Meeting the Diehards: Profiting from Shared Wisdom

A GRS reader dropped a line last weekend. “I want to invite you to the Diehard Organizational Meeting on Wednesday,” he said. “I'm new to the group but obviously we're all believers of value of index funds and John Bogle's investment philosophy.”

“Hope to see you there,” I replied.

I'm still new to investing, but my reading continues to point in the direction of index funds. (An index fund is a mutual fund designed to track a particular stock market index. FSMKX, for example, attempts to mimic the performance of the S&P 500 index.) Index funds were popularized by John Bogle, the founder and retired CEO of The Vanguard Group. Followers of Bogle's investment philosophy call themselves Bogleheads or Diehards.

I'm not a Diehard (yet), but a chance to meet and learn from them was an offer I could not refuse.

The Diehards
Seven of us gathered last night at a Portland coffeehouse. We're all at different places in life, and we each have different investment goals and strategies:

  • Ron is retired. He derives his income from dividends and social security. His investments follow a conventional split: 60% equities (50% stock index funds, 10% real-estate investment trusts, a.k.a. REITs) and 40% fixed income (30% bonds and 10% cash).
  • J.D. is a middle-aged blogger. He recently eliminated his consumer debt, and is only now beginning to learn about investing. All of his retirement money is in stock index funds (though one of them is FFNOX, which includes a small portion in bonds).
  • Tony is learning about investing. He reads Get Rich Slowly (and is the one who invited me to the meeting). His portfolio is 80% equities (50% total stock market index, 15% international, 15% small-caps) and 20% other (10% REITs and 10% bonds).
  • Greg is also new to investing — Tony has been showing him the ropes. Greg is a lifelong saver and is not a risk-taker. He tries to max out his Roth IRA every year, putting his money in Vanguard's STAR fund. Greg lives frugally in order to get the money to invest: he doesn't have cable, and he doesn't have internet.
  • Tim is a fee-based Certified Financial Planner. He believes that everyone's situation and circumstances are different. He likes to see the different approaches each person takes to financial planning. His own investments are 50% in stocks, 40% in fixed income (including 20% in TIPS, Treasury inflation-protected securities), and 10% in what he calls “alternative investments”, such as REITs and commodities.
  • Tom just moved to Vanguard index funds this year. He wants to do a lot of intense research over the next couple of years, find a plan that works, and then put it on auto-pilot. Like Ron, he has 60% invested in equities and 40% in fixed income.
  • Bruce teaches Certified Financial Planner courses at a nearby university. His personal investments are interesting. He's an income investor. He doesn't care how the share price moves. He cares about the income, because that's how he pays his bills. His portfolio contains 60% “income securities” (REITs, preferred stock, utilities) and 40% conventional equities (in other words, normal stocks). “This is not what I teach,” he said as he explained his methods.

Profiting from shared wisdom
As we introduced ourselves, others asked questions about our backgrounds, and we had tangential conversations about a variety of topics. We talked about health insurance. We talked about preferred stock. We talked about financial planning.

It seemed to me, though, that we were mostly discussing facts and figures. “What role do you think behavior plays in financial planning?” I asked.

“It's starting to play a bigger role,” said Bruce. “Financial planning is a huge topic. If you want to be a competent advisor, you have to know it all. The coursework is structured as if there are right answers and there are wrong answers, but then you get out into the real world and you realize that's not true.”

“There's no one right answer,” said Tim. “It's a broad subject.”

I also mentioned that the Doom-and-Gloomers (like Peter Schiff) are starting to get to me. “Those folks come out every time the economy goes bad,” Bruce said. “They bubble to the top. You just have to ignore them.”

I left the meeting with two pages of notes and tons of information, not just for the blog, but for myself. I learned about George Kinder and his concept of life planning. I learned about Sheryl Garrett, and her goal of making financial advice accessible to all people. I learned a little more about income investing (a subject that interests me).

I'm grateful to Tony for inviting me to join this group, and I look forward to additional meetings in the future.

Strength in numbers
It's certainly possible to learn about investing from books and blogs and magazines. But I think meeting and exchanging ideas with other people adds a new dimension to the subject.

If you're interested in sharing and learning about index fund investing, check the list of Diehards local chapters to find a meeting in your area. If you can't find a group nearby, you can still chat with hundreds of other like-minded folks at the Bogleheads investment forum.

You might also consider joining the American Association of Individual Investors, a non-profit founded in 1978 to provide individual investors — people like you and me — with tools and knowledge to better approach the stock market. This organization also has local meetings. (Here's info about the next meeting of the Portland chapter [PDF], which I hope to attend.) The downside to the AAII is that everything costs money.

There may be other similar groups in your city. One of the men at tonight's meeting mentioned that he's involved in a couple of other organizations that meet regularly to discuss saving and investing. These kinds of gatherings are excellent ways to meet other people, and to learn from their successes and failures. They allow you to profit from shared wisdom.

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Russ
Russ
11 years ago

I too believe in the value of low-cost, well diversified portfolios of efficient index or asset class funds.

However, I also believe that having and using the right tools is only a small part of the successful investing equation.

The real key is your behavior and whether or not you have the emotional & psychological discipline to hold on to your investments during times when everyone else is screaming that “the sky is falling”

Great post – thanks.

Stolid
Stolid
11 years ago

I find it interesting that you’re being ‘brought down’ by Peter Schiff – I find that I absolutely agree with him (the only real solution to this problem is to increase savings and let the economy sort out the good from the bad). Peter’s been saying this for years, but has only become a common figure on major news since the downturn. Before that whenever he was on a stock discussion his predictions that there would be a downside in the future were laughed at. Frankly I find the perma-bull status that most networks take during ‘good times’ to be… Read more »

NickK
NickK
11 years ago

JD – I’m in the industry, and probably most similar to Tom in the story from above. I wanted to make a comment on “investor behavior” for your readers to consider. Do you think investors behave differently at certain income levels or savings levels? How do they behave differently? I can tell you now that when the markets tanked during October, people with less than (approximately) 100k behaved significantly different from investors with 100k+ in the market. Also, people who did not have an emergency fund behaved significantly different than those who did, generally to their own detriment. These actions… Read more »

Paul Williams from Crackerjack Greenback
Paul Williams from Crackerjack Greenback
11 years ago

J.D., Glad to hear you learned about George Kinder and Sheryl Garrett. I think you’ll really like some of Kinder’s approach to personal finance. The Garrett Planning Network is a great tool for people who don’t want a planner who is paid by commissions or assets under management (AUM). It’s a good option if you don’t have a lot of money to invest right now or if you don’t agree with the AUM model. As far as income investing goes, I think you should look a little closer at the “total return” concept. It’s easy to want to use income… Read more »

Paul Williams from Crackerjack Greenback
Paul Williams from Crackerjack Greenback
11 years ago

@NickK:

I’m also in the industry and I’ve seen the behavior you’re talking about. I think part of it might have to do with their experience, education, and counsel. If they don’t have much invested then they probably don’t have a lot of experience investing. Additionally, they are probably still learning and usually can’t afford good counsel. The strength of having a trustworthy financial planner is the good advice and education they can provide you with so you’re less likely to make very detrimental mistakes.

kf
kf
11 years ago

Are you guys scared of women? 🙂 It wouldn’t hurt you to consciously diversify your ranks, especially along gender lines based on the names you listed and especially given that members seem to find invitees. Women needs this information, too. And you men could benefit by having some female perspectives in the room.

Chickybeth
Chickybeth
11 years ago

I totally agree with kf. As an example of how little the financial world has come in terms of gender equality, CNBC is having their “Portfolio Challenge” stock trading game again this year and all the prizes are golf outings. I’m not saying that there aren’t women golfers out there, but just reading the list of prizes makes me uncertain that I even want to play again. Of all the prizes won last year, I think only one was won by a woman. I think most of that has to do with marketing for the game being solely towards men.

J.D.
J.D.
11 years ago

Hey, KF and Chickybeth.

Yes, the absence of women was noticeable and obvious. I don’t think it was due to any intentional exclusion, though. This group was organized on the Diehards forums, I think, and there may not be a lot of female participants there.

I agree 100% that women need this information, too!

kf
kf
11 years ago

JD, Most exclusion of women isn’t intentional, as I’m certain was the case with your group. It’s just that people end up replicating what they know and their comfort level, or things are based on informal networks (like how you got invited) which can be gender segregated. Also, men often end up feeling more comfortable and/or entitled to take leadership and public roles, which then leads to them getting opportunities like this. I recall that once you were invited to a focus group or conference (maybe in SF), and that also sounded like it was entirely or almost entirely male.… Read more »

Miss M
Miss M
11 years ago

Interesting, I’m going to check out any local groups. I think the key to being a good financial steward is constant learning, gather all you can from both experts and peers. No one I know has much interest in personal finance, so I have no one to talk to or bounce ideas off of. A lot of the pf bloggers I read are women, so financially savvy women are out there, they probably just don’t know about this resource.

Snickers
Snickers
11 years ago

Thats’ true Miss M. I would like to get myself in touch with some local people who share some common ground on PF. I am houston. Refer me to any PF savy freinds of yours in Houston.

I would love to learn more about unconventional investments strategies.

JD your blog rocks. I never miss a day . 🙂

Brad
Brad
11 years ago

If you invest in a fund of Funds (such as Vanguard STAR) do you pay the management fee on that fund as well as the management fee for each of the funds the STAR owns? I realize that all the fees al low on Vanguard funds but I feel that the Expense ratio of 0.32% does not accurately reflect the total cost of owning such a fund.

Bill
Bill
11 years ago

Hi JD,

Glad to see you enjoyed your time with the local Diehards, including my buddy Bruce.

I’m in the process of securing George Kinder to speak at the FPA Mid Winter Conference here in the Portland Metro area in Feburary 2009, so I’m pretty confident you’ll get the opportunity to meet him in person.

Peter
Peter
11 years ago

“Brad Says: October 30th, 2008 at 10:46 am “If you invest in a fund of Funds (such as Vanguard STAR) do you pay the management fee on that fund as well as the management fee for each of the funds the STAR owns? I realize that all the fees al low on Vanguard funds but I feel that the Expense ratio of 0.32% does not accurately reflect the total cost of owning such a fund.” ————— Hey Brad, The answer is no, Vanguard’s STAR fund expense ratio is not an extra layer of expenses on top of the funds inside… Read more »

Annette
Annette
11 years ago

I don’t think it’s fair to pick on the Boglehead meeting for a lack of women. I recently joined the Boglehead forum as well as Get Rich Slowly and I have learned a ton. BUT……I have to say the knowledge of some of the posters on the Boglehead site is intimidating and I am a numbers, financial gal. Most women I know start running for cover when numbers come up in conversation, a lot of them have trouble figuring out how much 30% off really means when it comes to the sale price. Not meaning to offend anyone, cause there… Read more »

Eric
Eric
11 years ago

I’m a longtime daily reader of both Get Rich Slowly and the Boglehead forums. =)
to me, both sites go hand in hand

b-bo
b-bo
11 years ago

finally! good post! j/k 🙂 I’ve been a little critical of the direction of the blog because it seems like you’ve been spinning your wheels a bit. it seems a bit like you might procrastinate a bit on digging into the meat of “getting rich slowly”. I think more 401k/ira/investment vehicle allocation type posts are overdue sprinkled with the some of the ol’ thrift/debt elimination posts we’re used to for the newcomers…boglehead forum is great, the local meetups are great, looking forward to future meetups.

Mel Lindauer
Mel Lindauer
11 years ago

FWIW, I’d like to point out that we had nearly 50% female attendance at our recent seventh annual national Bogleheads get-together with Jack Bogle in San Diego.

And, two of those females served on the Q&A With the Experts Panel.

So, females are definitely welcome in Boglehead land.

Best regards to all,

Mel Lindauer

Denis Hijmans
Denis Hijmans
11 years ago

It was great to read your views on financial planning/decisions. We have come a long way since the 90’s, and life planning is making huge strides to help people align their hearts and minds in order to make sound and sustainable decisions. George Kinder is the best “guru” in this field, and the slowly increasing numbers of RLP’s (Kinder Institute Graduates)
will prove to be invaluable in the coming years.

Baba Ghanoush
Baba Ghanoush
11 years ago

I wanted to second Mel’s comment that women are welcome at the Boglehead forum. There may be fewer women than men there, but several of the well-respected regular posters there are female.

Greg
Greg
11 years ago

I kind of agree with the comment about Peter Schiff and his “doom and gloom”. I tend to be on the optimistic side of things. However, if it is the truth, then Mr. Schiff needs to be listened to.

I was reminded of this when I saw this link:
http://www.campaignforliberty.com/blog.php?view=4354

That link shows how Mr. Schiff understands the situation. We can’t just write him off just because he makes us fell uneasy.

Marie Swift
Marie Swift
11 years ago

Thought you might be interested in checking out Rick Ferri’s thoughts on the subject of fees – not just investment costs but advisor fees. Here’s a piece that recently ran on MarketWatch: http://www.marketwatch.com/news/story/rough-2008-do-2009-book/story.aspx?guid={FF938964-568D-411A-83C4-9100035FFD2A}&dist=msr_3 Rick has written 5 books to help the investing public understand that fees matter. His books show do-it-yourself investors how to reduce their costs. For those who really want a professional to help them with the asset allocation decisions and routine rebalancing chores, his firm, Portfolio Solutions (http://www.portfoliosolutions.com), offers low-cost .25% professional portfolio management services. It’s a great alternative to high-priced traditional investment management. Sheryl Garrett and… Read more »

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