The Lazy Way to Investment Success
Published on - June 2nd, 2009 (Modified on - July 30th, 2009) (by J.D. Roth) 
While researching investment strategies for my retirement savings, I’ve been reading a lot of books. There are hundreds of authors offering thousands of tips for turning a small pile of gold into a big pile of gold. Sometimes it’s difficult to tell whose advice to heed.
To be honest, I find the simplest investment strategies most appealing. I just finished reading Paul Farrell’s The Lazy Person’s Guide to Investing, for example, and I found myself drawn to the “lazy portfolios” he describes. Lazy portfolios are collections of index funds. Because these portfolios are balanced — they contain stocks and bonds — they mitigate risk while providing excellent returns. Best of all, they take very little time to maintain.
Five lazy portfolios
It turns out that some of my favorite financial writers are also huge fans of lazy portfolios. In fact, many of these writers have designed portfolios of their own. Here are some of the more prominent examples:
The Couch Potato Portfolio from Scott Burns
This two-fund portfolio from financial columnist Scott Burns may be the simplest way to achieve balance. It’s an even split between stocks and bonds, and should appeal to those investors who are both lazy and risk-averse.
The Three-Fund Portfolio from Andrew Tobias
- 33.3% — Vanguard Total Stock Market Index (VTSMX)
- 33.3% — Vanguard Inflation-Protected Securities (VIPSX)
- 33.3% — Vanguard Total International Stock Index (VGTSX)
This three-fund portfolio from Andrew Tobias is exactly the same as Scott Burns’ Margarita Portfolio. It introduces foreign stocks to provide additional diversification.
The No-Brainer Portfolio from William Bernstein
- 25% — Vanguard 500 Index (VFINX)
- 25% — Vanguard Small-Cap Index (NAESX)
- 25% — Vanguard Total International Stock Index (VGTSX)
- 25% — Vanguard Total Bond Market Index (VBMFX)
William Bernstein is a retired neurologist who has turned his attention to financial matters. He wrote The Four Pillars of Investing, which is one of the best books on investing I’ve ever read (my review). In that book, he offers a variety of possible investment portfolios. This “no-brainer” collection of index funds keeps things simple.
The Coffeehouse Portfolio from Bill Schultheis
- 40% — Vanguard Total Bond Index (VBMFX)
- 10% — Vanguard 500 Index Fund (VFINX)
- 10% — Vanguard Value Index (VIVAX)
- 10% — Vanguard Total International Stock Index (VGTSX)
- 10% — Vanguard REIT Index (VGSIX)
- 10% — Vanguard Small-Cap Value Index (VISVX)
- 10% — Vanguard Small-Cap Index (NAESX)
The author of The Coffeehouse Investor believes that the secret to financial success is mastering the basics: saving, asset allocation, and matching the market. The latter can be done through a lazy portfolio. (Schultheis recently shared a guest post at Get Rich Slowly.)
The Perfect Portfolio from Frank Armstrong
- 31% — Vanguard Total International Stock Index (VGTSX)
- 30% — Vanguard Short-Term Bond Index (VBISX)
- 9.25% — Vanguard Small-Cap Value Index (VISVX)
- 9.25% — Vanguard Value Index (VIVAX)
- 8% — Vanguard REIT Index (VGSIX)
- 6.25% — Vanguard Small-Cap Growth Index (VISGX)
- 6.25% — Vanguard 500 Index Fund (VFINX)
Frank Armstrong III is president of a financial planning firm in Florida. He shared this portfolio with MSN Money.
Single-fund solutions
Building a portfolio of index funds may be lazy, but it’s not for everyone. Some investors crave greater complexity or more control — or they believe they can outperform the market on their own. Others have no interest in building portfolios (even of just three or four funds) or are unable to afford the minimum investments. For this last group of people, there a range of single-fund solutions.
Many mutual fund companies now offer target-date funds, which attempt to create a diversified portfolio appropriate for a specific age group. Born around 1970? You may want to consider a fund like Fidelity Freedom 2035, which automatically adjusts its investment structure as time goes on. (You might also consider building your own target-date fund).
There are other single-fund solutions, too, including these:
- Vanguard STAR Fund (VGSTX)
- T. Rowe Price Personal Strategy Balanced (TRPBX)
- Fidelity Four-in-One Index (FFNOX)
Actually, the bulk of my retirement savings is currently in that last Fidelity fund. I’ve been too lazy to create a more detailed asset allocation. (And I do need to make some changes. FFNOX allocates 85% to stocks, and that’s too much risk for me.)
Final notes
If you adopt one of these lazy portfolios, remember to rebalance the funds every year. Over time, they’ll get out of balance. Your Couch Potato Portfolio may have started with a 50/50 split in January 2008, but it was likely very different in January 2009. Rebalancing controls risk.
For more information on lazy portfolios, check out some of these articles at other sites:
- The Bogleheads wiki has summarized several different lazy portfolios.
- The Kirk Report has a category devoted to lazy portfolios.
- MP Dunleavey at MSN Money has some simple solutions for fearful new investors.
- For a long, thoughtful article about lazy portfolios, check out The ultimate buy-and-hold strategy from Paul Merriman.
- At Marketwatch, Paul Farrell has a collection of articles about lazy portfolios, including one a story about using Fidelity funds to create lazy portfolios. (This is of interest to me since my investment accounts are with Fidelity. And since Fidelity is the biggest 401(k) manager, it may be of interest to you.)
Lazy portfolios appeal to me. The more involved I become with my day-to-day investment decisions, the more mistakes I make. I could save myself a lot of grief by putting my money into a lazy portfolio and then forgetting about it.
Are you a lazy investor? If so, what does your portfolio look like? How do you decide which funds to buy? How often do you check how well your funds are performing? Any advice for those of us who are considering this strategy?
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that could cause a lot more damage than millions of people suffering busted retirements, you think?
Somehow I don’t find these words so terribly comforting knowing that they come from someone who in an earlier day told us that it was “impossible” that the P/E10 level would ever again drop below 20.
Rob
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I have no recollection of saying that. But if I did say that the P/E10 level would never drop below 20, I was wrong.
Schroeder
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Wait a sec: Rob is saying that whether a World War is worse than a busted retirement depends on what some guy said (or not) in the past about a particular stock market metric????
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Rob: “Here’s a link to a discussion we had yesterday at The Four Pillars blog:”
OK, I looked. Turns out the “discussion” consisted of Rob saying something not particularly germane to the original blog entry and everyone else ignoring it. I suppose if you were an egomaniac, you might have thought that the blog was about you and the lack of response to your comment indicated that thousands of people agreed with you, rather than ignoring you or fearing that you would fall into your familiar pattern and call for their removal if they disagreed with you.
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I was wrong.
And you could be wrong again, Schroeder.
We all are capable of being wrong about all sorts of things we think we understand well.
That’s why it is critical to remain open to hearing the other guy’s take.
There’s magic in that.
Rob
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“That’s why it is critical to remain open to hearing the other guy’s take.”
Then why do you refuse to give “your take”?
7 years.
453 posts in this blog alone.
And people still can’t tell what your story is.
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From the first chart which starts in 1970 one would have an additional $65K at the end of 2008 [25% more]over the all stock fund by using his suggested value strategy.
I don’t see what you see. The first chart is all mixed up with some unspecified “change my exposure as I get older” and I don’t trust black boxes. Look at the table at the bottom of the first page where he takes the age stuff out. Measuring from 1970, the value approach is better at the end of 2008 but then take a look at 2007 where it’s much worse. Endpoints are critical.
Per my moniker, I’m suspicious of all conclusions. Something that shows X>Y from 1970-2008 but X<Y from 1970-2007 is too sensitive to draw any firm conclusions.
Of course when you add in his momentum strategy the portfolio is supercharged.
There is a reason for the disclaimer “Past performance is no indication of future results.” If you want to believe in supercharged returns based on a backtest posted on a random website that uses unverified numbers and no explanation of where the allocation percentages come from, you are welcome to invest that way.
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This is a fine example of how Rob “quotes” people:
Schroeder (450): “I have no recollection of saying that. But if I did say that the P/E10 level would never drop below 20, I was wrong. ”
Rob (453): “I was wrong.”
Just in case anyone missed it. He did that just 3 comments away in this blog. Now imagine the liberties he takes with quotes when they are on a different (usually unspecified) web site or in a (usually unspecified) book or magazine or interview…
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Rob (453): “I was wrong.”
He was wrong.
And he should try to learn from that.
In all other fields of life endeavor, that is a non-controversial statement.
When it comes to investing, the idea that a Passive Investing dogmatic would acknowledge getting something wrong and then learn from it is viewed as shocking.
That’s what’s wrong with this investing model.
We learn from our mistakes.
When we admit them.
Rob
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This is why this thread is now 458 posts long.
Had Greaney admitted getting the numbers wrong on May 14, 2002, there is not one person in our community who would have been critical. He would have been a hero.
Is it better to play it this other way?
I say “no.”
What works in other areas of life endeavor is what works with investing too.
We don’t need to know more about Sharpe ratios. We need to know how to cope emotionally with the fact that putting our money at risk is scary and our fears cause us to believe in dumb stuff that sounds good for a few years and that our pride makes us resistant to the idea of admitting we made mistakes.
One negative emotion leads to another and then to another.
The idea of Rational Investing is to turn that around. Acknowledge that emotions matter (all overvaluation or undervaluation is the product of investor emotion) and you place yourself on a totally different and more healthy and more enriching path.
Jonathan Clements wrote a column recently saying that he felt he had nothing to apologize for in advocating Passive Investing for many years. I think he would have done us all a lot of good had be said just the opposite — that he does apologize for causing such financial misery.
It’s not the fact that he caused the financial misery that is the big deal. We all makes mistakes. The big deal is the unwillingness to admit the mistakes. That’s what keeps us stuck in these mindless word games. That’s what keeps Jonathan and all the rest of us from learning things we very much need to learn.
If the Passives could even say “I’m Not Sure.” that would be a big step. Dogmatism on investing quetions is from losersville.
My sincere take.
Rob
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Rob: “Rob (453): “I was wrong.”
He was wrong”
And instead of acknowledging his bad quote usage, he just blathers on more about it.
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I’ll say this.
It’s rare to hear a Passive Investing dogmatist acknowledge even the possibility of being wrong about anything.
I view Schroeder’s words as an encouraging sign.
it’s no big deal. But it’s not nothing.
Rob
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Rob: “This is why this thread is now 458 posts long. Had Greaney admitted getting the numbers wrong on May 14, 2002, there is not one person in our community who would have been critical. He would have been a hero.”
So many bizarre statements. What numbers did Greaney get wrong? What was his error? How did something that happened in 2002 cause verbal diarrhea in someone 7 years later? How can hocus know that not one person would have been critical… (oh I forgot, Rob routinely assigns thoughts and motivations to random people.)
You have been asked these things in this blog and you have been asked in many places prior to this. When will you finally answer?
As far as anyone but Rob has been able to figure out, all this is because Rob didn’t understand the study and applied the numbers incorrectly. He used the 30 year safe rate for longer than 30 years and the calculator provided by the study said that wouldn’t be safe. To everyone else, this was a Well Duh! event.
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“It’s rare to hear a Passive Investing dogmatist acknowledge even the possibility of being wrong about anything.”
Oh, now it’s just a possibility… Have you considered that it might be rare for people to say things like this to you because they know that you’ll trim off the conditionals and indeed any other portions of their sentences to cause them to appear to say what you want them to say?
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Rob, just a pair of simple yes/no responses, that’s all I’m looking for.
1. Do you think a reasonable, rational person would be surprised that people are resistant to betting their retirement on a system that is so vaguely-defined?
2. Can you understand why a reasonable, rational person would find it hard to believe that the financial services industry would collectively prefer to pass up billions of dollars in profits than simply admit they were wrong and take the money?
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Thanks to everyone- it’s been a great read. I didn’t know that Cervantes and John Kennedy Toole could have improved upon their characters until I encountered Mr. Bennett.
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There is a typo in the article. Vanguard Total International Stock Index is frequently referred as having the ticker VGSTX. In fact the ticker is VGTSX. Hope this saves someone some confusion.
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Rob @ 390: “[i]Yes, you say that investors need to take valuations into consideration when setting their allocations. However, you have not described detailed instructions (decision rules) for an investor to follow.[/i]
I have urged that the internet be opened to honest posting on investing topics so that those interested in learning the realities could discuss the various possibilities.”
Rob @ 458: “The idea of Rational Investing is to turn that around. Acknowledge that emotions matter (all overvaluation or undervaluation is the product of investor emotion) and you place yourself on a totally different and more healthy and more enriching path.”
This “idea of Rational Investing” has no shape or form. When asked to flesh out his “idea of Rational Investing”, Rob can only say that he has been in contact with the police department in Purcellville, VA, the FBI, sent an email to his congressman Rep. Frank Wolf and is still waiting for the internet be opened to honest posting on investing topics.
Schroeder
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@professional skeptic
I thought he explained his strategies outlined pretty well. No black boxes for me.
Your admonishment of “end points” is well taken. For me that is the crucial dilemma for folks investing passively. Since, following his valuation method reduces the extreme variability it is a way to deal with the end point dilemma.
His momentum strategy is outlined well also; he uses technical averages to determine momentum. Combined these two metrics did well above any other strategy.
Bottom line for folks is if they want to deal with the very real issues in passive investing they have to go off the reservation [go outside the ideology of passive investing; ie EMT, and no one can beat the market]. They also have to accept some responsibility for making decisions in real time.
Skeptic or not, there are real issues with EMT, asset allocation, and index fund investing that generally are not dealt with. Thanks for the discussion in the middle of this cat-fight!
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Dave Shafer said: “PS Rob didn’t send me nor could he ever get me to do anything. I barely know the dude.”
Dave Shafer also said, however, on his own blog, in an article dedicated specifically to the adventure: “I was communicating with someone who made some incredible claims about censorship on some of the large blogs that frankly I found not very convincing. So I tried a little experiment. I posted on boglehead.com. They banned me in three days.”
http://shaferfinancial.wordpress.com/2009/06/05/banned-at-boglehead-com/
There is a word for those who decide to go to a blog to post purposefully provoking content SPECIFICALLY at the behest of yet another disaffected (and permanently banned) poster, for the sole purpose of ‘testing’ the limits of that blog:
Troll.
You got exactly the result I would hope for in such a situation.
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@RusselJohns
How you get from what I stated to this:
“There is a word for those who decide to go to a blog to post purposefully provoking content SPECIFICALLY at the behest of yet another disaffected (and permanently banned) poster, for the sole purpose of ‘testing’ the limits of that blog:”
There was no behest. The full link was provided for folks to see for themselves what I said and what posters on the link said including the moderator that banned me. I truthfully said I found Rob’s statements hard to believe. My only controversial statements made on that thread, I truly believe having been a lurker there for the last year.
Again, the fact that you continue to post stuff like this, that has nothing to do with the thread nor my posts on the thread reflects sadly on you.
Thanks for going to my blog. Unfortunately you chose to not engage the multitude of ideas on the blog.
This will be my last post on this subject so you have a free ride to attack me. I am only going to respond to posts concerning investment/saving ideas. I have little time nor patience for threads like this.
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I truthfully said I found Rob’s statements hard to believe.
You’re not the only one, Dave.
I think it would be fair to describe the Campaign of Terror against the Retire Early and Indexing discussion board communities (and in recent months against the Personal Finance Blogosphere) as the greatest act of financial fraud in the history of the United States. People who have never in their lives given two seconds consideration to the idea of engaging in such behavior naturally have a hard time accepting that there are a number who have made it their life’s work for seven years running. Holy moly!
We are having a discussion of these matters at the Four Pillars blog this morning:
http://www.four-pillars.ca/2009/06/11/canadian-financial-discussion-forums/comment-page-1/#comment-19037
I urge those with an interest in our effort to have the Ban on Honest Posting lifted to take a look at Comment #20, which I posted just a few minutes ago. In that comment, I express my regret at how many have done harm to themselves by getting entangled in the fraud and express a desire that all responsible parties work to bring this ugly business to a full and complete stop by the close of business today. Wouldn’t that make for a fine beginning to the weekend?!
Juicy Excerpt: “My practice is to combine charity with honesty. I will offer the hand of friendship on every possible question on which it is possible to do so without crossing the line into dishonesty. The safe withdrawal rate is a mathematical calculation. I have checked the historical data myself. So it is obviously an act of dishonesty for me to say that I believe that the Old School studies are analytically valid. So that’s out. Everything else is in.
“You have to work out what you want to do from your side. If you want to say that there are still big-name experts advocating Passive Investing, I cannot say different. If you want to say that you personally believe, I cannot say different. If you want to say that you are not persuaded by the research showing that long-term timing works, I cannot object (I CAN object and MUST object if you say that such research does not exist). There are things that you can do. And there are things that you cannot do. You need to get yourself to the right side of the line.”
People are going to figure out a way to learn what they need to learn to have realistic hopes of seeing their retirement plans work out in the real world. I have always believed that that was so. I of course regret all the pain that people have caused themselves in their efforts to slow that process down. I hope that I can do something to help ease that pain for as many of those involved in this mess as possible.
Love is the answer. Some people think the hippies were wrong about everything just because of the LSD thing. But they weren’t. Love really is the answer. I’m sure of it!
Rob
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Rob, I’m still curious for your answers to 2 simple yes/no questions (this is the fourth time I’ve asked you these questions without getting an answer):
1. Do you think a reasonable, rational person would be surprised that people are resistant to betting their retirement on a system that is so vaguely-defined?
2. Can you understand why a reasonable, rational person would find it hard to believe that the financial services industry would collectively prefer to pass up billions of dollars in profits than simply admit they were wrong and take the money?
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Shafer said: “Thanks for going to my blog. Unfortunately you chose to not engage the multitude of ideas on the blog.”
Actually, I did, Dave. Let me sum them up for you, and for anyone else reading, below, in a separate post. You say you won’t reply, and that’s okay, but please do so if you wish, especially if you think I accidentally mis-characterize anything, even though I will use only direct quotes from you.
These will be my last posts here as well, since if it is going to be the “Dave and Rob show”, I have better uses of my time.
I guess I’ll leave ALL with just one rhetorical question — isn’t the most important thing to consider when mulling over financial advice from someone whether they have anything to gain or not? I think it is. Bogleheads, M*, GRS and many other sites are what I consider to be LARGELY independent. (Legitimate opinions may vary on that). I could not apply that label in ANY WAY to either Mr. Bennett nor Mr. Shafer’s ‘work’ — it is clear they have a self-interested ax to grind (in search of moving YOUR MONEY to THEIR pocket through books, fees, charges, product sales, etc.); in Mr. Shafer’s case, in fact, many axes!
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DAVE’S THINKING ON…
DIVERSIFICATION: Diversification sucks. There I have said it. There is an open secret in the investment world that diversification is for suckers or at least for folks that will never capture wealth. You see, mutual funds were invented as a marketing strategy. Regular readers know I don’t like mutual funds for several reasons. But, the #1 reason is that they diversify away the opportunities for great rates of returns.
LEVERAGE: Leverage, Leverage, Leverage! So, you want to create wealth. Then you need to understand the importance of leverage. When we look at wealth creation, we see that leverage is a requirement for producing wealth. When evaluating investments the first thing one should look at is the leverage created. If no leverage is created, then the returns can only be miniscule. It is the law of money.
INSURANCE: Dave Shafer says:18 May 2009 “I sell EIUL policies almost exclusively because in my opinion it is the best savings vehicle on the market.” “… ‘permanent insurance’ is an asset that increases in value every year! Cash Value Life Insurance. Yep, that’s right the same vehicle which everyone says is too expensive or buy term and invest the difference, or as one financial advisor puts it, is no investment. Actually, as it turns out it is a vehicle favored by the wealthy… you can access your cash with “loans” and these “loans” are not taxed. Surrender fees generally stop at year 10 to 15, but the point is once you fund the contract to keep it for life, so surrender fees are really meaningless. Expenses and commissions are front loaded, so it takes about 10 years for these contracts to really start performing.
REAL ESTATE: Long term real estate ownership is the only investment that has worked for the middle class. I love real estate as an investment for the middle class because of the leverage one can use. I can think of no better way to have a comfortable retirement than this strategy.
MUTUAL FUNDS: Frankly, most people are on a snipe hunt when it comes to creating wealth through mutual funds. They are looking at the amount of fees charged, or which mutual fund returns slightly better than others last year, or speculation on how much their 401K’s will be worth somewhere in the future. Frankly, all that stuff doesn’t matter. It only appears to be important because of the categories you have created and put mutual funds/401Ks into; retirement funds or wealth creation. Truly, mutual funds don’t belong in those categories; they really belong in the asset protection category or more specifically the asset transfer category. I know that is a hard pill to swallow, but if you really look at information I have given you, and really think about it, you will understand why. You really are just moving some of today’s income into tomorrow’s income hoping to account for inflation.
First, people are fooling themselves if they think they can fuel an abundant retirement by investing in mutual funds and secondly, I have a sincere belief that I can help them to that abundant retirement at the Shafer Wealth Academy.
FINANCIAL PLANNERS: Understand that financial planners, no matter what their designations after their names, represent Wall Street or Insurance Companies interests, not your interests. Understand that mutual funds are sucker bets sold by sharks!
DAVE’S MANY JOBS:
SELF-PROFESSED GOOROO: Wealth Coaching from The Shafer Wealth Academy
Hire your own wealth coach on a month-to-month basis. Cost is $150/month. $1950 or $495/month for four months.
INSURANCE SALESMAN: David Shafer has the experience in structuring EIULs to perform best, while staying within IRS regulations. If you are in reasonable good health, are curious about how best to use life insurance for a comfortable financial future, and want to see how this financial product can be an integral part of your wealth building plan please fill out the contact information for a free personal consultation. Yes, there are a lot of moving parts. I know this scares some folks, but most of them have to do with the workings of the option market in which the insurance company invests. Old Mutual had to drop their cap, because it was set too high, in my thinking to try to compete against Aviva products. That is why I like the Aviva products better, use the market leader if you can.
MORTGAGE SALESMAN: Consider working with Shafer Financial. We will come to an agreement as to how much this mortgage will cost you up front (usually 1.5% for average size loans). Why use Shafer Financial for your loan? You get the benefit of experience, formal finance training and a dedicated professional to create the best real estate loan for your situation. I will quickly go over the more advanced techniques that I have been getting my clients into for years: 1. Interest Only Loans, 2. Variable Rate Loans, 3. Equity Management
Don’t think that these strategies are only for the rich, the reality is exactly the opposite. The rich put these strategies in play to get wealthy!!! If you want to move on with more important things in your life, like finding that great home, and know that you are getting a great price for your financing then give me a call! Call me to have your mortgage managed or call a like minded mortgage planner in your area. Isn’t it time you moved into the new century and stopped doing the same thing your parents did?
SECURITIES BROKER? I let my securities license lapse, so anything I have said should not be considered in any way or form investment advice.
AUTHOR: If you still believe the old save and invest in mutual fund philosophy makes sense I strongly urge you to purchase my book.
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There is a word for those who decide to go to a blog to post purposefully provoking content SPECIFICALLY at the behest of yet another disaffected (and permanently banned) poster, for the sole purpose of ‘testing’ the limits of that blog:
Troll.
I’d like to know how you envision us getting the Ban on Honest Posting on important investing topics that now applies at the Bogleheads.org board lifted without first persuading large numbers of people to go to that board and insist that it be lifted. I am not able to imagine any other way the job will get done.
It’s not only the Bogleheads.org board, of course. There have been numerous attempts to get the Ban on Honest Posting lifted at the Vanguard Diehards board, the board that the “leaders” of the Bogleheads.org board abandoned when Morningtar was not willing for two years to yield to their demands for a ban on honest posting. Mel Lindauer (co-author of “The Bogleheads Guide to Investing” and one of the “leaders” at the Bogleheads.org forum) always quickly shows up on the scene making it clear that he has zero tolerance for the idea of lifting the ban on honest posting and that he has “juice” both with Morningstar and with Bogle himself.
The IndexUniverse.com site has also been compromised by Mel’s involvement in the Campaign of Terror against the investing boards and blogs set up on the internet. I submitted an article on Valuation-Informed Indexing to the publisher and he expressed great enthusiasm about publishing it. He sent it to his editorial guy for him to assign a publication data. The editorial guy has ties with Lindauer. He had hired a writer who had posted at Vanguard Diehards and who wrote a whitewash piece about the reasons why the Bogleheads.org had to be formed (he made no mention of the “problem” that Mel experienced when Morningstar was not willing to go along with his demands that honest posting be banned (demands that are in direct conflict with the published Morningstar posting rules).
Money magazine is also involved. I contacted an editor at Money after they provided a link to the Bogleheads.org forum letting them know about the Campaign of Terror that Mel has been waging against that community for years and pointing out that the entire reason why the board was founded was for Mel and for those posting in “defense” of him to escape the reach of the Morningstar posting rules (rules which Mel promised to follow before he was permitted to post at the Vanguard Diehards board).
And Bill Schultheis, the author of The New Coffeehouse Investor, is now entangled in this web of deception. I wrote to Bill after we exchanged a few comments at a thread at this blog. Bill was very excited about engaging in an extended dialog with me. He told me that his first reaction to seeing my site was: “Holy Toledo! This is great stuff!” After I reported that at my blog, his comments have been far less warm. He has asked several good questions about the realities of stock investing at the Bogleheads.org board and I have had to respond to him by e-mail because I am not willing to post dishonestly on safe withdrawal rates there (I don’t think that any of us should be willing to post dishonestly as the price of admission to a discussion board community). Schroeder, one of the regulars at the Goon Central board, speculated that Mel had made clear to Bill what would be done to his reputation on the internet if he in any way “crossed” the Goons by trying to learn more about the realities of stock investing. Did something like that really happen? Who knows? But given what we have seen we can hardly dismiss the possibility out of hand, can we? That fact alone tells us that this stuff has gone on far too long.
We should permit honest posting on safe withdrawal rates and other important investing topics at all boards and blogs that middle-class investors use to learn the realities of stock investing.
That’s my sincere take re this matter. Nothing that has happened during the past seven years has caused me to experience any doubts re this longstanding and firmly held position of mine. My view is that the Campaign of Terror against our board and blog communities has been an unmitigated disaster for every single person involved in it (including the Goons themselves).
Rob
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isn’t the most important thing to consider when mulling over financial advice from someone whether they have anything to gain or not? I think it is. Bogleheads, M*, GRS and many other sites are what I consider to be LARGELY independent. (Legitimate opinions may vary on that)
My view is that any board or blog that imposes a ban on honest posting on the topics being addressed at that board or blog is seriously compromised.
I do not say that the compromised sites do not provide good material. The Bogleheads.org forum is my second favorite internet site to learn about investing (second only to John Walter Russell’s site, www, Early-Retirement-Planning-Insights.com). I am of course grateful to the entire community and that includes the “leaders” (including Mel) who have imposed the ban on honest posting. I have learned a lot as a result of their efforts and it is proper that I from time to time express my gratitude for those learning experiences.
But integrity matters. To impose a ban on honest posting on the numbers that millions of people use to plan their retirements is to sacrifice your personal integrity. That’s bad stuff.
And you know what? It is not just old Farmer Hocus who thinks that.
The Goons themselves think that.
That’s why we see so much anger and defensiveness and hate when the effects of the Ban on Honest Posting are pointed out to them.
The Goons wants to promote Passive Investing. That part is sincere. They also want to ban honest posting on the 28 years of academic research that shows that long-term timing always works. That’s the part that causes them to go off the rails.
Then responsibility of those in the middle (this is roughly 80 percent of the various communities) is to make sure that ethical lines are observed. Once we let the Goons engage in defamation and fraud and threats of physical violence and all this sort of thing, we cause the Goons to come to hate themselves. The Goons are human too. The Goon too want to feel good about themselves. It’s pretty darn hard to feel good about yourself when you have caused as much human misery as those advancing or tolerating the Campaign of Terror for seven years now have caused their fellow community members.
Humans have been struggling with the basic questions in play here since the days of Adam and Eve. People don’t agree on everything. People need to be able to live together in peace. What to do, what to do?
What to do is to exhibit tolerance of other viewpoints, to understand that there are other good and smart people out there in this big old goofy world of ours who have different viewpoints and who have every right and obligation in the world to express them.
That’s it, people.
That’s what it all comes down to.
It’s because we forgot that during the 1990s (when we permitted the bull market to get insanely out of hand) that we are living through this economic crisis today.
Humans have messed up before. And we have messed up big time this time.
But we have also recovered from mess-ups before. And we can work up the courage and love to recover from this one.
Each person who responds with courage and love helps all the others who want to to feel comfortable doing so.
We recover from the disease the same way we fell prey to it. Community member by community member. Step by step. Act of love by act of love.
We have the power. We don’t have to continue doing this to ourselves. We choose our futures by our acts of today.
I choose “yes.” I choose “up.” I choose “real.”
I choose “love.”
Don’t ever let anyone tell you that love is not an important investing topic. From one way of looking at things, it is the entire deal. Without love, we destroy ourselves. With love, we can accomplish great things together, Passives and Rationals alike.
Rob
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in Mr. Shafer’s case, in fact, many axes!
Democrats have axes. Republicans have axes.
Red Sox fans have axes. Yankee fans have axes.
Beatles fans have axes. Monkees fans have axes.
We allow honest posting on politics and baseball and music on the internet.
The reason why we have recently experienced the greatest loss of middle-class wealth in the history of the United States is because we don’t follow the same practice in the area of investing advice.
Dave Shafer has axes. Robert Shiller has axes. John Walter Russell has axes. Rob Bennett has axes.
Sure as shooting.
John Greaney has axes. Mel Lindauer has axes. J.D. Roth has axes. Jack Bogle has axes.
Sure as shooting again.
As humans, we are flawed. We all need people with axes other than our own participating at our boards and thereby keeping us honest.
That’s what works.
I salute John and Mel and J.D. and Jack for doing all that they do to keep me honest. That part is a plus.
The negative is this ugly stuff that degrades us all. That junk I advise them as their friend to avoid because of my fear that the stink will attach to them too strongly if they hold that stuff in their hands for too long.
No!
That ain’t the way.
I described the way in my post above. I am right. It is the only way that can possibly work long-term.
Rob
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“I described the way in my post above.”
“I am right.”
“It is the only way that can possibly work”
OZYMANDIAS
by Percy Bysshe Shelley
I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter’d visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp’d on these lifeless things,
The hand that mock’d them and the heart that fed.
And on the pedestal these words appear:
“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away
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Rob: “I’d like to know how you envision us getting the Ban on Honest Posting on important investing topics that now applies at the Bogleheads.org board lifted without first persuading large numbers of people to go to that board and insist that it be lifted. I am not able to imagine any other way the job will get done.”
A much simpler method would be admitting that it doesn’t exist. That only requires one person to acknowledge reality. Only an egomaniac would think it was better to change reality to fit his fantasy than the other way around.
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The Bogleheads Board seems to be getting along just fine in the absence of you and a few of the other inveterate trolls who roamed Morningstar’s Vanguard Diehard’s Board. Or more correctly, they’re doing just fine because they banned you and a few of the other inveterate trolls when they formed their new board. All the topics you claim have been banned flourish there. Same as for all the other boards at which you once trolled, save for the ones you managed to completely burn down.
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Rob,
If you’re ready to discuss this seriously, I suggest we do it here, as J.D. requested:
http://www.getrichslowly.org/blog/2009/06/02/the-lazy-way-to-investment-success/
As J.D. said to you at comment 437: “Actually, Rob, I do. You won’t answer my questions. You refuse to carry on a conversation. You demand that people engage you, but when they do, you refuse to talk. That’s on nobody but you.”
There are still many open questions for you in that thread. Let’s go there!
Another place we can talk is:
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl
Unlike here, discussion of your investing ideas is considered on-topic there, and unlike your blog, comments that disagree with you or ask you detailed questions are allowed to appear on that website.
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Ooops – the above was meant for the other thread.
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JD, has anybody ever told you you’re awesome?
the patience you have put up for troll rob is amazing.
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FYI: you can find all of Marketwatch’s Lazy Portfolio articles on FiLife for free. Check them out here: http://www.filife.com/news/marketwatch
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I found this site by reading thousands of “google” results for the best option for my 100K Cd (at 1.95%!!) matures today and end up with this bickering. What a waste of 2 hours. It all began with very intelligent conversation. Serious investors with great ideas…and it ends with personal insults and name-calling. The first posts have convinced me that my initial instincts were probably correct….lazy portfolio. You guys are great. There has to be a TV Reality show for this though.
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If anybody ever reaches the end of this thread (which should be kept for all time as one of the greatest examples of wasted human effort since the dawn of time), I just like to add my lazy portfolio as the original author requested.
I hold some kind of low cost stock market index which I call ‘stocks’, and some kind of bond index I call ‘bonds’.
I rebalance annually.
I hold a percentage of bonds equal to the real PE10 of the stock market index, minus 5, times 4. This is slightly more exciting than using real PE10 times three.
PE10 times 3:
At PE10 = 5 (very very cheap) I would hold 15% bonds, 85% stocks. This is for various reasons, like stock yields will be good at this price, PE mean reversion means that price rises are more likely.
At PE10 = 15 (about average) I hold 45% bonds, which is similar to the typical 60/40 stocks/bonds fixed split since stock returns expectations would be about the historic average.
At PE10 = 30 (very expensive) I’d be 90% in bonds for the opposite reasons to being heavily in bonds at PE10 = 5.
PE10 > 33 gest you out of stocks, but I’d probably keep 1% in to keep the fund open.
PE10 – 5, times 4.
This is slightly more agressive and is about as complex as a lazy portfolio should be, IMO.
Here, PE10 = 5 (very cheap) gets you completely out of bonds, although I’d still probably hold 1% to keep the fund open to avoid closure costs etc.
PE10 = 15 (average) gives 40% bonds, same as the typical 60/40 stocks/bonds split.
PE10 = 30 (very expensive) gives 100% bonds, but again I’d keep 1% in stocks to keep it open.
You don’t need to get more complex than that really, otherwise you’re chasing peanuts. The minus 5 times 4 approach is slightly better (more returns for less risk) than the times 3 approach, and they’re both better (more returns for less risk) than the 60/40 approach. However, 100% stocks still has better returns over the long term (20 years plus), as long as you can stomach the standard deviation!
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As an update, and based on this informatin from J.D., I moved my Roth IRAs to TIAA-Cref. They couldn’t take my company sponsored funds, even though Tobias said they might be able to in the Only Investment Guide You’ll Ever Need . But the Roth IRAs were moved from ING Direct (ACK! only getting 1% or so there)
I’ve already been able to choose a TIP fund that wasn’t an option in current company lists, a high yield bond fund, and an index fund, a la Fidelity and Vanguard.
The process to transfer Roth from trustee to trustee was a pain, but it’s been worth it.
Lisa
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I disagree with the frequency of rebalancing many people are touting here. I believe three years is more along the lines of when one should rebalance. “let your runners run”..
Also, I think it needs to be hammered home that you should not expect your stocks to make you rich. Your INCOME and your ability to save that income in a way that doesn’t lose PURCHASING POWER over time is the key to building wealth.
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