CraigTester wrote: ↑Tue Aug 16, 2022 8:47 pm
As a for instance, you've been asked to help a friend with setting his AA for retirement.
He comes to you all excited....
He just read a NYT article saying the SP500 grows at 10% per year.... and even after the Great Depression, it recovered in only 4.5 years.....
He does some math in his head, smiles, and asks if you think he's being too conservative to put 4.5 years cash in a safe mm account and throw the rest in stocks....
This is not what is recommended on the BH wiki regarding investment philosophy, asset allocation and risk assessement.
https://www.bogleheads.org/wiki/Boglehe ... philosophy
https://www.bogleheads.org/wiki/Asset_allocation
Assuming he has 25x...it's 20.5X equities and 4.5X fixed income or 80/20 (okay 82/18) which some folks will do in retirement.
Is it conservative for a 30 year retirement with 25x? No.
If he has 50x...yah, he's fine. At a 2% WR it doesn't really matter if he's 90/10. It's automatically "conservative" because he could have retired a while ago and he has a 2x what you needed for the historical worst case. That's a lot of margin for error.
There's no "gotcha" here because conservative and aggressive is relative.
The next day your 22 year old niece says she's very risk averse..., but as a new nurse..., keeps reading on CNBC that she should invest most of her paycheck in the stock market....
She explains that she understands that stocks can be risky.... And hopes we don't get another March 2020 situation where you have to wait for several months for the government to fix the stock market again....
Nothing wrong with investing most of her paycheck in the stock market.
You then point her at the above wiki pages regarding passive index investing, LBYM, risk tolerance, etc. At some point someone will explain that 2020 was amazingly fast and 2008 sucked a lot more. Given this is a common refrain in the forum, it shouldn't take too long for her to encounter that.
When she builds her IPS she can take into account how risk adverse she feels she is.
Again, no "gotcha" here either. Someone early career isn't incurring a lot of risk being 100/0 with an EF because their time horizon is long. She can choose some other AA but her circumstances is inherently low risk because her human capital is high. Her future earnings provides a tremendous amount of risk mitigation.
You then log on to Bogleheads and see multiple posters in heated exchanges about all sorts of esoteric things....
Tempers flare, and as one really strives to win the argument, he slips in these little sentences, explaining that even if the stock market goes down, it never lasts for more than a few years....
He goes on to proclaim that your just about guaranteed to make 10% per year if you just stay the course.... Nobody knows nuttin so just do what all these other people are doing and don't ask too many questions....
You try to interject a comment explaining that it can take 20 years to recover,
But he just says meh, you're not including dividends, you made a math error, etc....
Your wife calls you for dinner and you never get to correct the false statements....
So you decide to write a post explaining that markets really can take 20 years to recover, etc, etc....
Link required.
But people don't like what you're saying so they try to find holes in your data by showing you a long term Nominal stock chart.....and say, "see, it always goes up, your data is wrong...." Or claim you didn't include dividends....
Perhaps people simply disagree with your opinion that Bogleheads is somehow a source of misinformation...I think you seriously mischaracterize the general opinion of the forum.
If anything BH tends to be very conservative and the mantra is be ready for a 50% (or more) drop anytime and that it could last a while. That you only know your true risk tolerance when you have a large portfolio in a 2008 scenario. That 2020 was too quick of a crash to test your real tolerance.
So all that stuff above is straw man.
Others attempt to discredit you for being a "market timer" and then post public service announcements to make sure others aren't persuaded by your gibberish....
And finally, someone takes the bull by the horn and states that none of this historical data stuff is "actionable"....
All the Best,
Craig Tester
Maybe because if you follow the BH philosophy it really ISN'T actionable because the mantra is to "Don't do something, Just stand there!"
If you have an IPS and done a reasonable job assessing your risk tolerance and picked an AA based on your risk assessment then the fact that the market can crash hard and stay crashed a long time has already been factored into your thinking. The 1929 scenarios will already be factored in. It's factored into SWR. It's factored into VPW. It's factored into ABW. It's factored into the basic BH philosophy that time in market tends to fix many ills. It's factored into the need to ramp from your accumulation AA to your retirement AA. It's factored into the need to consider SORR.
Everything is already based on historical data stuff with a leavening of investment/economic theory which is itself based on historical data stuff.
Even if you don't understand that stocks can crash and stay down for 20 years the basic tenets/rules of thumb/best practices/etc have factored that possibility in there.
And as far as I can tell, nobody has called you a market timer.