Boglehead's version of play money?

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blimp
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Boglehead's version of play money?

Post by blimp »

Some people advocate for 5% of your portfolio dedicated to "play money" with high risk to "scratch the itch" for speculation, gambling, and hope of spectacular returns.

We're talking crypto, single stocks, NFTs, fine art, angel investing, or whatever looks sexy.

I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."

Obviously, owning a rental property or investing in private equity could be profitable, but these investments don't meet my criteria

So here are some ideas:

1) TQQQ Triple-leveraged Nasdaq. Up 34.12% year to date compared to 5.57% for VTSAX
2) TECL (Triple leveraged tech sector). Up 32.17% year to date.
3) UPRO (triple leveraged S&P 500). Up 18.34 YTD
4) An individual emerging market index fund. Turkey is up >100% in the last year. Just pick a country with favorable PE ratio? According to this website, the VanEck Brazil Small-Cap ETF has a PE ratio of 0.18: https://etfdb.com/compare/lowest-pe-ratio/
5) Pick an individual stock with the best valuation. Kinder Morgan, Inc. has a PE ratio of 2.914372.

For (4) and (5), you could "rebalance" once a year by selling and buying a new single emerging market index fund or a single stock based on favorable valuation.

Okay. Now it's your turn to come up with better ideas.

Go!
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Re: Boglehead's version of play money?

Post by er999 »

Do you have any bonds? If so reduce your bond percentage by 5% and add stocks.

Otherwise many speculative ideas on this site that are available with searching (try moonshot, leverage, hedgefundie) but no guarantees.
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Re: Boglehead's version of play money?

Post by enad »

Bogle stated in his books that if you must, no more than 5% of your portfolio to scratch the itch as you put it. I am past those days
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Re: Boglehead's version of play money?

Post by blimp »

er999 wrote: Fri Jan 27, 2023 12:48 am Do you have any bonds? If so reduce your bond percentage by 5% and add stocks.
Yes I have 10% bonds but you are missing the point of this post.
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Re: Boglehead's version of play money?

Post by blimp »

enad wrote: Fri Jan 27, 2023 12:57 am Bogle stated in his books that if you must, no more than 5% of your portfolio to scratch the itch as you put it. I am past those days
I admire your discipline
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Re: Boglehead's version of play money?

Post by secondopinion »

By the time one removes doing a serious analysis, it removes any potential purpose the speculative allocation may have.

I have such a budget, but it is not play money; it is a personal complementing hedge fund as it were to my portfolio. I do not abide by the rules you stated with that portion; I do rebalance to and from that portion on a yearly-ish basis. I have a 10% budget; if that sounds too high, then one is thinking too risky to make the allocation sustainable.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: Boglehead's version of play money?

Post by Triple digit golfer »

I'd rather just build it into my expense budget. Allow $X a month for it and consider it an expense. If you get lucky and make money doing it, it's like a casino win.
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Re: Boglehead's version of play money?

Post by magicrat »

Small cap value might meet your criteria. But why do you feel the need to do this at all?
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Re: Boglehead's version of play money?

Post by YeahBuddy »

I'd rather not speculate on investments but if I have an extra 5% I'd put that into a hobby that provides enjoyment and may return profit.
My hobby is classic car restoration.
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Re: Boglehead's version of play money?

Post by dcabler »

blimp wrote: Fri Jan 27, 2023 1:04 am
enad wrote: Fri Jan 27, 2023 12:57 am Bogle stated in his books that if you must, no more than 5% of your portfolio to scratch the itch as you put it. I am past those days
I admire your discipline
A lot of us are past those days. Don't get me wrong, I love to look at my portfolio, check progress, analyze the snot out of it in 100 different ways, etc. At least for me, peeking and analyzing hasn't caused me to make behavioral mistakes.

But for a time I did take my smallest account and tried a bunch of different things. It was time consuming and I basically just lost interest.

Cheers
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Re: Boglehead's version of play money?

Post by ScubaHogg »

Hedgefundie’s excellent adventure seems to qualify, excepting the quarterly rebalancing

viewtopic.php?p=4364001#p4364001
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Re: Boglehead's version of play money?

Post by vanuber »

blimp wrote: Fri Jan 27, 2023 12:39 am I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."
Sounds like you are looking for an index fund.

Like RobLyons, I like tangible assets. My fun money stokes my hobbies - art, design, vintage motorcycles.
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Re: Boglehead's version of play money?

Post by SmileyFace »

Do you have the itch or are you trying to create the itch?
Sounds like it might be the latter.
I have 0% in speculative investments since I don't have an itch to needlessly risk my hard-earned money.
(Full disclosure: I do buy a lottery ticket 3 or 4 times a year so maybe I put 0.00005% in speculation).
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Re: Boglehead's version of play money?

Post by riverant »

blimp wrote: Fri Jan 27, 2023 12:39 am I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."
I’ve heard good things about VTI

How will your 1-5 list satisfy a speculative itch?
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Re: Boglehead's version of play money?

Post by Harmanic »

PSLDX
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Re: Boglehead's version of play money?

Post by livesoft »

No work? How about being more realistic on that? How about as little work as it took you to make your original post in this thread?
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Re: Boglehead's version of play money?

Post by backpacker61 »

"Totally passive" or "no investigation required" takes the "play" out "play money" to me.

I went through a "phase" of doing a little of that sort of thing in the late 1990's, and still own a couple individual stocks I bought back then, which have done well. I'm earmarking them to initiate a donor advised fund account at some point.

My mega backdoor roth contributions to my employer-sponsored plan keep me in the poorhouse now, and I just don't have the cash flow to fund speculative investments. All the MBR money goes into index-tracking Blackrock CIT's (boring).
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Re: Boglehead's version of play money?

Post by JPH »

livesoft wrote: Fri Jan 27, 2023 8:34 am No work? How about being more realistic on that? How about as little work as it took you to make your original post in this thread?
I agree. What's the point of a hobby if you don't spend time on it?
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Re: Boglehead's version of play money?

Post by vxdx »

This just seems like a justification for the gambling type thrill that generally seems best to avoid.

You do 5% and lose, so you’d have been better not doing it at all.

You do 5% and win, and think “why am I not doing 10%?”.
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Re: Boglehead's version of play money?

Post by JakeyLee »

blimp,
Having a “play money” account some 25 years ago was the best thing that ever happened to me. I learned so many lessons. I mostly learned that I was not capable of beating the market. But man oh man.. I tried so hard. I no longer have the itch. But I’m so grateful
for the knowledge. This is NOT a knock on folks that trade. Many can do it successfully. I know that I can’t.

I still set up simulations and trades with fake money. I track them religiously. It’s a strange hobby, but then again, so am I. By and large I rarely beat the market… even with fake money. Go figure. I think I’ll buy a Powerball ticket this afternoon.
“On balance, the financial system subtracts value from society” | -John Bogle
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Re: Boglehead's version of play money?

Post by barnaclebob »

5% of your portfolio under performing by 25% is no better than giving it all to Edward Jones to manage.
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Re: Boglehead's version of play money?

Post by Stinky »

I enjoy the game of blackjack. Of course, I know that the house always wins (over the long term, at least).

In my younger days, I would go to the casino, put down $500 or so, and consider it a success if I walked out with much of anything. I’d spend 2-4 hours there, smell of smoke when I walked out, deal with the occasional novice or irrational player, and generally be disgusted with the entire experience.

I’ve found an online blackjack game in “demo” mode. Entirely free, and lightning fast (since I’m the only one at the “table”). I can easily “win” or “lose” $250 in 10 minutes or so. Then I can walk away. No smoke smell. No need to go to the casino. No actual money lost.

This scratches my itch. At no cost to my wallet.
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Re: Boglehead's version of play money?

Post by retired@50 »

blimp wrote: Fri Jan 27, 2023 12:39 am
Okay. Now it's your turn to come up with better ideas.

Go!
How about an actively managed fund from Vanguard?

International Growth, or Equity Income come to mind. VWILX or VEIRX.

Regards,
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Re: Boglehead's version of play money?

Post by arcticpineapplecorp. »

blimp wrote: Fri Jan 27, 2023 12:39 am I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."

Obviously, owning a rental property or investing in private equity could be profitable, but these investments don't meet my criteria

So here are some ideas:

1) TQQQ Triple-leveraged Nasdaq. Up 34.12% year to date compared to 5.57% for VTSAX
2) TECL (Triple leveraged tech sector). Up 32.17% year to date.
3) UPRO (triple leveraged S&P 500). Up 18.34 YTD
4) An individual emerging market index fund. Turkey is up >100% in the last year. Just pick a country with favorable PE ratio? According to this website, the VanEck Brazil Small-Cap ETF has a PE ratio of 0.18: https://etfdb.com/compare/lowest-pe-ratio/
5) Pick an individual stock with the best valuation. Kinder Morgan, Inc. has a PE ratio of 2.914372.
1. what's your definition of "low cost"?
2. do you consider these low cost:
tqqq costs 0.86%
tecl costs 0.94%
upro cosrts 0.91%

3. year to date? what's that tell you? What if you had asked this last year? How would last year have done?

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

of course, you can argue I'm cherry picking to make a point. But so are you. Sure this is just 5% of your money so even if you lose alot, it's alot of a little. But then ask yourself why are you are thinking of doing this? It's to make MORE money than you'd do WITHOUT doing this. But if you believe you'll make MORE money doing this, why stop at 5%? Why not 10% or 15%?

If you look at the whole time series portfolio visualizer shows (back to 2011) you see a few things:

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

4. While the CAGR of all 3 of your picks beat vtsax it was with far greater risk. St. deviation is like 3X to 4X higher with these (again i know it's just with 5% of your money).
5. vtsax had a higher sharpe ratio than the 3 etf picks and only ultra pro qqq had a higher sortino ratio (who knows about the future though). Max drawdowns and worst years were much worse for the etfs compared to vtsax.

one last chart to pull it all together (this time looking at your 95% vtsax + 5% in the three etfs vs. 100% vtsax):

Image

source: https://www.portfoliovisualizer.com/bac ... tion4_1=95

what do you notice? It took a few years for the difference to become apparent. your strategy didn't start pulling ahead until 2014 or so. Are you a patient person where you won't be upset if you don't see your strategy outperform for several years? Be honest. Methinks if you're focusing on year to date returns, you're not necessarily thinking really long term (though I admit I could be wrong in my assumption).

make sure to look at the chart from 2022 (and the last one) and make sure you'll be able to stay the course (whether those three etfs do worse than the market in any given year and/or if there are years where it doesn't give you the great returns over a string of years like you expected.

6. Buy and hold? If your three etfs outperformed, as they did after MANY years, you will have to rebalance otherwise the 5% in these three etfs will be >5%, won't they?

7. P/E's aren't predictive of returns. True it's better to buy stocks cheap than expensive, but stocks can always get cheaper. like zero.

8. individual companies are clearly risky, even Turkey that went up 100% last year. And you don't care what they did last year, you want to know what they'll do this year. And you can't know that in advance. And doesn't this fly in the face of your buy and hold/set it and forget it approach? Knowing a country can have a good year performance and then a bad year means if you'd have to buy before it did well and sell after it did well, otherwise you get reversion to the mean. Why not just hold total global stock market instead?

9. A Brazil small cap etf is more risky because you are taking the idiosyncratic risk of one country and one sector. What if large cap or mid cap outperforms in Brazil, while small cap is outperforming in US. Guessed wrong I guess. Instead own a more diversified small cap etf if you want to tilt to small cap.

10. investing's supposed to be boring. if you want excitement go to Las Vegas. Don't overthink this and don't try to get cute with the market or your investments. The market knows more than you do and will prove it again and again.
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Re: Boglehead's version of play money?

Post by Norsky19 »

I used "play money" to tilt towards small value. I bought SV ETF's in my vanguard brokerage. Also, I did more sector ETF's and even bought some blockchain ETF's. Oh, and I have an India ETF. I can't bring myself to buy individual stocks. Otherwise, I'm using the vast bulk of my investing by owning a Target Date Fund with Vanguard. Most of my brokerage money is split between Intermediate Term Municipal Bond fund and Total Stock index fund.
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Re: Boglehead's version of play money?

Post by Chrono Triggered »

I would personally research and pick out some individual stocks that you think could explode in value and see how they do over the years compared to the rest of your portfolio if you want to use some play money.
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Re: Boglehead's version of play money?

Post by blimp »

magicrat wrote: Fri Jan 27, 2023 6:09 am Small cap value might meet your criteria. But why do you feel the need to do this at all?
My feeling is that the Fama-French data is so well known that everyone and their mama is tilting small-value such that the advantage may be gone.
ScubaHogg wrote: Fri Jan 27, 2023 6:39 am Hedgefundie’s excellent adventure seems to qualify, excepting the quarterly rebalancing

viewtopic.php?p=4364001#p4364001
I am familiar with this legendary thread, though I would just stick with 100% UPRO instead of 55/45 UPRO/TMF since it is only a 5% allocation.
SmileyFace wrote: Fri Jan 27, 2023 6:55 am(Full disclosure: I do buy a lottery ticket 3 or 4 times a year so maybe I put 0.00005% in speculation).
I'll allow it, but if your lottery allocation exceeds 0.0001%, you are banned from the forum.
Harmanic wrote: Fri Jan 27, 2023 8:26 amPSLDX
Can you explain further
barnaclebob wrote: Fri Jan 27, 2023 12:18 pm 5% of your portfolio under performing by 25% is no better than giving it all to Edward Jones to manage.
This is a fair point. I would balk at a 0.5% fee, so why would I risk 5%?
JPH wrote: Fri Jan 27, 2023 9:08 am What's the point of a hobby if you don't spend time on it?
Okay. Some time is allowed but not too much.

arcticpineapplecorp. wrote: Fri Jan 27, 2023 12:49 pmLot of Brilliant stuff...
Okay you win. I can't argue with anything you wrote. I will stick the to the plan.
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Re: Boglehead's version of play money?

Post by the_wiki »

The problem is 5% doesn’t do much for overall returns. Say i get super lucky and it goes up 60%, well that’s 3% of total portfolio. You’d have to find the next Tesla for it to matter, and that’s Vegas odds.
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Re: Boglehead's version of play money?

Post by toddthebod »

If you have 5% of your portfolio that you don't need, spend it. I personally can think of a dozen things I'd rather spend my savings on than actively trading.
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Re: Boglehead's version of play money?

Post by backpacker61 »

the_wiki wrote: Sat Jan 28, 2023 12:06 am The problem is 5% doesn’t do much for overall returns. Say i get super lucky and it goes up 60%, well that’s 3% of total portfolio. You’d have to find the next Tesla for it to matter, and that’s Vegas odds.
I think the point is that this is "play money" more so than investing.

I would just set a monthly budget for it (assuming one wants to go that way), and when it's gone, it's gone; even if it goes to zero. I wouldn't categorize it with any part of my long term savings (nor allocate 5% of my existing savings). Many people budget for entertainment, and I think speculative investing is no better nor worse than other pursuits people fund for entertainment, so long as it doesn't become addictive (which is also a hazard with cigars, wine, beer, other distilled spirits).

If I was going to do this now, I would just use dividends from my "play money" stocks from the late 1990's and use those dividends to take some chances now. But I'm already spending those on mega backdoor roth, so I don't really have them available for anything else.
Last edited by backpacker61 on Sat Jan 28, 2023 9:29 am, edited 1 time in total.
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Re: Boglehead's version of play money?

Post by nisiprius »

blimp wrote: Fri Jan 27, 2023 12:39 am ...Some people advocate for 5% of your portfolio dedicated to "play money" with high risk to "scratch the itch" for speculation, gambling, and hope of spectacular returns...
toddthebod wrote: Sat Jan 28, 2023 9:23 am If you have 5% of your portfolio that you don't need, spend it. I personally can think of a dozen things I'd rather spend my savings on than actively trading.
Hear, hear!

Burton Malkiel has acknowledged, in AFAIK every edition of A Random Walk Down Wall Street, "Having been smitten with the gambling urge since childhood..." For whatever reason, I have not been smitten with the gambling urge. toddthebod is another. Not everybody is. I can't agree with normalizing irrational financial risk-taking. Plenty of people are able to lead their financial lives without it.

John C. Bogle's term for a gambling allowance was "funny money." He wrote about it in the first edition of The Little Book of Common Sense Investing but not the second. Some points about it are particularly worth noting, because they are sometimes omitted when his advice is referenced.
  • Bogle never advocated that anyone have a "funny money" account: "The rationale for a 100-percent-index-fund portfolio remains as solid as a rock." Bogle used the word if: "If you decide to have a Funny Money Account," which was needed only "if you crave excitement." He said "[For retirement assets] use an index fund strategy. Even better, use it for 100 percent of your assets.
  • He referred to a "Funny Money Account" and a "Serious Money Account." In interviews, he made it clear that he literally meant exactly that: separate accounts.
I have yet to see people advocating 5% allocated to funny money spell out exactly what happens if all of that 5% is lost. It seems to be implicitly assumed that the worst possible scenario is subpar returns. In fact Bogle seemed to be taking about picking your own stocks and discovering that you failed to beat the index fund.

But total loss is certainly possible.

If the investor is able to say "it's over" and live the rest of their lives without trying again, then it means they did not actually need to scratch their gambling itch. So it would have been better not to do it in the first place.

I fear that the more likely scenario is that the memory of pain fades, the itch recurs, they put up another 5% and try again. Or, even worse, risk a second 5% immediately in hope of recouping the first. If they allow themselves to try again after losing the 5%, then they have not met the goal of limiting losses to 5%. In fact, they allow themselves to try again, then the potential losses are not limited at all. In other words, I question whether people are really able to maintain a hard limit of 5%.
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Re: Boglehead's version of play money?

Post by LilyFleur »

I have 1% in Apple. :mrgreen:
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Re: Boglehead's version of play money?

Post by JoMoney »

I don't use a percentage. I have a budget for "entertainment" that's an expense and not to be considered part of my savings and investing. Sometimes I'll take it to the casino, I like to play poker, and like most everyone else at the table pretend I have an advantage skillfully playing better than them.
I try to keep those delusions in the entertainment expense category, and not let it commingle with my savings thinking I'm going to out-trade or out-pick other securities investors.
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Re: Boglehead's version of play money?

Post by IRouteIP »

Donate it.

If you have some amount of money that you just want to play with and don't care if it goes to zero, give it to someone who is hanging on by a thread and is in desperate need of a lifeline. The potential returns are better than anything the market can give.

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Re: Boglehead's version of play money?

Post by ruralavalon »

My version of "play money" is Monopoly® money, all of my investments are real money.
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Re: Boglehead's version of play money?

Post by goblue100 »

ruralavalon wrote: Sat Jan 28, 2023 11:30 am My version of "play money" is Monopoly® money, all of my investments are real money.
Exactly what I was going to say. I care about all my dollars equally, why discriminate?
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Re: Boglehead's version of play money?

Post by Harmanic »

blimp wrote: Fri Jan 27, 2023 11:27 pm
Harmanic wrote: Fri Jan 27, 2023 8:26 amPSLDX
Can you explain further
PSLDX is a professionally managed version of Hedgefundie. Basically a leveraged balance fund. It did horrible last year.
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Re: Boglehead's version of play money?

Post by bltn »

blimp wrote: Fri Jan 27, 2023 1:04 am
enad wrote: Fri Jan 27, 2023 12:57 am Bogle stated in his books that if you must, no more than 5% of your portfolio to scratch the itch as you put it. I am past those days
I admire your discipline
Not discipline so much as education.

After a decade of investing in individual stocks and rental real estate with the successes and failures of each, I became aware of the Bogle philosophy of index investing. I began to dollar cost average further investments into an index 500 fund. Five years into this process, I looked at my account growth and realized that simply allowing my funds to grow with the market did better than my previous active investment efforts. With much less involvement. For me it came down to betting on a sure thing rather than trying to get lucky with a long shot.
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Re: Boglehead's version of play money?

Post by burritoLover »

If I'm going to gamble 5% of my retirement portfolio, it is going be in something that has the potential to produce 20x, 50x, or 100x returns like individual stocks. Or just take a really nice vacation(s) with your family each year - in your old age, you will look more fondly on that than some period where you, at best, made a little money on some ETFs or at worst (and more likely), completely wasted your time and money.
bltn
Posts: 1843
Joined: Mon Feb 20, 2017 8:32 pm

Re: Boglehead's version of play money?

Post by bltn »

arcticpineapplecorp. wrote: Fri Jan 27, 2023 12:49 pm
blimp wrote: Fri Jan 27, 2023 12:39 am I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."

Obviously, owning a rental property or investing in private equity could be profitable, but these investments don't meet my criteria

So here are some ideas:

1) TQQQ Triple-leveraged Nasdaq. Up 34.12% year to date compared to 5.57% for VTSAX
2) TECL (Triple leveraged tech sector). Up 32.17% year to date.
3) UPRO (triple leveraged S&P 500). Up 18.34 YTD
4) An individual emerging market index fund. Turkey is up >100% in the last year. Just pick a country with favorable PE ratio? According to this website, the VanEck Brazil Small-Cap ETF has a PE ratio of 0.18: https://etfdb.com/compare/lowest-pe-ratio/
5) Pick an individual stock with the best valuation. Kinder Morgan, Inc. has a PE ratio of 2.914372.
1. what's your definition of "low cost"?
2. do you consider these low cost:
tqqq costs 0.86%
tecl costs 0.94%
upro cosrts 0.91%

3. year to date? what's that tell you? What if you had asked this last year? How would last year have done?

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

of course, you can argue I'm cherry picking to make a point. But so are you. Sure this is just 5% of your money so even if you lose alot, it's alot of a little. But then ask yourself why are you are thinking of doing this? It's to make MORE money than you'd do WITHOUT doing this. But if you believe you'll make MORE money doing this, why stop at 5%? Why not 10% or 15%?

If you look at the whole time series portfolio visualizer shows (back to 2011) you see a few things:

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

4. While the CAGR of all 3 of your picks beat vtsax it was with far greater risk. St. deviation is like 3X to 4X higher with these (again i know it's just with 5% of your money).
5. vtsax had a higher sharpe ratio than the 3 etf picks and only ultra pro qqq had a higher sortino ratio (who knows about the future though). Max drawdowns and worst years were much worse for the etfs compared to vtsax.

one last chart to pull it all together (this time looking at your 95% vtsax + 5% in the three etfs vs. 100% vtsax):

Image

source: https://www.portfoliovisualizer.com/bac ... tion4_1=95

what do you notice? It took a few years for the difference to become apparent. your strategy didn't start pulling ahead until 2014 or so. Are you a patient person where you won't be upset if you don't see your strategy outperform for several years? Be honest. Methinks if you're focusing on year to date returns, you're not necessarily thinking really long term (though I admit I could be wrong in my assumption).

make sure to look at the chart from 2022 (and the last one) and make sure you'll be able to stay the course (whether those three etfs do worse than the market in any given year and/or if there are years where it doesn't give you the great returns over a string of years like you expected.

6. Buy and hold? If your three etfs outperformed, as they did after MANY years, you will have to rebalance otherwise the 5% in these three etfs will be >5%, won't they?

7. P/E's aren't predictive of returns. True it's better to buy stocks cheap than expensive, but stocks can always get cheaper. like zero.

8. individual companies are clearly risky, even Turkey that went up 100% last year. And you don't care what they did last year, you want to know what they'll do this year. And you can't know that in advance. And doesn't this fly in the face of your buy and hold/set it and forget it approach? Knowing a country can have a good year performance and then a bad year means if you'd have to buy before it did well and sell after it did well, otherwise you get reversion to the mean. Why not just hold total global stock market instead?

9. A Brazil small cap etf is more risky because you are taking the idiosyncratic risk of one country and one sector. What if large cap or mid cap outperforms in Brazil, while small cap is outperforming in US. Guessed wrong I guess. Instead own a more diversified small cap etf if you want to tilt to small cap.

10. investing's supposed to be boring. if you want excitement go to Las Vegas. Don't overthink this and don't try to get cute with the market or your investments. The market knows more than you do and will prove it again and again.
There s the education.
bltn
Posts: 1843
Joined: Mon Feb 20, 2017 8:32 pm

Re: Boglehead's version of play money?

Post by bltn »

arcticpineapplecorp. wrote: Fri Jan 27, 2023 12:49 pm
blimp wrote: Fri Jan 27, 2023 12:39 am I can't bring myself to invest in garbage non-productive assets, and I am looking for something that vibes with the general boglehead philosophy in that it has these characteristics:

1) low cost
2) Buy and hold
3) No market timing
4) A "blind" approach. No serious analysis of the asset is required
5) No work required. "Set it and forget it."

Obviously, owning a rental property or investing in private equity could be profitable, but these investments don't meet my criteria

So here are some ideas:

1) TQQQ Triple-leveraged Nasdaq. Up 34.12% year to date compared to 5.57% for VTSAX
2) TECL (Triple leveraged tech sector). Up 32.17% year to date.
3) UPRO (triple leveraged S&P 500). Up 18.34 YTD
4) An individual emerging market index fund. Turkey is up >100% in the last year. Just pick a country with favorable PE ratio? According to this website, the VanEck Brazil Small-Cap ETF has a PE ratio of 0.18: https://etfdb.com/compare/lowest-pe-ratio/
5) Pick an individual stock with the best valuation. Kinder Morgan, Inc. has a PE ratio of 2.914372.
1. what's your definition of "low cost"?
2. do you consider these low cost:
tqqq costs 0.86%
tecl costs 0.94%
upro cosrts 0.91%

3. year to date? what's that tell you? What if you had asked this last year? How would last year have done?

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

of course, you can argue I'm cherry picking to make a point. But so are you. Sure this is just 5% of your money so even if you lose alot, it's alot of a little. But then ask yourself why are you are thinking of doing this? It's to make MORE money than you'd do WITHOUT doing this. But if you believe you'll make MORE money doing this, why stop at 5%? Why not 10% or 15%?

If you look at the whole time series portfolio visualizer shows (back to 2011) you see a few things:

Image

source: https://www.portfoliovisualizer.com/bac ... ion3_3=100

4. While the CAGR of all 3 of your picks beat vtsax it was with far greater risk. St. deviation is like 3X to 4X higher with these (again i know it's just with 5% of your money).
5. vtsax had a higher sharpe ratio than the 3 etf picks and only ultra pro qqq had a higher sortino ratio (who knows about the future though). Max drawdowns and worst years were much worse for the etfs compared to vtsax.

one last chart to pull it all together (this time looking at your 95% vtsax + 5% in the three etfs vs. 100% vtsax):

Image

source: https://www.portfoliovisualizer.com/bac ... tion4_1=95

what do you notice? It took a few years for the difference to become apparent. your strategy didn't start pulling ahead until 2014 or so. Are you a patient person where you won't be upset if you don't see your strategy outperform for several years? Be honest. Methinks if you're focusing on year to date returns, you're not necessarily thinking really long term (though I admit I could be wrong in my assumption).

make sure to look at the chart from 2022 (and the last one) and make sure you'll be able to stay the course (whether those three etfs do worse than the market in any given year and/or if there are years where it doesn't give you the great returns over a string of years like you expected.

6. Buy and hold? If your three etfs outperformed, as they did after MANY years, you will have to rebalance otherwise the 5% in these three etfs will be >5%, won't they?

7. P/E's aren't predictive of returns. True it's better to buy stocks cheap than expensive, but stocks can always get cheaper. like zero.

8. individual companies are clearly risky, even Turkey that went up 100% last year. And you don't care what they did last year, you want to know what they'll do this year. And you can't know that in advance. And doesn't this fly in the face of your buy and hold/set it and forget it approach? Knowing a country can have a good year performance and then a bad year means if you'd have to buy before it did well and sell after it did well, otherwise you get reversion to the mean. Why not just hold total global stock market instead?

9. A Brazil small cap etf is more risky because you are taking the idiosyncratic risk of one country and one sector. What if large cap or mid cap outperforms in Brazil, while small cap is outperforming in US. Guessed wrong I guess. Instead own a more diversified small cap etf if you want to tilt to small cap.

10. investing's supposed to be boring. if you want excitement go to Las Vegas. Don't overthink this and don't try to get cute with the market or your investments. The market knows more than you do and will prove it again and again.
There s the education.
Harmanic
Posts: 935
Joined: Mon Apr 04, 2022 10:19 am

Re: Boglehead's version of play money?

Post by Harmanic »

What a coincidence. This article was just posted explaining why "fun money" can destroy your finances.

https://www.marketwatch.com/story/its-a ... =home-page
The question isn't at what age I want to retire, it's at what income. | - George Foreman
afan
Posts: 8169
Joined: Sun Jul 25, 2010 4:01 pm

Re: Boglehead's version of play money?

Post by afan »

In all seriousness:

Some people grow up and lose the childish inclination to "play". Others retain the love of play throughout their lives.

There are many things with which one can play, other than investments. Take up a hobby. Buy a better pair of hiking boots, tennis or golf equipment, a musical instrument. Once you have whatever it is, play with it.

If you want pure play, get things made for playing- go to a toy store and pick something up. A set of Legos, for example. It should cost a trivial fraction of your assets. Nowhere close to one one thousandth of a percent.

INVEST in index funds.
PLAY with toys.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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