, it was a good idea.

B) SCV and EMV -> How much additional portfolio return would you get if you are right? Is it good enough for you to make the change? If you do not know the answer to those questions, why are you making the changes?

C) Gold -> The same set of questions applies.

For any changes, you need to answer at least the following 4 questions:

1) How do you make money?

2) How do you lose money?

3) How much additional money do you make if you are right?

4) Can this investment make enough money to justify the additional risk and effort?

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Re: "Just Stand There" vs. incorporating new info

Post by sureshoe »

burritoLover wrote: Mon Dec 06, 2021 9:33 am
sureshoe wrote: Mon Dec 06, 2021 9:28 am Here's something I think every investor needs to decide:
Do you think you can outperform the market?

If the answer to this is "yes", then I can't help you because I don't believe it.

If the answer to this is "no", then I would take some time to identify a basic lazy portfolio and begin migrating. Then, there are only a few simple questions you have to answer.
I would say I am not seeking alpha - I'm taking on additional risk (by investing in SCV) that may outperform the "market". I think there's a distinction there. Just like saying, can you potentially outperform a 60/40 portfolio by investing 100/0?
The only outperform is "alpha", which maybe would be a better way for me to pose it.

Trying to avoid wonky theory (and arguing about what is alpha vs. beta), you really are seeking alpha by overweighting (at least in my opinion). You're saying you're taking on "risk", but really, by overweighting, you're trying to outperform the broader market. If you really wanted to simply increase beta of your broader portfolio, I would just buy the broad market on leverage.

If you don't believe there is "alpha", then by definition, any outperformance you might get from SCV is offset by risk. (as an aside, hasn't SCV been getting crushed by the S&P for years? I don't follow it specifically, but this is part of what nudged me to broader index investing a decade or more ago)

Dropping theory > I think this is where some of your frustrations/challenge is coming from. Based on your answer, we probably generally agree that a 100/0 allocation should average about 10% annual return over several years. If I told you that you were guaranteed for 8% annual returns (with a 70/30 mix), would you sign up for that? (obviously I can't promise that). I am getting the sense you want a "better" return than that. What would make you happy? I think that's worth understanding.
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Re: "Just Stand There" vs. incorporating new info

Post by bertilak »

KlangFool wrote: Mon Dec 06, 2021 9:48 am How much additional portfolio return would you get if you are right? Is it good enough for you to make the change? If you do not know the answer to those questions, why are you making the changes?
Yes, many "tweaks" one can make to one's portfolio may have some legitimate expectation of increasing risk adjusted return but may add the additional risk that you are mistaken.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: "Just Stand There" vs. incorporating new info

Post by Independent George »

burritoLover wrote: Mon Dec 06, 2021 8:20 am Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information? I find that I have evolved my portfolio as I learn about different concepts. For example, I once had all TDFs in all accounts, including taxable, until I realized that TDFs can have very high capital gain distributions so I went with a 3-funder in taxable. Then I learned about small cap value, researched it, and felt that I wanted to take on that additional risk so I added an allocation there. Then Avantis came out with a new EM value fund and I want to now add that. And I kind of want to add an allocation to gold as well just so that money is not all tied up in equity/bonds.

I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
1. Write down an Investment Policy Statement (IPS). This can be as general or specific as you wish, but the point is, having it written down gives you something you can look at and work with instead of changing it with your gut feeling.
2. Every time you get a new idea, write it down, put a date next to when you started considering it, and a brief description of why you want to change it..
3. Decide how long you want to consider something before implementing it, and write that down in your plan, too. It should be at least 30 days. (My own policy is six months).
3a. Note that changing how long you want to wait before making a change is itself a change, and subject to the same rule. My six month-policy used to be a twelve-month policy, and yes, I waited twelve months before recording it in the plan. This is why you write things down.
4. Write down the date every time you change your plan, and how much you've changed your plan.

Early on, you are picking up a LOT of information very quickly; it is normal to change the plan often, as you learn more and more things. You should also expect this to level off very rapidly as you get more comfortable with investing.

You also have to distinguish between general investing advice versus things specific to your situation, and evaluate how much impact a proposed change to your portfolio will have.

For example, - you learned that TDFs can have very high capital gain distributions. Did your specific TDF have high capital gains distributions? Index target retirement funds such as Fidelity Freedom or Vanguard do not typically experience such distributions; if that was your concern, it might have been wiser to just move to one of those brokerages instead of exiting TDFs entirely. Moreover, those distributions are irrelevant if held in a tax protected account like a 401k or Roth IRA (which is where most Americans keep the bulk of their assets). Furthermore, you then shifted to factor tilting with Avantis, which does actually tend to have more capital gains distributions (since they include momentum factor in their products, and value tends to have higher dividends), taking your right back to where you started.

None of which is to say that what you've learned is wrong, or that you shouldn't implement those ideas - just that you need to write it down and take your time in the best way to implement it. For the record, I am planning to consolidate my accounts at Fidelity, and start a 10% SCV tilt in January; both of those have been in consideration since 2019, and I'm only implementing after a lot of reflection.
Last edited by Independent George on Mon Dec 06, 2021 10:09 am, edited 1 time in total.
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Garco
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Re: "Just Stand There" vs. incorporating new info

Post by Garco »

I'm retired, and in my 70's. I will never just stand there, unless I reach a point when I can't stand at all. But I do manage my investments, and my allocation is more conservative now than before I retired several years ago. I don't need more money. But I also don't want to just cash out, either all at once or over time (e.g., annuitize). And I don't want the value of my investments to deteriorate, whether in inflation-adjusted or nominal dollars.

During my retirement, even though I've been taking RMD's my holdings in my main investment account have more than doubled. I've taken a bit of risk off the table. My wife and I have managed the legal (estate) components of our finances by establishing a will.

So while we're not "just standing there," we have taken precautionary steps.
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Re: "Just Stand There" vs. incorporating new info

Post by Silverado »

Ramjet wrote: Mon Dec 06, 2021 9:39 am Unpopular opinion: I personally think the "nobody knows nuthin'" (similar to "just stand there") replies are largely silly and gives people a reason to turn their brain off and not think through challenges to conventional wisdom or new information
I would add a leading sentence. The more I learn, the more it solidifies the 'nobody…' and '…just stand there' concepts.

The more I learn, the simpler things become.
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burritoLover
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

Independent George wrote: Mon Dec 06, 2021 10:00 am
burritoLover wrote: Mon Dec 06, 2021 8:20 am Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information? I find that I have evolved my portfolio as I learn about different concepts. For example, I once had all TDFs in all accounts, including taxable, until I realized that TDFs can have very high capital gain distributions so I went with a 3-funder in taxable. Then I learned about small cap value, researched it, and felt that I wanted to take on that additional risk so I added an allocation there. Then Avantis came out with a new EM value fund and I want to now add that. And I kind of want to add an allocation to gold as well just so that money is not all tied up in equity/bonds.

I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
1. Write down an Investment Policy Statement (IPS). This can be as general or specific as you wish, but the point is, having it written down gives you something you can look at and work with instead of changing it with your gut feeling.
2. Every time you get a new idea, write it down, put a date next to when you started considering it, and a brief description of why you want to change it..
3. Decide how long you want to consider something before implementing it, and write that down in your plan, too. It should be at least 30 days. (My own policy is six months).
3a. Note that changing how long you want to wait before making a change is itself a change, and subject to the same rule. My six month-policy used to be a twelve-month policy, and yes, I waited twelve months before recording it in the plan. This is why you write things down.
4. Write down the date every time you change your plan, and how much you've changed your plan.

Early on, you are picking up a LOT of information very quickly; it is normal to change the plan often, as you learn more and more things. You should also expect this to level off very rapidly as you get more comfortable with investing.

You also have to distinguish between general investing advice versus things specific to your situation, and evaluate how much impact a proposed change to your portfolio will have.

For example, - you learned that TDFs can have very high capital gain distributions. Did your specific TDF have high capital gains distributions? Index target retirement funds such as Fidelity Freedom or Vanguard do not typically experience such distributions; if that was your concern, it might have been wiser to just move to one of those brokerages instead of exiting TDFs entirely. Moreover, those distributions are irrelevant if held in a tax protected account like a 401k or Roth IRA (which is where most Americans keep the bulk of their assets). Furthermore, you then shifted to factor tilting with Avantis, which does actually tend to have more capital gains distributions (since they include momentum factor in their products, and value tends to have higher dividends), taking your right back to where you started.

None of which is to say that what you've learned is wrong, or that you shouldn't implement those ideas - just that you need to write it down and take your time in the best way to implement it. For the record, I am planning to consolidate my accounts at Fidelity, and start a 10% SCV tilt in January; both of those have been in consideration since 2019, and I'm only implementing after a lot of reflection.
I do write down the IPS but not with a date and what I was thinking about at the time - that is great idea.

My specific TDF (Vanguard 2045) did not have large distributions at the time but I noticed that their 2020 TDF had some over $1 a share. This taxable account will be decently sized at retirement (at $25k-$35k contributions a year) and that was a concern with the Vanguard TDF. The Avantis ETFs have not had any capital gain distributions.
Last edited by burritoLover on Mon Dec 06, 2021 10:19 am, edited 1 time in total.
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Re: "Just Stand There" vs. incorporating new info

Post by TheGreyingDuke »

One thing that I have learned (too late for it to have relevance for me) has to do with TIRA allocation. Bear in mind that I have a small amount of my resources in such accounts but...

As things have turned out, the TIRAs are all going to charity, either now via QCDs or upon my death (Vanguard Charitable is the beneficiary of them). Had I known "back then" that this was how it was to go, I would have invested them much more aggressively.
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Re: "Just Stand There" vs. incorporating new info

Post by arcticpineapplecorp. »

burritoLover wrote: Mon Dec 06, 2021 9:12 am
goingup wrote: Mon Dec 06, 2021 9:08 am I like Rick Ferri's observation:

The Education of an Index Investor:
1. Born in darkness;
2. Finds indexing enlightenment;
3. Over-complicates everything;
4. Embraces simplicity.

Maybe you're at #3? :D
I've seen that before and I'm probably a bit of a hypocrite in that I tell others the same thing when they are adopting the latest fad. But I try to think that I'm adopting evidenced-based info into these changes, not something that has back-tested well recently. But maybe I'm deluding myself.
there's at least 150 portfolios that might be better than yours:
https://www.whitecoatinvestor.com/150-p ... han-yours/

unfortunately, you'll never know which one is better until after the fact and you want/need to know before the fact.

because you can't know the future which is unknown and unknowable, just pick one and just stand there.
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Re: "Just Stand There" vs. incorporating new info

Post by DaufuskieNate »

It seems you have made a very logical progression to a modestly tilted global equity portfolio. The SCV tilt has added risk and expected return. One consideration is how this portfolio will perform in a downturn and how you will react after potentially losing a significant percentage of your investment. Adding a bit more to your fixed income, combined with the tilted equity position, can make the downturns easier to digest.
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Re: "Just Stand There" vs. incorporating new info

Post by shess »

burritoLover wrote: Mon Dec 06, 2021 8:20 am Bogle famously said "Don’t do something, just stand there". Certainly you shouldn't change anything based on current economic conditions or returns, but what about incorporating new information? I find that I have evolved my portfolio as I learn about different concepts. For example, I once had all TDFs in all accounts, including taxable, until I realized that TDFs can have very high capital gain distributions so I went with a 3-funder in taxable. Then I learned about small cap value, researched it, and felt that I wanted to take on that additional risk so I added an allocation there. Then Avantis came out with a new EM value fund and I want to now add that. And I kind of want to add an allocation to gold as well just so that money is not all tied up in equity/bonds.

I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
A real problem I have is that my life delivers me variable amounts of free time and my body delivers variable amounts of energy. So, periodically I find myself elbow deep in things like this (Hedgefundie's excellent adventure! Crypto! SCV! EM! Gold! Dividend stocks! Robotically-managed SMAs!), fully convinced, ready to pull the trigger. And while my list just now was hyperbolic, often I think there is a "there" there, that some things really ARE worth considering.

But then I remember that at other times, my life delivers hardship, and my body is having troubles keeping up with the basics, like maybe something scary is happening to or with a family member, or there's a worldwide pandemic, or some other sort of challenge. And for three or six months, I have no spare ability to pay attention to optional matters like getting into the weeds about what combination of SCV and emerging-market debt is right for me.

And then I just stand there and let my somewhat aggressively positioned three-fund portfolio with a concentrated position in employer stock ride. It's been doing the job well for many years. Maybe I can use some of that free energy to make sure I have my spending covered for the next few years (I'm retired), and double-check whether things are in balance. Maybe look at whether I should sell a bit more this year to allow more Roth conversions next year, or vice versa. Basically, do all the boring boring work right now.

There is a software-engineering saying by Brian Kernighan which I think applies in cases like this:
Everyone knows that debugging is twice as hard as writing a program in the first place. So if you're as clever as you can be when you write it, how will you ever debug it?
This isn't to be taken literally, but the basic idea is that if you put a system in place which requires your peak performance to keep it going in the best case, then your worst-case experience is not going to be pleasant.
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Re: "Just Stand There" vs. incorporating new info

Post by burritoLover »

My thought processes for my recent round of proposed changes:

1. My SCV allocation has no EM - I would like to have exposure there as it now makes up 25% of equities which puts me underweight on EM across the portfolio.

2. 5-10% allocation to gold - this is a tough one but I wanted an allocation to something uncorrelated to stocks/bonds.

3. Starting to buy i-bonds each year - my 5% bond allocation is entirely in the TDFs in the 401k.

4. I feel like I want to increase my SCV allocation. We are maxing out 401ks and I have a very high risk tolerance. We will not be eating cat food if all we had to show for it was the 401k at retirement, short of extremely high inflation over 20-25 years.
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Re: "Just Stand There" vs. incorporating new info

Post by arcticpineapplecorp. »

burritoLover wrote: Mon Dec 06, 2021 10:35 am My thought processes for my recent round of proposed changes:

1. My SCV allocation has no EM - I would like to have exposure there as it now makes up 25% of equities which puts me underweight on EM across the portfolio.

2. 5-10% allocation to gold - this is a tough one but I wanted an allocation to something uncorrelated to stocks/bonds.

3. Starting to buy i-bonds each year - my 5% bond allocation is entirely in the TDFs in the 401k.

4. I feel like I want to increase my SCV allocation. We are maxing out 401ks and I have a very high risk tolerance. We will not be eating cat food if all we had to show for it was the 401k at retirement, short of extremely high inflation over 30 years.
Paul Merriman posted the following at a workshop he gave at retiremeet last year (can get online seats now for 2022 retiremeet) and he's a big believer/promotor in SCV. However, he cautions investors who want SCV that there are generally long periods of underperformance relative to the market, to wait for those short strong bursts of outperformance more than making up for long not so great periods. So you must be prepared to hold SCV for the long term. If you won't, don't bother. Investor, know thyself. How well do you know yourself?

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Re: "Just Stand There" vs. incorporating new info

Post by guppyguy »

burritoLover wrote: Mon Dec 06, 2021 10:35 am My thought processes for my recent round of proposed changes:

1. My SCV allocation has no EM - I would like to have exposure there as it now makes up 25% of equities which puts me underweight on EM across the portfolio.

2. 5-10% allocation to gold - this is a tough one but I wanted an allocation to something uncorrelated to stocks/bonds.

3. Starting to buy i-bonds each year - my 5% bond allocation is entirely in the TDFs in the 401k.

4. I feel like I want to increase my SCV allocation. We are maxing out 401ks and I have a very high risk tolerance. We will not be eating cat food if all we had to show for it was the 401k at retirement, short of extremely high inflation over 20-25 years.
If you don't mind sharing, how far away from retirement are you in terms of not only years left working but % of additional retirement funds required?

The reason I ask is that you will not be the same person later and that all of these ideas, while having some debatable merit, probably will not make that much of a difference. Is the extra alpha worth not only the increased ER but the increase time (and temptation) you will take in checking your portfolio all the time for rebalancing events?

I think you're handling the soap a bunch, because I do to, so it's easy to spot. Not a judgement, as I don't know you.
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Re: "Just Stand There" vs. incorporating new info

Post by Jack FFR1846 »

Just stand there.

Your progression is getting closer and closer to single stock picking.

Jack Bogle was interviewed in a video I remember where he made a point that the new, slick thing is most often not better than the haystack. He actually used SCV as the example. He said in the video that over a decade ago, it was the new slick thing and maybe then had the opportunity to grow faster than the haystack. But then everyone piled on it. Today, it's wicked old news that's been bid way over value, so in short is likely a better thing to short, for those who like to play games.

It's fine to listen to videos or blogs or read Bogleheads posts. Thinking about some new idea for a long time and perhaps seeking out contrary views is recommended before doing anything. I have a move I plan to make, based on Bogle's lack of international. I've been thinking about it for a few years. I stopped putting money into international but I haven't sold any. I don't plan to sell any until I've stopped working. Doing something in a few weeks is knee jerk.

There are 2 sectors (if that's the right word) that I've decided I won't invest in or won't add to. International, because go ahead and name a company who isn't heavily invested in or selling outside the US. Go ahead...find one. The second is REITS. Again, name a company who doesn't own real estate.

Now, I would say that changing a target date fund in a tax advantaged account to the individual 3 funds that really make it up are a good move and really not a change at all besides saving money. I don't see that as a change.
Last edited by Jack FFR1846 on Mon Dec 06, 2021 10:52 am, edited 1 time in total.
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Re: "Just Stand There" vs. incorporating new info

Post by Ramjet »

Silverado wrote: Mon Dec 06, 2021 10:10 am
Ramjet wrote: Mon Dec 06, 2021 9:39 am Unpopular opinion: I personally think the "nobody knows nuthin'" (similar to "just stand there") replies are largely silly and gives people a reason to turn their brain off and not think through challenges to conventional wisdom or new information
I would add a leading sentence. The more I learn, the more it solidifies the 'nobody…' and '…just stand there' concepts.

The more I learn, the simpler things become.
I didn't say you actually should do anything different or that it is even beneficial to

My point is to not dismiss something, even if unconventional, before thinking it through
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