The passive way to investment success
Many Americans conduct passive investing, which some call “lazy investing.” Though this is a common way to invest, it has its detractors.
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 done by 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.
Reminder: An index fund is a low-cost mutual fund designed to mimic the movement of a specific market index. A Vanguard 500 index fund (like VFINX), for example, tracks the performance of the S&P 500. The chief virtue of index funds is that, over the long-term, they deliver better returns than most actively-managed mutual funds.
Related >> Are Index Funds the Best Investment?
5 Lazy Portfolios
It turns out that some of my favorite financial writers are also huge fans of passive investing. In fact, many of these writers have designed portfolios of their own. Here are some of the more prominent examples:
The Couch Potato Portfolio
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
This three-fund portfolio from Andrew Tobias is exactly the same as Scott Burns’ Margarita Portfolio. It introduces foreign stocks to provide additional diversification.
- 33.3% — Vanguard Total Stock Market Index (VTSMX)
- 33.3% — Vanguard Inflation-Protected Securities (VIPSX)
- 33.3% — Vanguard Total International Stock Index (VGTSX)
The No-Brainer Portfolio
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 portfolio” is a collection of index funds that keeps things simple.
- 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)
The Coffeehouse Portfolio
Bill Schultheis is the author of The Coffeehouse Investor and 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 an article at Get Rich Slowly.)
- 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 Perfect Portfolio
Frank Armstrong III is president of a financial planning firm in Florida and created “The Perfect Portfolio”.
- 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)
Note: These portfolios were constructed using mutual funds from Vanguard. Vanguard is probably the best source for index funds, but it’s not the only source. My money is actually with Fidelity, which seems to have plenty of options.
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).
Related >> How to Create Your Own Target-Date Mutual 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 at one point, but may look very different now. Rebalancing controls risk.
Passive 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 passive 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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There are 495 comments to "The passive way to investment success".
Nice collection of lazy porftolios! I think a lot of times beginners feel that going with one of these is a cop out. That they should be picking their own stocks and being more involved. But in reality this is the best way for most investors. None of us have the time or the patience to really have a more active portfolio. There is no magic potion, but lazy portfolios of index funds are about as close as you’ll get because they’re actually doable and they work.
Also, the Three-Fund Portfolio is almost identical to the second grader’s portfolio.
When you’re investing in a taxable portfolio, remember two things: First, consider all investments you have to avoid doubling up. For example, if you’re collecting simple pension or annuity income, count that as bonds and keep the rest of your portfolio tilted away from bonds to compensate. Second, consider ETFs to avoid annual taxes on capital gains distributions. If, however, you’re inside a tax-advantaged vehicle (401k, TSP, etc.) no-load index funds (matching the lazy ideas in this post) should be fine. I agree that picking individual stocks is not a long-term strategy for most people. Even solid stocks eventually slide (GM, for example) so you cannot just buy and hold. Diversification through indexes is best for most investors.
My portfolio is very lazy – mostly exchange traded funds with a few dividends stocks on top.
When I retire (soon), I think I am rolling over my TSp(federal 401K) into an external plan and will then rebalance with all my other investments. Of course, I hope to have more time in retirement to think about my investments(my only stock outside of a fund is Starbucks) but I like these suggestions!
Another asset allocation post, another post which doesn’t do justice to international, and totally ignores EM. Seriously, are you guys really so sure that the US equity market is going to outperform all other world markets that you are so overweight in it and are willing to bet your personal financial future on it?
http://investmentscientist.com/2009/05/07/lessons-from-harvard-timely-bet-on-emerging-markets/
Not a fan of this approach generally but I am clearly biased because of my profession so take what I have to say with a big dose of salt.
I believe that the market is so volatile that such an approach could lead to disappointing results.
Also, I’m not a fan of bonds at all right now.
On top of that, you are young so equity is probably what you need even though it will be a bumpy ride.
FWIW.
Neal
I’m for a “lazy” style investing strategy also because you don’t worry about the investment so much. When you are constantly worrying about a particular company, you get emotional and can make bad decisions. When you are more generally investing in the stock market in something like an index fund, you just have to let the economy run it’s course. You would be less likely to move your funds elsewhere. Problems arise when you get scared and make investment decisions based on those fears.
These lazy portfolios are definitely appealing — but unfortunately many people are in a way forced to hold a significant portion of their investments in company-sponsored 401k or 403b plans — mine is with a firm with high fees, and I have few funds to choose from. Unfortunately this makes being able to use heuristics for asset allocation quite difficult. Of course when I leave my job I will roll everything into an IRA. But while I’m employed I feel trapped. Anyone have any recommendations on dealing with this?
Why no comparison on how these blends have performed over the past 10 years?
Agree with Frugal Bachelor.
I agree with the premise of lazy investing, but I think the asset allocations are all wrong. I’d put more in the Emergine Markets, they’re essentially small big caps.
Nice post.
These are all valid approaches, but don’t forget to rebalance at least quarterly. The percentage holdings will change in time– have the discipline to stick to the plan and reset them to the appropriate numbers.
quarterly is not necessary
yearly is sufficient
Nearly every Index Fund that I research has an extremely large initial investment. Any strategies for someone like myself that doesn’t have 10,000 to drop into an index fund?
Jeremy,
Most index funds I see only require something like $3000 initially. Some will let you put in a smaller amount if you agree to automatically invest a certain amount every month.
I enjoy reading your articles on investing, I agree the four pillars of investing was a great novel, though I only skimmed through it. I will most likely use this information when investing on my own and will consider these funds.
Great outline and I love the breakdown of different types of portfolio’s for different people. I wrote about Lazy Investing on my blog here: http://www.twentysomethingsense.com/2009/01/investing-the-lazy-way.html
The bottom-line for me is that if you are just going to “toss your money over the wall” – make sure that its at least put somewhere that is diversified and minimizes fees!!
Again, outstanding article and breakdown – love it.
@Bon: Why don’t you put in the minimum for a match with your company and go ahead and START that IRA? Do a cost-analysis comparison on having the funds taxed now (to add them to the IRA) and the amount you spend already on the high-fees for the current account.
Just wanted to let you know that I’m a long time reader and beneficiary of your knowledge and this site.
I realized that I’ve been viewing your site in Firefox while using the Ad-Block plugin, and wanted to let you know that I’ve disabled it for your site so that you can start counting my impressions and clicks as part of your earnings. Thanks for all of the great work and keep it coming!
I’m with Jeremy (#12). Most of the index funds require at least 10K and if you find one that allows less than that they typically charge annual fees to be below that balance. Fidelity Four-in-One Index (FFNOX) does allow you to put in 2500 min as part of an IRA but it charges a fee. Any other good options?
If you don’t have enough to start off with multiple funds due to the minimums check out the Vanguard STAR Fund (VGSTX) https://personal.vanguard.com/us/FundsSnapshot?FundId=0056&FundIntExt=INT
It has a $1000 minimum and is basically a blend of other Vanguard Funds, essentially a one-stop lazy portfolio. Once you build it up to enough you could split it up into separate funds based on one of the above portfolios.
I am a real fan of the concept, but I hate calling them “lazy.” This *IS* the way to invest. “Lazy” implies that it is somehow a lesser deviation from the correct behavior. But this is how many financial planners, academics, finance authors and journalists actually invest.
Select an asset allocation that’s appropriate to your own priorities. Implement it using low-cost, index funds. Maintain it through rebalancing. And, don’t mess with it unless your priorities change. SOmetimes the easiest answer is the best answer.
As a financial planner myself, I disagree with Neil’s suggestion that the market is so volatile that such an approach could lead to disappointing results. Perhaps the market may lead to disappointing results, but that is not the fault of the approach. The idea that active/tactical approaches can do better is actually more likely to lead to disappointing results. That is just a mathematical fact.
My RothIRA looks a lot like the Couch Potato Portfolio with the exception of allocation percentages.
@bon (Comment #9), If you are unhappy with your company’s program make sure they know you are and why. You should be only investing the minimum to get your company match at this point and investing the rest of your retirement savings in an IRA, traditional or Roth, with a firm you are comfortable with.
@DDFD (Comment #11) I’m lazy and only rebalance once a year.
@Jeremy (Comment #12) Vanguard has a $3k minimum for most of it’s funds. Others will let you start with less if you have automatic investments set up. You may also want to look into ETFs, although you will pay a broker fee on them, the initial investment can be considerably less.
General Question…. People keep talking about rebalancing. Isn’t it easier (if you are still investing) to just add money so that your portfolio stays balanced, instead of selling and buying?
Just buy whatever is lower?
I know this only applies to the people who haven’t retired.
On the investment minimums for index funds, there are several reasonable, diversified options from places like Fidelity or Vanguard. If you don’t yet have the couple thousand needed, save in a high yield direct online savings account until you do.
When you’re just starting out, you balance will be much more impacted by your own contributions than market returns. Your ideal allocation may not be available with only a few thousand dollars, but the difference in potential return percentages may only equate to a few dollars at that point.
How about the ultimate “Lazy Fund” either Vanguard or Fidelity’s Balanced Index funds… They keep the 6040 split and do the re balancing for you. You just have to keep putting the money in. 🙂
I am definitely a lazy investor. I’ve been doing the 25% on 4 funds approach for the past 20 years and it’s proven very successful. As I near retirement age, though, I need to come up with another strategy.
@Waves (#21)
Yes, it is easier to rebalance by just adding money to the funds in which you’re short. If that works for you, then do it. It’s not feasible in all cases, though, so I like to think of rebalancing in general terms. There are several ways to do it. It’s just important that you get there somehow.
I’m also a fan of index funds, although it was only recently that i took concerted efforts to transform more of my total portfolio into more index funds.
this is a great comparison, but you’ve not indicated what age range these might be suitable for. If you’re in your 20s, you can afford to be much more aggressive on the stock end while if in your 50s, not so much.
As nice as it sounds to just dump money into these index funds, the companies in these indexes (Exxon, McDonalds, Starbucks, Shell, Novartis) have horrible effects on society. Should we really all rush out and put all of our investment money into these companies for the rest of our lives? If we do, I worry about the ramifications for the environment, our society, and our health.
I recommend putting the effort in to find some investments that are good for the world and not just your retirement account. It can be tough (very few companies are 100% good) but there’s a big difference between a wind energy firm like Vestas and a slimy oil company like Exxon.
Thanks for these portfolios. My wife wants me to open her up a ROTH IRA, and I told her we should do it with Vanguard to get the best index funds. I have an IRA with sharebuilder and I use all ETF’s that follow similar indexes, but I have a little more risk built in for higher returns. She, however, is not a risk taker, so I think the “no-brainer” portfolio will be a good one for her.
What do you think of date targeted funds? They are usually named “retirement” funds, but there is nothing I’ve seen that indicates you can’t use it for a taxed account.
I’d like a post dedicated to emerging markets inside retirement portfolios.
Considering that my IRA is totally Fidelity Four-in-One, I’m interested to see what you decide to do with yours!
I need to think of a catchy name and start my own lazy portfolio. Those names are all pretty lame :).
There are also very nicely crafted ETFs for those who cant afford to get into a Vanguard Mutual Fund (I think minimum first investments is 3000).
Check out iShares S&P Moderate Allocation (AOM)
TOP 10 HOLDINGS ( 99.91% OF TOTAL ASSETS)
Company % Assets
iShares Barclays Aggregate Bond 25.39
iShares Barclays Short Treasury Bond 23.32
iShares Barclays TIPS Bond 11.92
iShares Cohen & Steers Realty Majors 2.91
iShares MSCI EAFE Index 11.46
iShares MSCI Emerging Markets Index 1.24
iShares S&P 500 Index 18.3
iShares S&P MidCap 400 Index 3.24
iShares S&P SmallCap 600 Index 2.13
They even have target date porfolio so they do the rebalancing for you according to you age
example:
(notice the heavy weight of domestic large cap equity and bonds)
iShares S&P Target Date 2020 (TZG)
iShares Barclays Aggregate Bond 33.79
iShares Barclays Short Treasury Bond 6.06
iShares Barclays TIPS Bond 2.59
iShares Cohen & Steers Realty Majors 0.89
iShares MSCI EAFE Index 10.81
iShares MSCI Emerging Markets Index 2.43
iShares S&P 500 Index 36.74
iShares S&P MidCap 400 Index 4.1
iShares S&P SmallCap 600 Index 2.54
The only downside to these products is that they are faily new so the liquidity (popularity) is not so high yet exept for a couple of them. I dont expect any of them to trade below NAV becuase of the low liquidity but if you find one at a discount snatch it! its a bargain! on the other hand dont buy at a premium either! To find out the real-time NAV visit ishares.com and look for something like this ^TZG-IV (this is the one for the 2020 portfolio above) and type it into finance.yahoo.com to get the number
Watch out for FFNOX, the fee is a little larger than just having the individual index funds, not much but non-zero. You are basically paying them to rebalance for you.
I like the idea of Lazy Portfolios. The problem I have with all of these, however, is that asset allocation doesn’t change as your time horizon changes.
A young person who invests in the “Couch Potato” portfolio will not generate the kind of returns he will need to retire someday. Conversely, a retired person will likely be overexposed with the same portfolio.
If your Target Retirement Fund of choice doesn’t suit you, at least consider modifying the above portfolios to be more age appropriate.
I’d like to see some of these guys chime in on adding a green fund to their portfolios. I’m working to diversify my holdings right now and am writing about which strategies and funds I’ve been researching. There are a lot of options out there from the very small and specific to the the very broad and diversified. I think this will be a good industry to add for those that like to diversify with industry specific funds.
Why don’t folks just go with Vanguard target retirement funds? My retirement money is stashed there. Appropriate domestic/international/bond mix that rebalances for you over time. People make things way too complicated. Since I’ve switched, I haven’t thought about my investments since.
This may be a stupid question, however I’d like to know if there is a difference in buying it from Vanguard as opposed to sharebuilder or etrade etc? I know there is the brokerage cost, however do you also pay something like that when you setup an account with Vanguard? Or, is it out of convenience and having your investments in one place (etrade, sharebuilder etc)? Thanks!
This is an interesting idea, tried and true lazy portfolios. I think building on ideas that have been shown to work is the key to innovative success. Great Job.
Okay J.D. you know why I keep coming back to visit this site?
The readers here are intelligent and think for themselves, and if they disagree with you, or believe your infomation to be lacking they tell you, and most of them will offer information to back up their argument. (Example #6, #12, and #27.)
Some other sites I check out with large followings seem to have a cult like following with a bunch of sycophants who murmur in unison agreeing to everything that is said, with no dessention as if the words of the blogger are gospel.
Great posts and even better readers, that’s why your site is still relevant to those of us who can think for ourselves.
P.S. I hate your new text box for comments, there isn’t a spell check and you can’t copy and paste the text to another program,(i.e. Microsoft Word) to see if everything is spelled correctly.
Nice collection of funds. I notice the heavy focus on index funds and I’ve seen that around the web a lot lately. While the idea of index funds does appeal to me, all this agreement makes me a little antsy. Do you know of any writers you like who don’t believe in investing in index funds as a strategy? I’d like to read some opposing opinions before I jump in with both feet.
All ETFs. I’m in my mid-20s so my bond to stock allocation is aggressive at the moment.
20% BND – Vanguard Total Bond Market
20% VTI – Vanguard Total Stock Market
10% VGK – Vanguard European
10% VNQ – Vanguard REIT
10% VB – Vanguard Small-Cap
10% VO – Vanguard Mid-Cap
10% VPL – Vanguard Pacific
10% VWO – Vanguard Emerging Markets
At some point I may replace the Total Stock Market with the Vanguard 500. I prefer the ETFs for easier tracking / trading. And with certain brokerages the transaction fees are lower (e.g. Schwab).
The lazy portfolio works great for me. I think I would be too tempted to speculate if I didn’t have a framework such as this in place.
J.D, thanks so much for including the Fidelity option – all of my retirement funds are with Fidelity, and we had never seen a “lazy portfolio” specific to them.
I’ve printed it out, and will be re-assessing soon. I have way too much of my $$ in cash right now.
@sandi_k (#43)
You might want to borrow that “Lazy Person’s Guide to Investing” from the library. It offers some Fidelity-based lazy portfolios…
I am definitely a lazy investor. My 401k is in targeted risk funds – half “aggressive” and half “growth”. It rebalances automatically every quarter. I’m considering opening a Roth IRA with T Rowe Price’s target date fund. I have a regular IRA which I opened at 25 to roll over my 401k from my first job, and haven’t touched it since – except to roll over my 401k from my 2nd job. It’s in a few funds – one large cap, one small-mid, and one international – but I don’t know which ones they are or how they stack up. I’ve considered getting rid of it and getting some of the funds I’ve read about here, but a) don’t want to think about it b) don’t want to sell low and c) my advisor there is great at answering questions. 🙂
target funds FTLW (for the lazy win lol)
The #1 problem with passive [lazy] investing is that most people haven’t taught themselves to deal with bear markets. It’s hard to have confidence in an investing style that is called “lazy!”
The data [Dalbar Inc., Vanguard, etc.] all point out the same effect. People pull out massive amounts of $$ during a bear market effectively selling low after buying high. This holds true whether it is an active or indexed mutual fund!
I’m sure many of those folks told themselves they could withstand seeing their stock portfolio going down 20-30-40%, but in the end couldn’t!
Now on the plus side, if you are starting to invest now, stocks are relatively cheap!
This is a great list, thank you very much, J.D. Just reading your posts about funds and comparing them to my 403B options through Prudential made me realize that my fund choices through work doesn’t include even one Index Fund. No Vanguard at all. Some Fidelity funds, but only target funds that have fees of 1.25% and higher. What a rip off. I complained to HR, but it seems somebody on the board picked these funds. I tried to opt out of my 403 B account and go with TIAA-CREF, but the TIAA CREF account reps say you can’t do it, even though Andrew Tobias says you can.
I’m going to see about opening my IRA with Vanguard. Thanks again!
Lisa in Louisiana and http://www.moneyinreallife.com
Or in other words…diversify!
OK, so I just spent an hour on the Fidelity site, and moved over all my funds, as well as re-directing all new elections.
My target:
55% Fidelity Spartan Total Market Index
25% Fidelity Spartan International Index
10% Fidelity Emerging Markets
10% Fidelity Inflation Protected Bonds
My former elections were mainly target funds, with some emerging markets and bonds added in. I like the new portfolio – much easier to see the asset allocation with just four funds.
J.D., thanks for the book recommendation. I’ll check it out.
I know what you mean by ‘lazy’ in this context, but I’ve never been a big fan of the word when applied to investing. How often does laziness lead to success at anything else? Why would it be different with investing?
Personally, I think the more ‘work’ people can do to learn about investing and make informed decisions, the better they will do. Simply planting money in a certain spot and sitting back for 50 years isn’t likely to turn out so well. Not that J.D. is advocating something so simplistic, but I see many people with that mentality.
I honestly don’t see how you, in your position as a responsible blogger, suggest that people invest in funds and then forget about it.
That didn’t work so well last year, and there are more bear markets in everyone’s future.
Investors should want to reduce risk – at least that seems natural to me. The simplest way to do that is to own collars (an option strategy). But there are alternatives. Learning how options work so you can decide if path towards financial security.
Not for the very lazy investor. But for the intelligent investor who wants less risk.
The Rookie’s Guide to Options
Matthew (#27),
From what I understand, the Stock Exchange is a secondary market. Exxon gets none of my money if I buy Exxon stock. Now, I may have part “ownership” of Exxon if I buy it (as in one tiny percentage of a percentage of one percent), so maybe that would bother someone. . .
Mark (#52) wrote: I honestly don’t see how you, in your position as a responsible blogger, suggest that people invest in funds and then forget about it. That didn’t work so well last year, and there are more bear markets in everyone’s future.
Of course there are more bear markets in the future. And if you believe that you can time them, then by all means do so. But from the books and articles I’ve read, a diversified portfolio composed of bond and stock index funds can and does provide excellent returns through all market conditions. Not everyone has the time or inclination to monitor the market. And, in fact, research demonstrates that when people pay too much attention to their portfolios, they underperform the market. I feel very comfortable suggesting that lazy portfolios might be appropriate for some investors — even for me!
Great post! The “Lazy” portfolios are certainly a viable investment alternative, although usually more effective when utilized in conjunction with a few other strategies such as CD laddering, etc.
Regarding a few of the examples above (Coffeehouse and No-Brainer): 20-25% in Small Caps and 8-10% in REITs seem high. 15% max in Small Caps and 5% in REITs would be more prudent based on normal asset allocations, but personal situations vary. Maybe a higher dividend producing equities component?
Agree. I would NEVER try to time the markets. Nor is there any reason to be an active trader. But I believe in being protected at all times.
You can buy a simple investment (or a few of them) such as the S&P 500 index, the Russell 2,000, etc. The buy puts for proection and sell calls – limiting profits, but paying for the puts.
Result – protection against a significant loss – and limited profits. That’s a great combination for me. You can trade these collars once per year, so it’s not active investing.
Of course, one can indeed be lazy and hope the next 50 years is a repeat of the last 50. I prefer insurance.
Good luck.
“The data [Dalbar Inc., Vanguard, etc.] all point out the same effect. People pull out massive amounts of $$ during a bear market effectively selling low after buying high.”
How can you have a bear market without people pulling money out?
@Mark Wolfinger,
No one has ever claimed that buy and hold indexing protects value all of the time and in every market environment. Saying that it didn’t work last year is just a silly argument. There is only harm in a market decline if you need to sell and raise cash; otherwise, you can forget about it, ride it out.
Insuring with options has costs, so if you don’t need the money in a market decline, why pay for insurance you don’t actually need? You’re essentially talking about wearing your rain coat when you’re not even planning to leave the house. It may make you feel good, but you’re not getting wet anyway.
Justin (#53),
At the very least, when you buy index funds that contain these horrible companies like Exxon you push the price of that stock up. The employees and the executives at Exxon own tons of Exxon stock, of course, so when you push the price up you are making these people rich. Why do we want to make Exxon employees rich? They’re taking the natural environment (which should be shared equally by everybody) and destroying it for their personal short-term profits.
Don’t be confused by the fact that a lot of these brokerage firms are trying to push you to buy into the S&P500. You’re investing in multinational companies like Exxon and Starbucks that are destroying the world that you, your family, your friends, and your future descendants will have to live with.
@ Matthew
Matthew, I admire the fact that you follow your ideals when investing. Just realize that not all of us feel the way you do.
I, for one, am thankful that Exxon exists so I can drive my car to work everyday. And I enjoy my cup of coffee in the morning. I don’t see the great evil in these companies providing services that people want at a price people are willing to pay.
Are they perfect? Definitely not. But I vastly prefer the construct of capitalistic competition to that of monopolistic socialism. At least you have the option of investing your money in more socially responsible companies. If the natural environment were “shared equally by everybody” you would most assuredly not have alternatives if it was not being treated how you desire.
those looking for Emerging Markets will get this in Vanguards fund of funds, Total International Index fund. Currently 21% Emerging Markets.
“How can you have a bear market without people pulling money out?”
Every trade has two parties, doesn’t it? So there is always someone buying when people are selling, even when a person is naked shorting a stock.
The point is that this strategy only works as long as people are able both functionally and emotionally able to stay long [invested]. The vast majority of mutual fund investors aren’t able to do this when stocks start going down. Of course the inverse is also true, people tend to buy stock mutual funds when the market goes up exhibiting what has been called irrational exuberance. Hence people who purchase mutual funds tend to buy high and sell low so they underperform the market by a significant amount. As to whether it happens to any individual, it’s a guess at best. So when people talk about risk, they rarely discuss the real risks involved in investing in the market!
Just my opinion!
@Mathew
There is nothing wrong with adding your values into investing. Keep it up. There are fund families for people who have similar value systems. Hope you find one that fits your belief system.
I’m so lazy that I am going to rush out right now and start researching Lazy Portfolios.
Hahahaha
@dylan,
I’m willing to pay for protection by limiting my upside gains. There is no other cost when choosing an appropriate collar.
Thanks for the discussion.
@dave shafer
“The point is that this strategy only works as long as people are able both functionally and emotionally able to stay long [invested].”
Sure, not selling at the bottom is crucial. But why suffer through that bottom? Why not avoid all debacles in exchange for limited profits? The profits are not trivial, just less than they would be during surging years. The collared investor actually earns more money most of the time.
My current AA of my traditional IRA is:
35% Vanguard Total Stock Market
25% Vangaurd Total Intl Stock Mkt Index
10% Vanguard REIT Index
20% Vanguard Total Bond Market Index
10% Vanguard TIPS
I am 42. As I age, the top 3 funds will shrink and the bottom 2 will grow.
Taking a finance course in college converted me to index investing. Learning even the basics of Modern Portfolio Theory is enough to convince anyone.
In my Roth I have a target retirement fund. My plan is that in retirement I will live on withdrawals from my traditional IRA, and the Roth is a source for major home maintenance expenses and vehicle replacement.
In my employer’s plan where I am stuck with high-cost options, I just do the best I can do. Someday that money will land at Vanguard too.
A good rule for rebalancing is anytime a fund is + or – 5% of desired allocation, you sell what is too big and buy what is too small. New money of course always goes to the spot which needs it most (to be at target allocation). Twice during this downturn I have sold bonds and bought stocks. Now I am almost to the point that I will have to sell stocks and buy bonds. You improve your returns by doing this, and you avoid emotional reactions to market volatility.
Regards.
“Every trade has two parties, doesn’t it? So there is always someone buying when people are selling, even when a person is naked shorting a stock.”
As more people want to sell, prices go down to match limited buyers to many sellers. So as more people wish to sell, prices drop and we have a bear. And the data shows people sell during a bear. That’s just not that interesting I think. Of course that buyer may turn out to be seller if the market doesn’t recover as soon as he hoped so he may or may not do well “buying low”.
But yes, if you have a strategy you must stick to it.
But how do you know that the people selling into the bear were the lazy investors? They could be active investors getting out when the getting is good according to whatever system they have.
“I’m willing to pay for protection by limiting my upside gains. There is no other cost when choosing an appropriate collar.”
Mark, is someone giving you the option for free? I think that’s pretty unlikely.
Maybe Harry Browne’s permanent portfolio can also be considered a lazy portfolio, albeit a rather special one.
“But how do you know that the people selling into the bear were the lazy investors? They could be active investors getting out when the getting is good according to whatever system they have.”
I don’t. Neither do you.
It always amazes me that people who like to use averages never take into consideration the real average returns people get as opposed to the hypothetical returns one can get from any particular strategy!
But that is a very human thought pattern.
Lazy investors live in Lake Webogan where every one is above average.
Good luck to all in their investing!
I put everything I can into VTTHX, Vanguard’s 2035 target retirement fund. It’s not my intended retirement date, but its allocation curve is a little closer to my preferences. I have smaller amounts in other accounts that don’t offer Vanguard funds. That includes FCNTX, Fidelity’s popular actively managed Contrafund. Not my style, but I don’t mind letting them play with a small part of my portfolio.
@Mark Wolfinger (#56):
“You can buy a simple investment (or a few of them) such as the S&P 500 index, the Russell 2,000, etc. The buy puts for proection and sell calls – limiting profits, but paying for the puts.”
Wow Mark, that sounds like the perfect strategy. But it seems quite complicated. If only there were a book to explain it all in simple terms!
Oh wait, here are 3:
“The Rookie’s Guide to Options: The Beginner’s Handbook of Trading Equity Options” – Mark D. Wolfinger
“The Short Book on Options: A Conservative Strategy for the Buy and Hold Investor” – Mark D. Wolfinger
“Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETFs and Options” – Mark D. Wolfinger
And they’re all written by you. How convenient.
Conflict of interest much? A little disclosure would’ve been nice.
@ Jason (#37)
Why don’t folks just go with Vanguard target retirement funds? My retirement money is stashed there. Appropriate domestic/international/bond mix that rebalances for you over time. People make things way too complicated. Since I’ve switched, I haven’t thought about my investments since.
I don’t know about Vanguard’s target funds, but the one I have available in my 401k was not be allocated the way I think it should be for my target date. Two years ago when I first invested in it, it was drastically underperforming the funds that were focused on small cap, emerging markets, and international, so since I have 30 years plus to go I started my own lazy portfolio (before I knew it was called that ;-)). It’s allocated like the No-Brainer above – only in the equivalent funds available to my account.
All Vanguard unless otherwise noted:
Index 500 15%
Small cap Index 10%
REIT Index 5%
Meridian Value 5%
Total Int’l 5%
Int’l Value 5%
CA Int term Bond 13%
Short Term Inv Grade Bond 5%
Total Bond Index 20%
Hi Yield Bond 2%
Money Mkt 15%
“A fool and his money are soon parted.” – Thomas Tusser
Anyone who doesn’t have a large, and I mean LARGE, sum of money to invest and the time to research the stock market would be best served by a lazy approach. There are many former “day traders” out there who lost everything thinking they could beat the market. Many of them from before the current market slump.
In answer to the question posed at the end of this article, “hell yes!” I am a lazy investor!
ING Direct’s ShareBuilder has index funds (which I use in a Roth IRA) that “strategically allocate” your contributions based on a timeframe (short term = safe investment, middle = somewhat conservative, long term = growth & risk)
They split up the portfolios into a mix of domestic stocks and bonds, foreign stock, money market, etc (for instance the growth fund is largely domestic & foreign stocks). Whatever contributions I make are automatically split up.
Yes ING has custodial fees on the account (negligible) but their customer service and easy of investing makes it worth a few dollars every month.
I am a severe critic of the Lazy Investing approach, at least in its conventional form.
I see the appeal. There is indeed a huge amount of unnecessary complexity in much of what we hear about investing. Avoiding needless complexity is a perfectly sensible goal.
And there is no need to pick individual stocks. Index funds provide huge diversification at low cost. They are a great option for those of us who have other things we want to do with our free time than research stocks.
There’s even a sense in which I advocate a Lazy Investing approach myself. I advocate Valuation-Informed Indexing, which is an indexing strategy in which you lower your stock allocation at times of insanely high prices and increase it at times of insanely low prices.
The problem with the other Lazy Investing approaches is that they do not call for changing one’s stock allocation in response to big price swings. When you fail to adjust your stock allocation, you permit your risk level to go wildly off the mark from what you had intended it to be and from what is right for you. That means that you end up suffering huge losses and eventually feel pressed to abandon stocks altogether.
The particular form of laziness that causes people not to want to consider stock prices when setting their allocations is a form of laziness that generates huge amounts of stress in the long run. Valuation-Informed Indexing is a low-stress “lazy” approach. There’s nothing appealing in my eyes to being worried that my retirement plan is not going to work out because I was too “lazy” to make the adjustments in my allocation needed to keep my risk profile roughly stable.
How often do you need to change your allocation to achieve a low-stress approach to laziness? About once every 10 years on average. But the one change in 10 years means the difference between an approach that works in the real world and one that does not. I don’t believe in being so lazy that I am not willing to take that one critical step toward achieving my goal of long-term investing success.
Rob
Rob Bennett (#78) wrote: The problem with the other Lazy Investing approaches is that they do not call for changing one’s stock allocation in response to big price swings.
Rob, I’m not sure why you make this claim. These lazy portfolios do call for re-balancing, as do most of the other similar portfolios I’ve seen. If a huge price swing occurs, the portfolio will become too heavily weighted in one asset or another. Periodic adjustments correct for this.
I can’t think of a lazy portfolio that doesn’t require require regular re-balancing. It’s a fundamental tenet of the “genre”.
Rob, I’m not sure why you make this claim. These lazy portfolios do call for re-balancing
Thanks for your response. J.D.
You are of course correct that the Lazy Investing approaches all call for rebalancing.
I make the claim because the aim of rebalancing is to stay at the same stock allocation. That doesn’t do the trick. To remain at the same risk level, (this is what I say you must do in order to “Stay the Course” in a meaningful way), you must change your allocation in response to big price swings.
Say that you are an investor seeking a risk level of about “6” and you determine that a 60 percent stock allocations yields that risk level at a time of moderate prices. So you go with a 60 percent stock allocation. Then valuations increase enough so that a 60 percent allocation is now a risk level of “9.” With Valuation-informed Indexing, you would then lower your stock allocation to perhaps 30 percent, the stock allocation that provides a “6” risk level at the new valuation level.
Investors have a choice. They can stick with the same risk level at all valuation levels or they can stick with the same stock allocation at all valuation levels. They cannot do both. The other lazy approaches argue for sticking with the same stock allocation and permitting the risk level to go wildly wrong. The idea with Valuation-Informed Indexing is to make the occasional allocation changes needed to keep one’s risk level roughly constant.
Rob
“Valuation-informed Indexing” sounds like another way to say “market timing.”
@Dylan: LOL! I was thinking the exact same thing. 🙂
“How often do you need to change your allocation to achieve a low-stress approach to laziness? About once every 10 years on average. But the one change in 10 years means the difference between an approach that works in the real world and one that does not. I don’t believe in being so lazy that I am not willing to take that one critical step toward achieving my goal of long-term investing success.”
I note that Rob has made that claim countless times before in his voluminous postings to various online discussion boards and blogs. I also note that he has never provided a side-by-side comparison of returns for his strategy versus any of the Lazy Portfolio alternatives. Odds are very slim that he’ll chose this moment to provide evidence to back up his oft-repeated claims.
“Valuation-informed Indexing” sounds like another way to say “market timing.”
That’s fair, Dylan.
There are two kinds of market timing, short-term market timing (changing your stock allocation with the expectation that you will see good results within a year or so) and long-term market timing (changing your stock allocation with the understanding that it often takes five years or even longer to begin seeing produce good results). The academic studies show us two things: (1) short-term timing never works; and (2) long-term timing always works. So the claim that “timing always works” is every bit as accurate as the marketing slogan saying that “timing never works.” The reason why The Stock-Selling Industry put all its money into promotion of the “timing never works” claim is that that’s what sells at times of insanely high stock prices (when the Get Rich Quick impulse within all of us is desperate for some rationalization not to act on the common-sense understanding that one must keep one’s risk level roughly constant to have a realistic hope of long-term success).
Since the huge price crash we have seen a lot more articles questioning the merits of Passive Investing, which is the model responsible for most of the Lazy Investing approaches. My hope is that some responsible people will step forward and that we will be able to get the word out to millions of middle-class investors in coming days as to what really works for investors seeking a realistic chance at long-term success. I think it would be fair to say that the fate of the U.S. economy hangs in the balance.
Rob
That Guy,
Expense ratios and custodial fees are not the same thing. ING funds have very high expense ratios. Paying an extra 1%+ per year is not “negligible”, it is a huge bite out of your nest egg, and it takes another bite from the same dollars year after year after year.
I also note that he has never provided a side-by-side comparison of returns for his strategy versus any of the Lazy Portfolio alternatives.
I provide a calculator at my site (“The Investor’s Scenario Surfer”) that permits anyone who is interested in doing so to run as many comparisons of a Passive indexing strategy with a Valuation-Informed Indexing strategy as he cares to look at. The bottom line is that valuation-informed strategies beat passive strategies in nine of out ten of the 30-year returns sequences that are consistent with those we have seen in the historical record. It is not too uncommon to see a portfolio balance for the valuation-informed strategy that is double the size of the passive portfolio.
The reason is the magic of compounding returns. A Passive strategy can do as well as a Valuation-Informed strategy for a good number of years. But sooner or later the Valuation-Informed strategy always goes ahead. Once that happens, compounding takes over and the differential grows larger and larger and larger over the years. Many people have a hard time accepting how powerful a force the compounding returns phenomenon is. But it is a real thing. The long-term investor should want to have the compounding returns phenomenon working for him, in my view.
Rob
Oh for Goodness Sakes.
Yet another potentially useful thread diverted into the Rob Bennett Vanity Show.
You know, if the fellow had anything worth saying, I would not mind his nearly insufferably large ego. Unfortunately, he has no experience, no training, and nothing new to say.
As it is, as soon as Rob Bennett arrives, all reasonable discussion can be presumed to be over. And no, it is not due to anyone else but you, Mr. Bennett, and you alone. Grow up, please.
@Rob Bennett,
“The academic studies show us two things: (1) short-term timing never works; and (2) long-term timing always works.”
If you understood how markets work, you should understand the flaw in your statement.
I do get what you are trying to advocate. It’s nothing novel. People have been trying to mine historical data for clues about how to beat the markets since existence of historical data. The bottom line is that we all can’t be above average, and any market timing strategy that can persist relies on the faulty premise that it is truly superior but will never become mainstream.
I saw your Web site, and can quickly see how invested you are in this Valuation-Informed Indexing strategy, so I don’t expect anything I could say to change your mind. So, I’ll just agree to disagree on which strategy is better.
I looked at the calculator as you suggested. It’s, uh, quite remarkable. One could spend a great deal of time attempting to make use of your creation. Time spent most unproductively. Is there any particular reason you do not care to provide a simple table of the past returns for your strategy? One can go to The Coffeehouse Investor and find a simple table listing its past annual returns. Same for any of Vanguard’s “Lazy-style” funds such as Balanced Index, Wellington or Star. Same for any of the other Lazy Portfolios. Your approach requires one to negtiate a nearly indeciferable calculator. Keeping things opaque apparently enables you the luxury of making statements to the effect that passive strategies have “never worked” in the real world. A simple side-by-side comparison of the returns for your stategy with “Lazy” alternatives would clearly show whether your strategy had merit. Your calculator assures that no one will be able to make such an easy comparison. But enough time wasted in a futile attempt to have you show any evidence of how your system has performed in the past. One doesn’t have to do much research to learn that debating you is a fool’s errand. Good day.
The bottom line is that we all can’t be above average, and any market timing strategy that can persist relies on the faulty premise that it is truly superior but will never become mainstream.
Valuation-Informed Indexing certainly does not rest on that premise. It’s precisely the opposite. Valuation-Informed Indexing works best when everyone understands the need to change stock allocations in response to big price changes. A key premise is that investing is primarily an emotional endeavor and we all are inclined to do what we see everyone else doing. The only way we can be sure to invest rationally (that is, in a valuation-informed way) is to see lots of others people doing the same. I view the stock market as a common resource, like the environment. My belief is that we all should be trying to protect it from the destruction that comes in times of insane overvaluation so that it will be around to help us achieve our retirement goals.
The mistake you are making (in my view!) is in thinking that it takes some special skill to beat the market. It does not. All it takes is a little bit of common sense. It is not at all hard to understand why valuations would affect long-term returns. The price we pay for everything else we buy affects the value proposition that we obtain from those things. The odd thing would be if price did not affect the long-term value proposition of stocks.
What trips people up is that people see how intellectually smart the “experts” are and figure that they must be on top of things. No! Intellectual smarts is often a negative when it comes to stock investing. The most important thing is getting your emotions under control. The “experts” are at a huge disadvantage here because their intellectual skills give them super powers when it comes to rationalizing away evidence that high valuations mean danger for the stock investor. It is the investor who is able to hold onto his common sense when 90 percent of the “experts” are promoting Passive Investing who has the edge.
Markets are not rational. The key error made by the Passives is thinking that they are. If markets were rational, the valuation levels we saw from 1995 through 2008 would be a physical impossibility. If markets were rational, stock prices could never go to three times fair value, as they did at the top of the bubble.
Passives often say “oh, if there were some advantage to engaging in long-term timing, we would all be doing it.” IF we were rational, that would indeed be so. But we’re not! That’s the entire point! If we were rational, overvaluation would not even exist. If we were rational, there would be no such thing as drunk driving. Does it make sense to let your friend drive drunk because you like to think that he is rational and therefore you see no need to protect him from the consequences of irrational behavior? Not in my eyes. I don’t let my friends drive drunk and I try to talk my friends out of investing passively too.
I’ll just agree to disagree on which strategy is better.
That’s of course fine, Dylan. Thanks for the helpful back-and-forth.
Rob
A simple side-by-side comparison of the returns for your stategy with “Lazy” alternatives would clearly show whether your strategy had merit.
No, it wouldn’t, Carlyle.
I mentioned above that Passive often goes ahead for short periods of time. The time-periods in which Passives go ahead are time-periods of immense overvaluation. It’s no coincidence that the Lazy Portfolios have become immensely popular during the time of the most out-of-control overvaluation we have ever seen in the history of the U.S. market.
You’re asking me to focus in on a few years when the market was as irrational as it has ever been in history and compare a rational strategy with an irrational strategy (I mean no personal offense to any Passives, but I think it is fair to say that thinking that stocks are the only asset class on Planet Earth for which price does not affect the value proposition is indeed irrational) and see which one does better. Obviously the irrational strategy is going to do better at times of irrational prices. What you want to be looking at is the long-term, the sorts of time-periods in which your strategy is going to need to function in in the real world. You need to be looking at 30-year time-periods.
That’s why the calculator shows results over 30-year time-periods. That’s the appropriate test. Using the appropriate test, Valuation-Informed Indexing comes out ahead in about 90 percent of the tests done (there are some odd returns sequences where Passive can come out ahead, but counting on a one-in-ten shot coming through is gambling, not investing).
Ignoring valuations does not destroy investors in the short term. That’s why Lazy Portfolios can do well in the short term. For long-term success, you need to take valuations into consideration when setting your stock allocation. That’s why I recommend that people seeking to compare the Lazy approaches with the valuation-informed approach (which is plenty lazy enough, in my mind, but not so lazy as to not generate good results in the real world) look at how the two approaches compare in 30-year returns sequences.
Rob
The bottom line is that we all can’t be above average,
We can’t all be above average. But if we become educated about how stock investing works, we can move the average up far higher than what it has been in a time-period when we were not making informed choices.
There have been four times in U.S. history (from 1900 forward) when stock prices have gone to insanely high price levels. The average price drop in the years following is 68 percent. There has been been a major economic crisis on each of those four occasions. There has never in that time-period been a major economic crisis that did not follow a time of insanely high stock prices.
Persuading millions of middle-class investors that it was not necessary for them to adjust their stock allocations in response to huge price changes was an act of national economic suicide. The Passive Investing Mistake was the greatest mistake ever made in the history of personal finance. We are in the early days of learning the consequences of that mistake today.
There is no law of the universe that says we need to do this to ourselves over and over again. If we taught people the realities of stock investing, market prices would be self-correcting. If we let people know that they MUST lower their stock allocations when prices get to insanely dangerous price levels, there would never again be a huge bull and there would never again be a huge bear and there might never again be a huge economic crisis.
When we invest rationally, we all enjoy the fruits of that decision because we all have a more rational market in which to invest our retirement money and a richer economy to work in and buy things in. When we collectively go nuts (as we did when we told millions of people that there was no need to lower their stock allocations when prices went to three times fair value), we ALL pay the price, Rationals and Passives, New Schoolers and Old Schoolers.
Irrational exuberance comes at a big price. We all should have an interest in trying to get the U.S. economy back on track. This is not a game. This is the real thing.
Rob
Carlyle: “A simple side-by-side comparison of the returns for your stategy with “Lazy” alternatives would clearly show whether your strategy had merit. ”
Rob Bennett: “No, it wouldn’t, Carlyle. I mentioned above that Passive often goes ahead for short periods of time.”
So you’re saying that we wouldn’t like your system as much if you gave use the data instead of just sweeping marketing statements.
Anyone who has a truly better system could provide details and performance results. I can track the returns of indexes, mutual funds, newsletters and documented portfolios and methods, but I’ve seen several attempts to put your many vague paragraphs into testable formulas and portfolios and each has been somewhat different and they generally underperformed the market when tested. A few years ago you even agreed with a poster that he had put your system into simple testable words and then he tested it in a few hours over the history of the US stock market and it underperformed.
So here we are today and nothing has changed except perhaps that you have become even more vague.
So what’s the deal here? Do you intend to charge people money for your system and then send them a piece of paper that says that your system is to convince people to pay you to tell them your system? That’s a pretty old system.
Mr. Bennett, Vanguard’s Wellington Fund was established on 7/1/1929. Is that sufficient time to be considered long-term in your estimation? Annualized returns are presented for the fund and its unmanaged comparison index at Vanguard.com dating back through 1999. Earlier annualized performance figures for the fund and its unmanaged comparison index can be found at SEC Info for earlier annualized periods. Rather than referring readers to your calculator (which appears at first glance to utilize hypothetical returns and return sequences), it would be much more helpful if you could post a simple table of returns for your valuation-based model versus the Wellington Fund and/or its unmanaged comparison idex. That’s considered standard form in backtesting proposed investment strategies.
Wow this Rob Bennett guy is something else.
You know I actually don’t doubt his basic premise, at all. If one could accurately, every decade or so, sell at the high point or even somewhat close to it, and then buy back in at the low point, the returns would be astonishing.
Well duh! It’s only obvious that an active strategy, that actually worked, would beat the tar out of a passive strategy.
To his credit he argues this basic point rather well, but it’s not exactly a hard thing to argue as the facts would support it.
The problem is I’ve read all these dozens of comments, even looked at his site and calculators, and never once does he provide any specific underlying architecture, formula, or methodology that’s unambiguous and simple to follow as he claims it is. Sure he refers to the price to earning ratio (a real accounting ratio) as some kind of metric, but not yet have I seen where does he say how investors should research what this ratio is at any given instant in time and what specific, concrete, acceptable parameters are.
Is a P/E of 10 the time to buy in or get out? He never seems to say.
What’s more, he seems to be rooted in the assumption that the basic behavior of stock prices won’t ever change in the future. Maybe it will become the norm that P/E ratios for a given stock will be much higher in 15 years than they are now. Maybe it will be the opposite.
I’d argue that any given stock will of course fluctuate in its P/E ratio over time, but will tend towards its actual value so buyers should just dollar cost average it out since there’s no way of knowing the highs and lows ahead of time, but that seems to be the very idea he’s against because he claims to know how to buy low and sell high.
But the problem is how, and he never seems to really answer that question. He shows you how much money you’d make if you managed to do that, but that’s not telling you how to do it.
Even if you’re using the composite of all stocks, IE an index fund, instead of individual stocks to do this, the problem is the same, how do you know so well in advance when to buy and sell?
He claims “long term timing” (whatever THAT is as he never seems to define it except in general vagaries of 7 to 13 year intervals between trades) always works but never demonstrates why or how.
Furthermore I see nothing fundamentally different between this idea and Graham’s. The passive investing methodology was invented as a reaction against the failure of the average person to be able to use that method, not the other way around as he spins it.
He rants against passive investing like it’s the dominant style everyone follows. That’s simply completely untrue. Most people try to trade and beat the market averages. Most people don’t even own an index fund. It’s just one of several models that are followed today and singling it out to contrast it against his vague ideas is a false dichotomy to try to make his ideas look so much better.
Finally, Buffett’s comments about diversification as protection against ignorance take nothing away from the passive strategy. I fully admit I am ignorant of what economic conditions on the whole planet earth are going to be for the rest of my life at every given point. That’s the underlying assumption in my own ideas about investing.
Also Buffett’s comment on index funds included a statement something like “If you don’t bring anything to the table, why do you expect anything above an average return?” That’s exactly the phenomenon the index investor is counting on, read Bogle’s The Little Book of Common Sense Investing. As I said before there’s no doubt that an active strategy that worked would beat a passive strategy’s returns, but the problem is Bennett has not shown me or anyone else exactly how to use this strategy.
It’s one thing to state basic ideas like buy low and sell high, and quite another to actually be able to implement them effectively. I personally have watched many many people try to do this very thing and they all gravitate to the mean, with some becoming very rich and some going completely broke.
I personally cannot risk the latter, I will take the average and call it a day. I believe it to be a fool’s errand to think anyone is smart enough to comprehend the literally millions of variables that will affect the financial markets over the next few decades.
but I’ve seen several attempts to put your many vague paragraphs into testable formulas and portfolios and each has been somewhat different and they generally underperformed the market when tested.
Gibberish.
The historical stock-return data is public information.
Rob
it would be much more helpful if you could post a simple table of returns for your valuation-based model versus the Wellington Fund and/or its unmanaged comparison idex.
Valuations affect long-term returns. That means that valuations affect risk. That means that taking valuations into account is the same thing as taking risk into account. And that failing to take valuations into account is the same thing as failing to take risk into account.
It is not possible for the rational human mind to imagine a scenario in which it would be a bad idea to take risk into account when setting one’s stock allocation.
If you look on a year-by-year basis at the allocation decisions made by the Wellington fund managers and you find any in which they made poor allocation decisions and test what would happen if those decisions were changed to reasonable decisions, you obviously are going to see a better risk-adjusted result. What the heck would you expect to see?
And that’s of course what you see when you look at what happens when you invest in a broad index in a valuation-informed way.
Taking the factors that affect stock returns into account when setting your stock allocation is obviously a good idea. There are rare cases (about one in ten) when it produces results inferior to those obtained from a passive strategy. If you are certain that the one-in-ten longshot is going to come through for you, please feel free to go that way. I prefer to do what I can to put the odds in my favor. He who earns the money gets to decide how it will be invested.
Rob
If one could accurately, every decade or so, sell at the high point or even somewhat close to it, and then buy back in at the low point, the returns would be astonishing.
I am not aware of any means of identifying either the high point or the low point. So I find this idea preposterous.
But you knew that, didn’t you, snowballer?
Rob
it’s only obvious that an active strategy, that actually worked, would beat the tar out of a passive strategy.
That’s correct.
And the active strategy that works is long-term timing. That doesn’t involve picking highs or lows. It involves taking into consideration the extent to which the long-term value proposition of stocks varies with big changes in valuations and adjusting your stock allocation accordingly.
The academic research showing this dates back nearly 30 years.
Rob
And there’s the problem.
That’s exactly what your methodology is doing, you even admitted yourself it’s just a form of timing.
You come here and tell me that “I am not aware of any means of identifying either the high point or the low point.”
And then propose the average investor should do exactly that via value investing.
How is your idea different from Graham’s again?
The problem is I’ve read all these dozens of comments, even looked at his site and calculators, and never once does he provide any specific underlying architecture, formula, or methodology that’s unambiguous and simple to follow as he claims it is.
What architecture or formula or methodology do you need to figure out that a car with a fair value of $20,000 doesn’t offer such a hot value proposition when the asking price is $60,000?
It works that way with stocks too.
Rob
“Gibberish. The historical stock-return data is public information.”
Yes it is. That’s always been your problem. Attempts to test people’s guesses as to what you’ve been saying against this public data shows that your system, or people’s best guesses as to your system, fail historically.
I will take the average and call it a day.
The odds are extremely long against you “taking the average” on any stocks you purchased at the top of the bubble, snowballer. The historical data shows that the most likely 10-year returns for stocks purchased at the prices that applied in 2000 is a negative number. That’s a long ways down from the average return of 6.5 percent real.
If you invest in a valuation-informed way, it becomes possible for you to “take the average.” If you elect not to do so, you reduce the odds of that dream coming through for you considerably.
Rob
See Bennett this is the problem with everything you say.
You say a thing like this.
“What architecture or formula or methodology do you need to figure out that a car with a fair value of $20,000 doesn’t offer such a hot value proposition when the asking price is $60,000?”
Obviously you shouldn’t pay 60k for a thing worth 20k.
The problem is, you apply this to stocks, which is fine, but you never give any concrete ideas about what P/E ratio is acceptable. What are the numbers, the hard and fast figures?
Where does one find this data for the whole market to figure out an effective P/E for the index in question?
Should it matter by sector?
Should it matter if P/E increases or decreases across the board in the future?
Again how is this different from Graham’s 1950s era ideas which the average person can’t effectively use?
How is your idea different from Graham’s again?
It’s not.
Rational Investing has been around since the first stock market opened for business. So has emotional (or “Passive”) investing.
Passive becomes popular when markets are highly irrational. Rational becomes popular when rationality returns to the market.
I am not spilling any secrets by pointing out that Passive cannot work in the real world, Snowballer. Graham (Buffett’s mentor) was saying it years and years ago.
Rob
“What architecture or formula or methodology do you need to figure out that a car with a fair value of $20,000 doesn’t offer such a hot value proposition when the asking price is $60,000?”
The fair value of your house if $12. Here’s $20. I’m offering you nearly twice fair value. Are you going to take it? I’ve told you that it’s fair value so you have to believe me, right? If I repeat several hundred thousand times (like you) that the fair value is $12, will you then believe me?
Well, guess what, Rob. We’re not any more gullible than you are.
You’re free to invest as you please, Lindsay.
That’s of course as it should be.
Rob
“You’re free to invest as you please, Lindsay.”
Thank you for informing me of this.
“What architecture or formula or methodology do you need to figure out that a car with a fair value of $20,000 doesn’t offer such a hot value proposition when the asking price is $60,000?”
Mr. Bennett, an automobile is a depreciating manufactured mechanical device. Its sale price depends upon its cost of production plus intangibles such as perceived prestige of ownership (such as Chevrolet vs. Mercedes). Fair value is thus relatively easy to establish. A corporation is a complex entity established to manufacture something such as automobiles or to provide services. Determining the “fair value” of a corporatiion thus is a far more complex endeavor than your simplistic analogy would assume. In short, your analogy fails to impress as does your refusal to show evidence that your valuation-based strategy is superior to other strategies.
You’re touting your idea, which I again stress would work if you could successfully execute this “long range timing” of bailing out of the stock market indexes when prices are high and buying in when they’re low, as being the method the average person should be using because the results are better.
Well duh, I’d be a very rich man if I could time the market like that even in such broad strokes. I think I’m being very fair to your idea to admit this. The trouble is, your methodology is never defined in a way the average person, or any person, could ever be able to follow your model and implement it to make it work. Just because the underlying idea is sound doesn’t mean it can be pulled off.
You admitted yourself in one of your old comments linked to from the other thread that your model has potential but hasn’t produced any results yet.
The problem is we have decades of evidence that the average person simply cannot successfully implement Graham’s method. Obviously some people can, but they do it by finding information and influence that most people can’t find for themselves.
The passive approach is but one alternative, others such as buying into BRKB or BRKA, or mutual funds that use value investment strategies, or hiring professionals to do value investing for you, are all being used. Yet you keep picking at passive investing alone, setting up a false dichotomy that it’s either your idea or this idea.
You say passive investing has failed without ever defining what failure means. I could argue that a portfolio of T notes is a failure because it doesn’t return a certain percentage. You have to define your terms.
I really want to believe your idea is The Answer because I’m always looking for a better idea. But you’ve answered none of my questions, and I am the average investor you’re trying to sell your ideas to. So to me you’re a guy with a cute economic model (with some base assumptions I might challenge) and no real ideas about how to exploit it advantageously.
Your only product is your ideas, blog posts, etc. and all you have to offer is tons of reading material mostly attacking straw men and theoretical calculators you don’t show the underling mathematics for. This is useless to me. If you could produce a list of steps boiled down to steps the average person can follow, instructions if you will, you might actually have something marketable and useful.
Boil it down to something the average or even slightly above average person can understand like Bogle, Malkiel, etc. or a personal finance writer like Bach, or even Dave Ramsey does, tell them how to do it, and you’ll have something.
I question if you haven’t done this because you haven’t thought of it, or if because your model is just a model and there’s no way to implement it.
“The odds are extremely long against you “taking the average” on any stocks you purchased at the top of the bubble, snowballer. The historical data shows that the most likely 10-year returns for stocks purchased at the prices that applied in 2000 is a negative number. That’s a long ways down from the average return of 6.5 percent real.
If you invest in a valuation-informed way, it becomes possible for you to “take the average.” If you elect not to do so, you reduce the odds of that dream coming through for you considerably.”
And see I don’t even disagree with this!
The problem is I have no idea of knowing where the “bubble” is. I buy into the bottom of the bubble, the sides, and the top over time however. That is taking the average return over time, and I have a very, very wide window. I’ll have some negative returns and some positive ones. The risk I take is market risk. I am admittedly betting on the assumption that the economy of the world will grow over time so that the gains offset the losses, but I submit I lose a lot less money that way than if I were to attempt timing to avoid the losses. If it doesn’t well I guess I’m screwed and so is everyone else, but if I want to be all doom and gloom I’d buy into a Browne Permanent Portfolio.
What you are arguing is not “taking the average” it’s market timing which you just admitted you cannot perform in comment #97.
And you cannot mask that fact by calling it “long range timing” or “valuation”.
Your idea would work because timing the market would produce great results if you could do it with any kind of accuracy even if it wasn’t perfect. The problem is you have not told me or anyone else how. You just comment about P/E ratios and make broad statements, dodge questions, and pick out small quotes and contrast them against obvious facts like it’s relevant.
I’m the average guy. I really am. I’d love to know how I can use VII but I see no methodology or steps to implement, just the theoretical model for the results it would produce. You tout this as being something I should do but you do not answer any questions at all.
The jury is out as far as I’m concerned. Maybe your idea works maybe it doesn’t, but I have no idea how to even attempt it if I wanted to. Seriously, write a book if you really believe in this, I would buy it because I am always challenging my own assumptions. The problem I have is I can’t tell why I should believe your idea over any other active investing strategy.
That, and your argument against passive investing is basically “see if you traded at the right time the results are much better!”. Any active investing advocate could demonstrate that, their chosen method is irrelevant. It’s like saying “You should have bought the winning lottery ticket.”
The problem is we have decades of evidence that the average person simply cannot successfully implement Graham’s method.
To the contrary. The evidence shows that Valuation-Informed Indexing has worked for a far back as historical stock-return data exists.
On top of that, many big-name experts (including John Bogle) have endorsed the principles on which Valuation-informed Indexing is based.
On top of that, it is not possible for the rational human mind to imagine a scenario in which taking price into consideration could be a bad thing.
On top of that, in seven years of discussions in which thousands of Passive dogmatics have participated, no one has been able to identify any serious flaws in the idea.
Rob
Then why do you not advocate specific security buying? Why use indexes at all? Those who do invest this way successfully do it as I described before, they have some kind of special insight the rest of us can’t get or perhaps grasp.
And how do you explain the people who do use value investing who lose every penny?
Again, this goes back to my question from before, how do I, the average investor, take a look at the price of a share of SPY and determine that index is over valued or under valued? What is the mathematical formula? What is the basis for comparison?
Can you at least answer that question?
Yet you keep picking at passive investing alone, setting up a false dichotomy that it’s either your idea or this idea.
There are many approaches to investing that can work.
There is only one that can never work. That is the idea of not taking valuations into account at all.
Why would you want to do that? What would the purpose be of ignoring valuations altogether?
There are many wonderful ideas that are often included in a package of ideas that are advocated by most Passive Investing advocates. One is to keep costs low. One is to use indexes. One is to ignore the short-term noise. All of these ideas are gold.
The one that causes all the trouble is the idea that there is no need to engage in long-term timing. Huh? How could that be? The only way to take price into consideration is to engage in long-term timing.
That one was a mistake. There were studies done that showed that short-term timing doesn’t work and some smart people jumped to a hasty conclusion that long-term timing doesn’t work either. And then when the studies came out showing that it does they didn’t want to correct the error. As a result, we have brought on a huge economic crisis.
It is time to admit the mistake and get about the business of fixing it.
There has never been any reason to believe that long-term timing does not work. It is not even possible for the rational human mind to imagine a scenario in which long-term timing would not work.
It is because this is so obvious that we see so much defensiveness among Passive Investing advocates re this matter. If I could offer them some arguments to make their case stronger, I would do so. But there are none.
This is the result of a mistake. There is no way to think up arguments to put forward in support of a mistake. When you learn that you have made a mistake, the proper thing to do is to fix it.
Rob
You say passive investing has failed without ever defining what failure means.
1) It produces huge losses
2) That often end up causing those who follow it to abandon stocks forever
3) And it makes those who buy into the idea extremely emotional and defensive
4) Eliminating the possibility of these people ever being open to learning about better approaches.
Rob
That, and your argument against passive investing is basically “see if you traded at the right time the results are much better!”.
Stocks were priced at insanely high prices from 1995 through 2008.
You didn’t have to “trade at the right time.” You had to lower your stock allocation at any point within that 13-year time period.
Rob
The problem I have is I can’t tell why I should believe your idea over any other active investing strategy.
The big difference is that short-term timing approaches require that you be able to pick a top and a bottom. That’s why short-term timing does not work.
Rob
1) Huge losses compared to what? A timing strategy that worked perfectly? Well duh. Again read Bogle’s Little Book to Common Sense Investing, that’s kind of the idea. Average performance is failure to you? If that’s your definition that’s just fine but come out and say it.
2) I follow it, mostly for lack of a better method, and I’ve not abandoned stocks. However I have the emotional temperament to just throw money out there and let it ride. Is not having stock allocation failure to you? That doesn’t even make sense, some people may be in a position they shouldn’t invest money in any stocks at all.
3) Any investing idea can people defensive it’s human nature. It’s not even the idea really it’s just how people are. You’re certainly very defensive, claiming that “Goons” are after you and such. So from this angle your idea is as much of a failure as any other idea, which means nothing.
4) People are asking you questions you’re not answering. I’d call that being open to better approaches. I’d wager a good many of them are not even passive investors, or in my case not purely passive investors. Some of us like to use multiple models you know.
But NONE of that defines “failure” it’s just a list of allegations against passive investing that I’d argue are either irrelevant (#3), flat out wrong (#4 and #2) or not proven (#1).
“Stocks were priced at insanely high prices from 1995 through 2008.
You didn’t have to “trade at the right time.” You had to lower your stock allocation at any point within that 13-year time period.
Rob”
That is just imprecise market timing! Just because it’s a big window doesn’t mean it’s not timing! It is indeed “trading at the right time”.
Again explain please how the average person is supposed to know stocks were overvalued in that time period. I’ve asked that question a lot and you’ve not answered it yet.
“The big difference is that short-term timing approaches require that you be able to pick a top and a bottom. That’s why short-term timing does not work.”
That’s the same reason long term timing wouldn’t work either! 5 months or 50 years, what difference does it make? It’s a fair question.
It’s really easy to sit here in 2009 and say “See you should have sold in 2007 or 1997” etc. The problem is nobody could have known that ahead of time. If I’m wrong explain why so many valuation strategy based mutual funds and value investors still lost money in 2008.
““Stocks were priced at insanely high prices from 1995 through 2008.”
Says you.
“You didn’t have to “trade at the right time.” You had to lower your stock allocation at any point within that 13-year time period.”
Huh? 2000 and 2008 were fine times to lower your stock allocation. But 1995, 6, 7, 8, 2002, etc. were bad times to do so. Simply rebalancing and selling as that required in 2000 and 2008 sounds a lot better than picking some arbitrary time in a 13 year period to do it.
Let me ask another question for Bennett or anybody else.
Let’s say I cannot be convinced that it’s possible for me personally to know when to trade (or lower an allocation if you prefer to call it that) for optimal or near optimal results ahead of time.
I might believe that people with inside information, special influence or skills, or otherwise advantaged people can time the market. But I don’t see how I’m supposed to develop that capability for myself, seeing as how my opportunity cost (my time, my current job) is too high.
What then could be more rational than super diversifying and avoiding expenses and fees, and then slowly shifting my holdings to less risky ones as time moves on?
Passive investing only seems “absurd” if you believe that you can effectively time things. I’m not even convinced the market is efficient and I still don’t think I can time it.
Nobody has ever been able to tell me a sure fire way to time the market however, and the thing is, if one exists, you’d do well to keep it to yourself because you’d become very rich. If you tell everybody your method you’re no longer at an advantage. If there is somebody out there laughing at all us buy and hold types, he’s not going to tell us his ways because he’d lose his advantage.
Anybody offering to tell me how to invest actively is therefore highly suspect.
So I have no way of timing the market, my opportunity cost to discover how is too high, and no one with a method that works would ever realistically tell me how it’s done. I won’t ever know when prices hit highs or lows. What else is there to do but invest passively?
Rob Bennett has challenged me to name a scenario in which a rational person would ignore the price of securities. I just did so.
Then why do you not advocate specific security buying? Why use indexes at all?
Indexes offer huge diversification at low cost.
I don’t oppose stock picking. But Valuation-Informed Indexing will not work for those purchasing individual securities. VII works because the growth of the general economy is far more predictable than the growth of any one particular company. U.S. stocks have been providing an average long-term return of about 6.5 percent real for a long time. You cannot say that re any one particular company.
Rob
The problem is nobody could have known that ahead of time.
Lots of people knew.
Robert Shiller knew. Ed Easterling knew. John Walter Russell knew. Jeremy Grantham knew. Andrew Smithers knew. I knew. Rob Arnott knew. Michael Alexander knew. Cliff Asness knew.
Anyone with access to the internet could have known. This was reported at the Motley Fool site, at Morningstar.com, at IndexUniverse.com, at the Early Retirement Forum.
The only reason why millions more did not know is that The Stock Selling Industry spent hundreds of millions promoting Passive Investing and many bought into it. If the Stock Selling Industry had been promoting Rational Investing, everyone would have known.
Is there any reason why that cannot change now that we see the damage that is being done to our economy by not letting more people know?
Rob
Passive investing only seems “absurd” if you believe that you can effectively time things. I’m not even convinced the market is efficient and I still don’t think I can time it.
I agree with this statement. The way I would say it is that Passive Investing only seems absurd if it is established that valuations affect long-term returns (if valuations affect long-term returns, then long-term timing obviously works — you just lower your stock allocation when valuations are such that the long-term value proposition of stocks is poor). The academic research showing that valuations affect long-term returns dates back to the early 1980s.
if one exists, you’d do well to keep it to yourself because you’d become very rich.
That’s not so. The massive promotion of Passive investing has caused the greatest loss of middle-class wealth in the history of the United States. The economic crisis that resulted from this loss of wealth may send the entire economy over a cliff. That’s bad news for all of us, Rationals and Passives alike. We all should be doing what we can to save the U.S. economy. None of us will be rich in any meaningful sense if we fail to do that. That’s Job #1.
Rob
There’s ALWAYS someone who “knew”. Too bad it’s rarely the same person that “knew” last time.
“I knew.”
You got out of the market in 1995 and waited for a drop so you could say you “knew” – within plus or minus 13 years. A broken clock is right once every twelve hours and an undefined investment scheme is right once every thirteen years.
We got out in 2008. Our guess was obviously vastly better than yours, but we’re not claiming we “knew” or “know” what will happen next because we don’t need to sell snake oil.
You know, Rob doesn’t actually invest in the equities market himself…
RE-DISTRIBUTE every 6-12 months
This approach can work – but only if you RE-DISTRIBUTE back to your original percentages every 6-12 months.
So if you are 50% bonds and in 12 months time that is now 60% of your net worth you sell some and buy stocks.
This has the effect of ‘selling high’ and ‘buying low’. Take the last 2 years – you would have been selling off stocks and buying bonds, in the next year you will be doing the reverse.
You got out of the market in 1995 and waited for a drop so you could say you “knew” – within plus or minus 13 years.
I got out in 1996. I didn’t do it so that I could say that I knew. I did it to protect my retirement money from the crash that I knew was coming because a crash has to come once prices get to those levels. If prices never returned to reasonable levels, the entire market would collapse. Why shouldn’t I want to protect my retirement money?
It was 12 years until the big crash in 2008. But it was only four years until stocks started performing poorly in 2000.
Long-term timing can take up to five years to pay off. Sometimes even longer. You shouldn’t do it unless you’re willing to wait 10 years for a payoff. That’s just the way it is. Stock prices are determined primarily by emotion in the short term and emotions are unpredictable. So short-term timing doesn’t work.
I didn’t make stock investing what it is. I just report on what I have learned about how it works. Your anger is not properly directed at me, Lindsay. You should be angry at God or Evolution or whatever force it is that you believe was responsible for making stocks what they are. I had nothing to do with it. I’m a reporter.
Rob
@Snowballer (#109) You keep asking Mr. Bennet for a formula an average Joe can follow. The problem is that if there was a proven formula the average Joe could follow, every average Joe would start to follow it and every average Joe’s returns would then become… average.
Mr. Bennet it is to your benefit and the benefit of every other “Valuation Informed Investor” to quietly let the emotional roller coaster continue – otherwise there would be no highs and lows to sell and buy at! Of course, if you’re adding to your nest egg by selling VII to those hoping to get rich quick, then you’re in the WRONG PLACE – this is Get Rich Slowly!
LMAO!
Rob Bennet (#102):
“The odds are extremely long against you ‘taking the average’ on any stocks you purchased at the top of the bubble, snowballer. The historical data shows that the most likely 10-year returns for stocks purchased at the prices that applied in 2000 is a negative number. That’s a long ways down from the average return of 6.5 percent real.
“If you invest in a valuation-informed way, it becomes possible for you to ‘take the average.'”
You seem to have a fundamental misunderstanding regarding the concept of an “average” as it pertains to markets. Comments like the one above lead me to suspect that you believe that in the context of investing, the “average” refers to some concrete, constant value. You even appear to quantify this value as 6.5%. I suggest that you’re the only person defining “market average” in this way. Everybody else uses a different definition, in the context of investing to “achieve the market average.”
The “Market Average” isn’t some fixed value. It simply refers to the actual average return of the market. It varies, depending on which period you select. The fact that the market average was negative in the 10 years following the year 2000 doesn’t mean that passive investors didn’t achieve “market average” returns. While it may be true that real returns were negative for a period, you fail to acknowledge that active traders may have experienced even WORSE returns – that is, returns that were even more negative than the market average (I’m referring to the actual definition of “market average” here, meaning the actual rate of return of the market, not your own definition which seems to mean “always 6.5%”).
So if you bought at the top of the bubble, and experienced a negative return, you’ve still achieved the “market average.” It was simply negative for that period. You did no better or no worse than the market as a whole, for that particular window of history. That’s the “market average.” Passive investors realize that, over a long enough period, that “market average” will be higher than the return they could have realistically hoped to achieve using an active trading strategy (which you seem to be espousing), or by exposing their portfolio to the exorbitant fees, expense ratios, and tax penalties associated with actively-managed mutual fund products.
@Rob (#115):
“Stocks were priced at insanely high prices from 1995 through 2008.”
COMPARED TO WHAT?
That’s what people keep asking you, and what you still haven’t answered.
How is the average investor supposed to discern when stocks are “insanely overpriced,” or even just mildly overpriced, for that matter?
The conventional answer is, “P/E ratios.” But as others have pointed out, what constitutes an “acceptable” P/E ratio can change over time. It’s based on nothing more than the prevailing opinion of the aggregate of all investors, and thus cannot be predicted.
Finally, there’s one more huge flaw in your strategy, which you have not explained. According to you, people should sell their stocks when they’ve become overpriced. However, people who did that in 1995 (the beginning of a period of “insanely high priced” stocks, according to your quote above) would’ve missed the enormous run-up that culminated in 2000. Passive investors, on the other hand, would’ve blindly kept buying index funds, and hanging on to their “insanely overpriced” stocks. Those lucky enough to have retired in 1999/2000 and cashed out would’ve done wildly better than your strategy.
The last question I have is, how do you know when it’s time to buy back in? How do we know that even today, at 8,500, the Dow isn’t still “insanely” overpriced? How do you tell when it’s time to buy back in again? What formula are you using to discern these various “trigger points?”
You know what, your answer doesn’t even matter, because no matter what it is, it will be flawed. Even if it worked, as soon as it became common knowledge, it would stop working. See Malkiel’s “Random Walk Down Wall Street.” What you’re talking about is “market timing” and has been so thoroughly debunked, I don’t know why we’re even still talking about this ridiculous notion.
“I got out in 1996. I didn’t do it so that I could say that I knew. I did it to protect my retirement money from the crash that I knew was coming because a crash has to come once prices get to those levels. If prices never returned to reasonable levels, the entire market would collapse. Why shouldn’t I want to protect my retirement money?”
The market is higher NOW than it was in 1996. That means you missed several years of gains and compounding. Explain again how this brings you out ahead?
Actually, it is pretty easy to operationalize Rob’s ideas. When the PE10 goes above a certain number, say 30 then you lower you stock allocation. When it goes down to a certain number, say 12, then you raise the stock allocation. Those numbers can be changed depending upon your risk tolerance. And you can see how it works at his calculator. Since the PE10 stays within the 12-30 range most of the time, this strategy only requires you to rebalance occasionally.
I don’t see what is so hard to understand about this?
In 2000 the PE10 was 45. Historically, that was as high as we had ever seen. That is why we are sitting here a decade later with lower values. Now does it make sense to take a look at that? Most folks would agree, if they weren’t so attached to the current passive methods, that it does make sense to account for this irrational exuberance.
Buffett has been stating for over a decade that it was very difficult for him to find ply his value strategy because of the high valuations. Now he has some limitations that the small investor doesn’t have, but he was very open about that.
Finally, some suggest that the popularity of passive investing and DCA has increased the variability of the market. DCA, encourages people to invest when prices are high, while passive investing results in many people selling when prices are low [see mutual funds outflows during bear markets] for emotional reasons. This creates opportunities for those who account for price like myself. Markets go insanely high and crazily low as judged by earnings or return on equity or book value. Since markets in the long term do adjust to those metrics it provides an opportunity for all. You obviously have to choose to take the opportunity.
One final comment. The “sequence of return” issue is one you all might want to discuss as it can decimate retirement income quickly for the unlucky [like those that have retired since 2000].
If you have an interest in value investing, check out Greenblatt’s “The Little Book that Beats the Market.” He advocates picking individual stocks, but he explains the rational behind value investing in clear, simple language.
Mr. Bennet it is to your benefit and the benefit of every other “Valuation Informed Investor” to quietly let the emotional roller coaster continue – otherwise there would be no highs and lows to sell and buy at!
I think that would be great. If there were no extreme highs and no extreme lows, the market would be more rational than it is today. That is to everyone’s benefit.
The reason why a Valuation-Informed Indexer lowers his allocation when the risk of investing in stocks goes sky high is not to make a killing. The reason is that he does not want his risk level to go to crazy levels. It is an act of self-defense. If we all learn how to invest more effectively and there are no longer these extreme highs and lows, everyone wins.
you’re in the WRONG PLACE – this is Get Rich Slowly!
It is Passive that is the Get Rich Quick scheme. Remember, it is Passive that argues that there is no need to lower your stock allocation when stock prices go to insane levels. Why? Because we all have that Get Rich Quick impulse within us that tells us that it’s all going to turn out different this time from how it has always turned out before. Only it never really does work out that way, does it?
VII is the Get Rich Slow approach. I am today far ahead of where I would have been had I followed a Passive strategy. And the compounding returns phenomenon will put me farther and farther ahead as the years go by. But it took four years before my decision to get out of stocks in 1996 began to pay off. The key to successful stock investing is being willing to stick with the rational choice even when the media and the Stock Selling Industry are pumping put marketing slogans aimed at enticing you to abandon your common sense. Common sense often works only in the long term. Short-term investors should not even think of following a VII strategy.
Rob
So if you bought at the top of the bubble, and experienced a negative return, you’ve still achieved the “market average.”
We of course agree on this, Kevin.
What I don’t get is why you would want to achieve the market average at a time when the market average is likely to be a negative number? What’s the point?
At some prices, the market offers an amazing long-term value proposition. At some prices, the market offers a strong long-term value proposition. At some prices, the market offers a poor long-term value proposition.
I invest heavily in stocks when the long-term value proposition is amazing. I invest mostly in stocks (but not quite as heavily) when the long-term value proposition is strong. And I invest not too much in stocks at all when the long-term value proposition is poor.
Does that not make sense?
Rob
How is the average investor supposed to discern when stocks are “insanely overpriced,” or even just mildly overpriced, for that matter?
The valuation metric that I use is P/E10. That’s the price of the index over the average of the last 10 years of earnings.
P/E1 (the metric most frequently cited) is not a good metric. I don’t know of anyone who takes valuations seriously who uses P/E1.
The problem with P/E1 is that a single year’s earnings is heavily influenced by how the economy happens to be doing at any given time. P/E1 therefore gives you a lot of false reads. It sometimes works. But it is a highly unreliable metric.
P/E10 uses 10 years of earnings and thereby smoothes out the earnings number to something far more workable and effective. There’s been lots of statistical research done showing that P/E10 does a good job of predicting stock returns for a broad index that will apply 10 years out or 15 years out or 20 years out.
We cannot tell you the precise return that will apply. We can give a range of possible returns and report the rough odds of each of the various possibilities coming up. There is not enough precision in the predictions for them to be too useful unless you go at least 10 years out (that’s another way of saying that short-term timing doesn’t work).
Rob
According to you, people should sell their stocks when they’ve become overpriced. However, people who did that in 1995 (the beginning of a period of “insanely high priced” stocks, according to your quote above) would’ve missed the enormous run-up that culminated in 2000. Passive investors, on the other hand, would’ve blindly kept buying index funds, and hanging on to their “insanely overpriced” stocks. Those lucky enough to have retired in 1999/2000 and cashed out would’ve done wildly better than your strategy.
All that you say here is correct, Kevin.
Rob
how do you know when it’s time to buy back in? How do we know that even today, at 8,500, the Dow isn’t still “insanely” overpriced? How do you tell when it’s time to buy back in again? What formula are you using to discern these various “trigger points?”
There’s a calculator at my site called “The Stock-Return Predictor.” It employs a regression analysis on the historical stock-return data to reveal the most likely 10-year return on a purchase of a broad stock index at any of the various valuation levels.
http://www.passionsaving.com/stock-valuation.html
In January 2000, the Predictor reported that the most likely 10-year annualized return was a negative number. At today’s prices, it reports the most likely 10-year annualized return as 5 percent real.
Each investor has to decide for himself or herself whether it is worth taking on the risks of investing in stocks today to obtain a likely 10-year annualized return of 5 percent real. I see it as a not-bad deal. My thought is that a stock allocation of about 50 percent makes sense today. If the P/E10 value drops below 10 (I view this as likely since this is what has always happened in the aftermath of earlier times when we went to insane price levels), I would be inclined to go with a much higher stock allocation. At a P/E10 level of 10, the most likely 10-year annualized return is nearly 11 percent real.
Rob
You know what, your answer doesn’t even matter, because no matter what it is, it will be flawed.
I mean no personal offense, Kevin. But this is the dogmatic attitude that is characteristic of Passive Investing that makes it such a turn-off for me. You’re saying that nothing I could possibly say could ever matter for you. Is that not a different way of saying that you think you already know it all? Would you not find that attitude a turn-off if someone else were evidencing it and the topic was anything other than investing? The promotion of Passive Investing has turned millions of us into arrogant know-it-alls. Again, I mean no personal offense. But is that not a fair response to the words quoted above? How can we have a warm and friendly and intelligent conversation when you start out by declaring that nothing I could possibly say even matters?
Even if it worked, as soon as it became common knowledge, it would stop working.
And no one will ever be able to make an airplane that will fly. And the average person will never be able to afford a computer. And indoor plumbing is a silly dream. And the Red Sox will never win the World Series. And forget about this notion you have of constructing a printing press.
People make mistakes, Kevin. The idea that Passive Investing can work was a mistake. When we acknowledge the mistake, our understanding of how investing works advances. We all move forward into a better and more enriching place.
Valuation-Informed Indexing is rational indexing, Kevin. It doesn’t stop working when everyone knows about it. It works better when everyone knows about it. The hardest part of VII for me was sticking with my decision to be out of stocks from 1996 through 2000, when prices were going up 20 percent or 30 percent per year. If everyone believed in VII, everyone would have been telling me how smart I was. That would have made the job easier, not harder.
Rational investing will always work. It’s the idea of ignoring prices that stops working. It stops working when people see for themselves what they could have learned by checking the historical data — ignoring prices always leads to investing disaster for every investor who buys into the idea. There are no exceptions in the historical record.
What you’re talking about is “market timing” and has been so thoroughly debunked, I don’t know why we’re even still talking about this ridiculous notion.
Have you ever personally looked at any of the “studies” that the Stock-Selling Industry assures us prove that “timing doesn’t work,” Kevin? I have.
Those studies show that short-term timing never works. Every study that looks at long-term timing shows that long-term timing always works. So which statement is more true, a statement that “timing never works” or a statement that “timing always works”?
It’s the same historical data that show both things always to be so. If you believe in what the data tells us about short-term timing, what is it so hard for you to accept what it tells us about long-term timing?
Rob
Rob wrote: “I invest heavily in stocks when the long-term value proposition is amazing. I invest mostly in stocks (but not quite as heavily) when the long-term value proposition is strong. And I invest not too much in stocks at all when the long-term value proposition is poor.”
I’ve followed the writings of Rob Bennett for several years. And in all that time, he has NEVER claimed to have been invested in stocks. Not “heavily”, “not mostly” and “not too much”.
Schroeder
The market is higher NOW than it was in 1996. That means you missed several years of gains and compounding. Explain again how this brings you out ahead?
I’ve had my money in asset classes paying a rough average return of 3.5 percent real (most is in TIPS and IBonds, which were paying those returns at the market top). Those returns beat what I would have gotten by investing in the S&P index.
Now that stocks are again selling at reasonable prices, I am able to buy more shares because of the differential. So there is no way that a Passive can ever go ahead of me. I earned the better return when stocks were insanely overpriced and I now will be earning at least an equal return when stocks are priced reasonably. Taking price into consideration when buying stocks is a win/win/win. There’s no downside (except you do need to be a long-term investor — as Kevin points out, I was down in 2000).
Rob
I’ve followed the writings of Rob Bennett for several years. And in all that time, he has NEVER claimed to have been invested in stocks. Not “heavily”, “not mostly” and “not too much”.
Stock prices were insanely high from 1995 through 2008, Schroeder. I certainly never advocated that anyone be too heavily invested in stocks at those price levels.
I did often recommend that even valuation-informed investors go with a stock allocation of 20 percent to 30 percent. I was personally at zero. But I think a good case can be made for going with 20 percent or 30 percent stocks even at times of insane prices because we never know how stocks are going to do in the short term. If you feel that you would be “missing out” to see stocks go up by 30 percent at a time when prices are already insane, going with a 30 percent allocation makes a lot of sense. That way you save yourself that emotional angst.
There are lots of different strategies possible. There is not any one Rational strategy. What distinguishes Rational strategies from Passive strategies is that all Rational strategies take valuations into account in some way. I say that ignoring valuations altogether (investing passively) is a 100 percent emotional approach. I am not able to come up with any rational justification for this approach. I mean no personal offense to anyone when I say that. It is my sincere view and I believe that, given the marketing dollars that have been directed to the promotion of the Passive approach, it needs to be said.
I favor the exploration of scores of different Rational strategies. The reason why I am so severe in my criticism of Passive is that for years now it has been sucking all the oxygen out of the room. We all need to be discussing what particular Rational strategy is best suited for us. Instead, we waste lots of time going over the same old ground because of misperceptions that people have come to hold as a result of the massive marketing push for Passive.
It is the belief that there must be something to Passive that is holding us all back. I have studied this stuff for seven years and I have never been able to find a sliver of logic or data that supports the Passive approach. It appears to me to all have been a huge mistake. There were important studies that showed that short-term timing doesn’t work and some smart people jumped to a hasty conclusion that that meant that all forms of timing don’t work. Then studies came out in the early 1980s showing that long-term timing does work. And for close to 30 years now we have been holding off on acknowledging the mistake that has now put the entire U.S. economy into a crisis situation.
I am very much looking forward to the day when we just admit the mistake and all move forward together with the task of building a model that actually works in the real world.
Rob
“Actually, it is pretty easy to operationalize Rob’s ideas. When the PE10 goes above a certain number, say 30 then you lower you stock allocation.”
Yes, this has been done, and backtesting shows that this method has underperformed the market historically. Rob has since become even more vague about the details.
“I don’t see what is so hard to understand about this?”
It’s not hard. It’s just a bad plan historically. This is a “little issue” that Rob has tried to hide with massive typing several times in the past.
backtesting shows that this method has underperformed the market historically.
This is of course inaccurate.
There is an extensive record on the internet that anyone interested can check out.
Discussion of Valuation-Informed Indexing has been banned at the Vanguard Diehards board at Morningstar.com and at the Bogleheads.org board.
Why?
That fact alone tells the story for any reasonable person trying to get to the bottom of things.
Rob
@Rob:
“You’re saying that nothing I could possibly say could ever matter for you. Is that not a different way of saying that you think you already know it all?”
Not at all. I’m saying nobody can know for certain which way the market is going to go.
“What I don’t get is why you would want to achieve the market average at a time when the market average is likely to be a negative number?”
Of course nobody WANTS to achieve a negative return. The problem is that there is absolutely, positively NO WAY to know ahead of time whether this year is going to be an “up” year or a “down” year. Any attempt at guessing amounts to nothing more than market timing, which has been proven to be futile and costly. Of course there are a few people who got lucky and profited with their timing, but overall, as a whole, people who actively trade achieve lower returns than buy-and-holders.
Rob, you were right about one thing, and I owe you an apology. I came down a little hard on you. I should have kept a more civil tone in my responses to you. There’s no reason we shouldn’t be able to discuss this rationally. I simply get very worked up when I see someone steering innocent people towards a strategy which I am completely convinced will cost them money. A lot of people come to this site for good advice, and frankly, I see your advice as harmful. Many, many financial luminaries far smarter than you or myself have covered this topic in countless books, and come to the conclusion that market timing cannot consistently lead to higher returns. Bogle, Malkiel, Schwed, Buffet … these guys are legends in the industry, they’ve studied it to death, and they support what everybody here except you is saying: market timing doesn’t work.
Are you claiming you’re right and John Bogle is wrong? Do you seriously believe that your research is correct, and Warren Buffet is mistaken?
What you do with your money is your business, but I would encourage any young investors tempted by your tactics to first read books by the authors I listed above (and more) and draw your own conclusions.
“This is of course inaccurate.”
Says you (again.)
“There is an extensive record on the internet that anyone interested can check out.”
Yes there is. That’s how I know Rob just says stuff.
“Discussion of Valuation-Informed Indexing has been banned at the Vanguard Diehards board at Morningstar.com and at the Bogleheads.org board.”
How misleading. “Valuation-Informed Indexing” is a name Rob made up for a some general systems of investing that other people created. Rob has been banned from many web sites – not any discussions of any investment system nor the other users of those systems. Rob just keeps saying this name he made up again and again and again because this name is on his web site again and again and again and he hopes to make it pay off as a big google search term. (He has admitted this on a blog about blogging.)
Rob wrote: “I was personally at zero.”
I know that. And you are still personally at zero stocks, correct? At what price level are you waiting for before you personally own stocks, Rob?
Schroeder
I’m saying nobody can know for certain which way the market is going to go.
Are you sure of this, Kevin? Without meaning to be patronizing, I encourage you to think it over. I believe that if you work through the logic chain link by link, you will see that everyone can know which way the market is going to go in the long term.
If you really believed that we cannot know anything about where stock prices are headed, you would believe that investing in stocks is pure gambling. I presume that you don’t believe that. So you believe that it is possible to know something.
The something that we all know is that the U.S. economy has been sufficiently productive for a long, long time to finance a return from stocks of about 6.5 percent real.
Now — the 6.5 number cannot possibly apply at all price levels, right?
If 6.5 is the long-term number that applies when stocks are priced fairly, the long-term number that applies when stocks are priced at three times fair value has to be far, far lower, right?
That’s the logic chain. All that the calculator does is add the actual numbers that flesh the thing out.
Is it possible that there have been economic changes that could cause things to go a little better or a little worse than they ever have in the past? Sure.
But those are long-shot possibilities. Do you really want to put all your retirement money down on long shots?
The Stock-Return Predictor tells you what you need to know to have a rough idea of how much you need to lower or increase your stock allocation at various price levels to keep your risk level where you wanted it to be. Valuation-Informed Indexing is Stay the Course investing.
Passive pretends to be Stay the Course investing. But it doesn’t cut it. With Passive, you are going along with Mr. Market whenever he chooses to indulge in one of his wild drinking binges. For what purpose?
I am happy to go along with Mr. Market when he is sober. I don’t trust him when he is drunk. He hurts too many people when he is drunk. I want to protect myself from a drunk stock market and I want to protect my friends from a drunk stock market too.
How were we all to know that the market was drunk in the 1990s? Look at the returns. You thought they were real, that they were not being borrowed from the future?
Really? Truly?
I think we all knew on some level of consciousness. And I think that the healthy thing is for us all now to acknowledge that we knew.
Bull markets are bad news. Bull markets hurt us. We need to begin talking straight about these things. Our retirement money is at stake.
Rob
“I’ve had my money in asset classes paying a rough average return of 3.5 percent real (most is in TIPS and IBonds, which were paying those returns at the market top). Those returns beat what I would have gotten by investing in the S&P index.”
Rob, just to be clear: you’ve dabbled in asset classes like TIPS, Ibonds and savings accounts, but based on numbers that you gave out years ago, it appears that most of your current assets was a recent inheritance from your parents. I don’t think you’d be so shy about your portfolio if the returns were actually good. Instead you’ve just made claims about tiny slices of it. By they way, this is a common feature of people who claim to be successfully timing the market.
You’re claiming to be ahead of the stock market today, but you also claimed that last year before the crash, and every year before that. It doesn’t matter what the markets are doing – your vague system is always ahead, because, according to you, the human mind can’t imagine it being any other way. I’m afraid marketing phrases like that are just not enough.
Oh and I know your common response that you don’t talk about your portfolio because that somehow causes other people to lie about your portfolio. What really used to happen is that people said something about your portfolio, you would claim it is a lie, and then they would provide a link to where you said the exact same thing earlier. So you’ve learned that be being perpetually vague, you can’t perpetually be shown to be not doing well. This is similar to the way you’ve become more vague about what your system is.
The problem is that there is absolutely, positively NO WAY to know ahead of time whether this year is going to be an “up” year or a “down” year.
That’s correct.
So what?
Why is it such a big deal to know the precise year when you are going to lose most of your retirement money?
If you know you are going to lose it in the long term if you remain heavily in stocks, it seems to me that that should be enough for you to know that you need to lower your stock allocation.
I don’t get why it is such a big deal to know in advance the precise year when you are going to lose your money. For me the key is to know what is going to happen in the long term. When stocks are a bad long-term bet, I lose interest in putting my money in them.
Rob
Rob, you were right about one thing, and I owe you an apology. I came down a little hard on you. I should have kept a more civil tone in my responses to you. There’s no reason we shouldn’t be able to discuss this rationally.
Thanks very much for saying that, Kevin. That means a lot to me.
I think it helps everyone for you to say something like that. It makes people feel that they can venture forth with their own views without having to worry that they will get hit on the head for doing so. And we all benefit when everyone is expressing their sincere beliefs.
I have lots of friends who are confirmed Passive Investors. I hope that I will be able to add you to the list, Kevin.
Rob
I simply get very worked up when I see someone steering innocent people towards a strategy which I am completely convinced will cost them money. A lot of people come to this site for good advice, and frankly, I see your advice as harmful. Many, many financial luminaries far smarter than you or myself have covered this topic in countless books, and come to the conclusion that market timing cannot consistently lead to higher returns. Bogle, Malkiel, Schwed, Buffet … these guys are legends in the industry, they’ve studied it to death, and they support what everybody here except you is saying: market timing doesn’t work.
You are wrong about this, Kevin. Again, I mean no personal offense, but you need to read these books more carefully.
I learned that valuations affect long-term returns from Bogle. The best piece of writing that I have seen that describes why Valuation-Informed Indexing works is Chapter Two of William Bernstein’s book “The Four Pillars of Investing.”
These people do NOT say that long-term timing doesn’t work. The literature shows that it does work and these people are all familiar with the literature.
Please go back and check the statements that you have seen that have led you to believe that these people believe that long-term timing doesn’t work. You will find that in each and every case the statement was “timing doesn’t work.”
Is it true? Well, it’s true that short-term timing doesn’t work. So I suppose that there is a sense in which the claim that “timing doesn’t work” isn’t an outright lie.
But it is an EXTREMELY misleading statement.
It is ever bit as accurate to say that “timing always works” as it is to say that “timing never works.” It is the same historical data that shows both things to be so.
I offered to make a presentation to a meeting of the Vanguard Diehards board community at which Bogle was going to be present. Mel Lindauer, the co-author of “The Bogleheads Guide to Investing” responded by changing the rules for attendance at the meeting and explaining that he needed to “protect” Bogle from my questioning.
Huh?
Bogle is one of the most influential investing experts in the world and I am some guy who posts stuff on the internet. Why the heck would Bogle need to be “protected” from me?
He needs to be “protected” because I know the right questions to ask. Mel knew that I had no intention of asking Bogle whether timing works; we all know what he would say to that. I would quote from the sections of Bernstein’s book (which Bogle endorsed) showing that long-term timing works and ask Bogle whether long-term timing works. That’s the question that Mel believes Bogle must be “protected” from.
Here is what Bernstein says (on Page 55) about long-term timing in his book:
“We’ve just acquired a much more valuable bit of knowledge: the long-term expected return of the market. Think about it, which would you rather know: the market return for the next six months, or for the next 30 years? I don’t know about you, but I’d much rather know the latter. And, within a reasonable margin or error, you can.”
Rob
“Bull markets are bad news. Bull markets hurt us. We need to begin talking straight about these things. Our retirement money is at stake.”
To put this in perspective, you need to understand that Rob, by his own words, had “a tiny amount of money” in the stock market for 2 or 3 years back in the early 90s.
And that’s it.
With a tiny bit of money in stocks for 2 or three years out of a ~55 year life, you can see that bull markets don’t do anything for Rob. That’s why they “hurt us”.
Rob is still waiting to buy back in at the bottom. Once someone can tell him exactly where that is.
Are you claiming you’re right and John Bogle is wrong?
Yes.
Here is a link to an article at my site entitled “Bogle’s Big Mistake”:
http://www.passionsaving.com/John-Bogle.html
I have the greatest respect for Bogle. I rate him as my fourth favorite investing advisor of all time (behind only Shiller, Russell, and Buffett). I often describe him as the Godfather of the Rational Investing model as the model is heavily influenced by Bogle’s thinking.
Still, the reality remains that the one huge mistake made by Bogle — his advocacy of Passive Investing — has caused more financial ruin than any other mistake in the history of personal finance. I don’t think I would be much of a friend to Bogle to let him go on saying things that are wrong that I know to be wrong. Do you?
I sent an e-mail to Bogle several years ago letting him know about the Valuation-Informed Indexing strategy, telling him that I see it as the future of the Indexing Revolution and linking him to the Stock-Return Predictor. I did not receive a response to that e-mail.
I look forward to working with Bogle (and many other Passive Investing advocates, to be sure) in reforming the Passive model so that it can help investors achieve financial freedom rather than destroy their hopes of doing so.
Bogle is a human, just like all the rest of us. The title of Chapter Ten of the book that I am writing is “Jack Bogle Started Out As a Little Boy.” We all need to stop thinking that today’s investing “experts” are gods. They are flawed humans. They make mistakes. When they do, our job as their friends is to help them come to an acknowledgment of the need to admit those mistakes and fix them. Those who fail to do this are dissing their expert friends by failing to show them the respect they merit, in my assessment.
I count John Bogle as a friend. My friend messed up big time when he advocated Passive Investing. I urge him to turn it around. I believe that he will. I urge all the rest of us to get about the business of doing what needs to be done to get him to turn it around.
Bogle still appears at the Vanguard Diehard meetings. If we open that board up to honest posting on the flaws of the Passive model, any one of us can ask Bogle the questions that need to be asked to get this train back on the right track. My offer to make a presentation and follow that up with some hard but kind questioning remains open. I would be thrilled to have the chance to stand on the same stage as one of my long-time heroes.
Rob
“Why the heck would Bogle need to be “protected” from me?”
Do you think maybe it was due to the post where you threatened the life of a baby girl because she was the granddaughter of a website owner that banned you?
That would scare a lot of people. I mean maybe you’re harmless in person but when you post stuff like that, people do wonder. I think people feel much safer talking to you over the internet than having you physically at a small event with celebrities.
Or maybe it’s just the fact that on the internet, you never stop typing, and the thought that you might behave like that in person too and no one else would get a word in edgewise? In fact, Mel had just stated that he planned to ignore you on the forum rather than responding and causing infinitely long threads but there is no ignore feature at a live event.
It was only a few weeks later that someone mentioned that he had created a new forum that was just like the existing forum, only his policy was not to allow you and other trolls and spammers to post. The users quickly and overwhelming moved to his new site. I’ve never seen such a rapid exodus from one forum to another brand new forum. It seems your never-ending thread hijacks just weren’t has popular with that group as you like to believe.
Just a few thoughts…
Do you seriously believe that your research is correct, and Warren Buffet is mistaken?
Buffett has said on numerous occasions that the secret to successful long-term investing is to be greedy when most others are fearful and to be fearful when most others are greedy.
That’s Valuation-Informed Indexing.
Benjamin Graham (who endorsed Valuation-Informed Indexing in his famous book “Security Analysis”) was Buffett’s mentor.
Rob
I would encourage any young investors tempted by your tactics to first read books by the authors I listed above (and more) and draw your own conclusions.
I second that advice, Kevin.
I’m some guy who posts stuff on the internet. Anyone who invests money solely going by something I said is a flat-out moron.
No disrespect intended to anyone thinking of doing this. But that is my sincere take re this matter.
Rob
he hopes to make it pay off as a big google search term. (He has admitted this on a blog about blogging.)
I certainly would like to see all the work I have put into this pay off big time, Lindsay. I work it hard and I like the idea of seeing a big payoff for all the hard work I have put into this.
Go, Valuation-Informed Indexing!
Rob
you’ve dabbled in asset classes like TIPS, Ibonds and savings accounts, but based on numbers that you gave out years ago, it appears that most of your current assets was a recent inheritance from your parents.
There are tens of thousands of false claims about my personal financial circumstances available on the internet today that have been put forward by Passive Investing dogmatics as part of an effort to intimidate me and many others from offering their sincere views on how stock investing works at the various Retire Early and Indexing boards.
This is one more to add to the mountain of trash.
Rob
Or maybe it’s just the fact that on the internet, you never stop typing, and the thought that you might behave like that in person too and no one else would get a word in edgewise?
Passives probably outnumbered Rationals by a 10 to 1 margin at the Vanguard Diehards board.
If the Passives were not able to hold up their end of the discussion despite a 10 to one edge because of my typing speed, my take is that there must be something terribly wrong with the investing approach they are promoting.
And I never once posted abusively despite the fact there there were many thousands of highly abusive posts directed at me there. That tells a tale too.
Passive is a dying idea. It remains popular for the time being. But support for it is ten miles wide and one inch deep. What we see when we see Passive defended is what we should expect to see when a once powerful idea has entered its dying days.
Rob
“Passives probably outnumbered Rationals by a 10 to 1 margin at the Vanguard Diehards board.”
And you out-type/out-talk most people by a margin of about 8000 to 1. And you simply type the same stuff over and over and ignore everyone’s carefully thought-out responses. The Crank How To guide refers to this as the “exhaustion strategy.”
“And I never once posted abusively despite the fact there there were many thousands of highly abusive posts directed at me there. That tells a tale too.”
At one forum that was given to Rob, requests for a definition of an abusive post were among the posts that Rob deleted. “Abusive” is whatever Rob says it is at any given moment.
“There are tens of thousands of false claims about my personal financial circumstances available on the internet today that have been put forward by Passive Investing dogmatics as part of an effort to intimidate me and many others from offering their sincere views on how stock investing works at the various Retire Early and Indexing boards.”
Notice that Rob can’t be “intimidated” into giving specifics anymore since he learned years ago that telling people what his portfolio was allowed them to track its poor returns in the future.
First, regarding my reference to various financial luminaries (specifically Bogle, Malkiel, Schwed, and Buffet) and their support for passive index investing. You said, “You are wrong about this, Kevin. [Y]ou need to read these books more carefully. The best piece of writing that I have seen that describes why Valuation-Informed Indexing works is Chapter Two of William Bernstein’s book ‘The Four Pillars of Investing.'”
I never said anything about Bernstein. I cited Bogle, Malkiel, Schwed, and Buffet, all of whom DO favor passive index investing. You’re correct that Bernstein (and Graham, and others) advocate a more value-oriented approach to investing, which is why I didn’t mention them. That doesn’t make me “wrong,” just because there happen to be other authors out there with a different viewpoint.
Secondly, I’ve read “Four Pillars” and am familar with the section you referenced. However, in that passage, Bernstein isn’t advocating active trading. He’s simply saying that in the short term, the market is unpredictable and irrational (I particularly liked his analogy to walking a dog on a long leash through a park). This, of course, is true. And I even agree with the premise that over the long term, in general, the market is going to continue to go up.
However, this is where our philosophies diverge. Since I fully expect the market to be higher 20 years from now than it is today, I am simply jamming the pot with as much cash as I can, as fast as I can, before the prices inevitably go higher. All that matters to me is that I can buy stock today for less than its expected value 20 years from now. If I sit back and wait for a bargain, I could lose the opportunity altogether. That is to say, even if the market IS overvalued today, who’s to say that it will eventually wise up and drop down to a more realistic level? Maybe it’ll remain overvalued for several years, inching upwards, until the underlying fundamentals finally “catch up” and justify its value, at which point it’ll continue going up even further. In such a case, when the fundamentals finally make sense, your strategy would come off the sidelines and dive back into the market. A passive investor like me, however, would’ve been dollar-cost-averaging in all along, and would’ve been in a position to take advantage of the gains, even if they weren’t justified until now.
I repeat: For a long-term investor, all that matters is that stocks are cheaper today than you expect them to be when you need to sell (i.e., when you retire). In that respect, I wholeheartedly agree with Bernstein and the section of his book you quoted. I don’t think he was advocating active trading – rather I think he was advising focusing on the long-term performance of the market. If anything, I think the quote you included speaks AGAINST actively trading and trying to time the market.
Let me close by saying I disagree with your characterization of index-based investing as a “failed” model. There are millions of real people out there who have successfully built comfortable retirement nest eggs for themselves by simply following a passive, index-based investing strategy. Likewise, there are many others who’ve lost enormous fortunes “waiting” for the market to act rationally and return to fair value, or futilely trying to buy low and sell high.
I think we’re going to have to simply agree to disagree.
I cited Bogle, Malkiel, Schwed, and Buffet, all of whom DO favor passive index investing.
Bogle and Buffett strongly support Rational Investing, Kevin.
I learned that valuations affect long-term returns by reading Bogle’s book.
This is why Mel is so concerned about what would happen if I were to ask Bogle about this.
You are right that Bogle supports Passive. I am right that Bogle supports Rational. The two are opposite strategies. But Bogle is a big supporter of both.
Now do you understand what I am getting at when I say that it is a mistake to place too much of our confidence in what the “experts” say? The experts are heavily compromised by the need to market products and services. And the experts often have a big emotional investment in one particular approach and have a hard time accepting it when that approach is discredited. And the experts are humans and want other humans to like them. So they don’t want to point out to people that being overinvested in stocks at times of insanely high prices is a bad idea. Most people who are overinvested in stocks at times when stocks are dangerous want to be told that that’s just fine. A lot of times the thing that the “experts” are most expert in is in telling us what we want to hear.
The goal of Rational Investors is to get beyond all that. I am not looking for people to tell me what I want to hear. I am looking for people to tell me what works. When Bogle does that, I praise him for his expertise. When he gives in to the pressures to tell me what he thinks I want to hear rather than what works, I point out the contradictions in what he is saying and I point to the data showing that what he is saying doesn’t add up.
I believe in taking the good in what the experts have to tell us and making use of it and leaving the not-so-good stuff behind. That’s Rational Investing.
I think it is fair to say that only in the investing field could such an idea be perceived as “controversial”!
Rob
Hi Kevin,
“all of whom DO favor passive index investing.”
I think I can clear this one up. Take a look at the May 13th blog titled: “How to Build Wealth, Ignore Wall Street, and Get on With Your Life”
At comment #194 Rob says: “If you read the work of Bogle and Bernstein (and of many other Passive Investing advocates) carefully, you see that they often try to speak in code to their more sophisticated readers…”
Obviously, Kevin, if you can’t decrypt the code then you are simply not one of the more “sophisticated readers” like Rob is. As a child you may have been taught the story of the emperor’s new clothes that only the “sophisticated” people could see.
Since I fully expect the market to be higher 20 years from now than it is today, I am simply jamming the pot with as much cash as I can, as fast as I can, before the prices inevitably go higher.
Your assumption that the market is likely to be higher 20 years from today is a good one, according to the historical data.
The data did not support that assumption when stocks were selling at the prices that applied in January 2000. At those prices, the most likely 20-year annualized real return was 1 percent. You could have easily beat that by investing in Treasury Inflation-Protected Securities, which were paying 4 percent real at the time.
That’s why I think it makes sense to be going with a higher stock allocation today than what you were going with in January 2000. The Passive strategy would put you at the same stock allocation at both price levels.
Rob
Maybe it’ll remain overvalued for several years, inching upwards, until the underlying fundamentals finally “catch up” and justify its value, at which point it’ll continue going up even further.
This is a good point.
The question is whether you can beat the return being provided by stocks with another asset class during the time stocks are “inching up.” If stocks are only a little bit overvalued, there’s a good chance that you could not. In those circumstances, I would agree with you that it’s best to stick with a high stock allocation. However, at the top of the bubble, TIPS were providing a guaranteed long-term return of a full five percentage points above the most likely return for stocks.
You are right that it is theoretically possible that stock prices would not have collapsed even at those price levels. But it would have taken years or even decades for the “inching up” process to be completed starting from those price levels. You would have been better off having your money in an asset class paying a small positive return than having dead money for many, many years in stocks.
This highlights the good aspect of the recent stock crash. From 2000 through 2008, stocks did not pay a positive return. Prices were too high for a good return to be possible. Now that prices have crashed, we’ve got stock back! Now a strong positive return is possible again.
That doesn’t mean that we are going to see a strong positive return in the next year or so. I don’t think it’s possible to know one way or the other. But I think it is important to know that a big positive return is at least a possibility again. That’s a reason for investing in stocks that didn’t exist prior to the crash. That makes stocks far more appealing to me today than they were prior to the crash. I like big positive returns!
Rob
Rob wrote: “That’s why I think it makes sense to be going with a higher stock allocation today than what you were going with in January 2000.”
Can you tell us when you personally moved into stocks, Rob? I thought you were out of stocks and still waiting to get back in.
Schroeder
even if the market IS overvalued today, who’s to say that it will eventually wise up and drop down to a more realistic level?
The entire purpose of a market is to set prices properly. The seller wants a high price, the buyer wants a low price and the market is the mechanism by which they come to a meeting of the minds.
What messes things up with stocks is that too many investors forget that they should be seeking low prices. Many investors root for high prices, which is counter to their self-interest as buyers.
But the market ultimately must set prices properly. If the market never got around to setting prices properly, stocks would never again provide a decent long-term return. Say that we stayed at the prices that applied in 2000 indefinitely. That would mean that money market accounts would provide better returns than stocks for all remaining time. Does that sound like a good thing or even a possible thing?
You are right that it is possible that stocks can return to fair prices by staying at the same level while earnings provide the push needed to make what was once an improper price a proper one. That can happen. But prices must over time return to something in the neighborhood of fair value. If that doesn’t happen, the market totally breaks down. You certainly don’t want to be invested in stocks in that circumstance.
Lots of people think that the price crash was a bad thing. It wasn’t. The reality is that the price crash has helped us all. Yes, many of us have less money in our portfolios today. But stocks are now able to provide better returns than what was possible before the crash. That’s the good news. If you work the numbers, you find that even those who had high stock allocations before the crash are slightly better off today as a result of the crash. They have less money today but in the long term they will end up with a bit more than they would have if prices had not crashed and returns had never again moved in the right direction.
The way to think about this is in terms of probabilities. When stocks are only a little overvalued, it’s true that they could remain overvalued for many years and you are better off going with a high stock allocation. But the worse the overvaluation gets, the higher the odds get that there is going to be a huge crash. That’s another way of saying that the risks of owning stocks grow larger and larger as prices go higher.
The error in the Passive model is the idea that we should ignore the risk of stocks when setting our allocation. We should consider risk. When stocks were the riskiest they have even been in history (as they were from 1995 through 2008), we all should have been going with stock allocations appropriate for that risk level. The risk level that applies today is obviously not the same. It does not make sense to be going with the same stock allocation today as you were going with before the crash, when the risk of a price meltdown was many times greater. The Passive model ignores the most important risk of stock investing.
Rob
Bernstein isn’t advocating active trading. He’s simply saying that in the short term, the market is unpredictable and irrational (I particularly liked his analogy to walking a dog on a long leash through a park).
I liked that analogy too, Kevin.
The dog dashes this way and that and it means nothing. That’s being compared to the short-term movements in stock prices. They are meaningless. Short-term timing doesn’t work.
But the dog is also moving in a particular direction over time. His long-term movements are to a large extent predictable. The same is true with stocks.
Bernstein isn’t advocating active trading and neither am I. Bernstein is saying that long-term stock prices are to a large extent predictable and so am I.
The long-term return is not the same for stocks purchased at wildly different price levels. It is dramatically different. Price matters.
Rob
For a long-term investor, all that matters is that stocks are cheaper today than you expect them to be when you need to sell (i.e., when you retire).
If your retirement is 30 years off, we agree. At 30 years out stocks offer a strong value proposition from just about any valuation level. Even at the top of the bubble, the most likely return in 30 years was an annualized 5.4 percent real.
I don’t like the idea of having to wait 30 years to see my stock return get to a good level, however. If you make the necessary adjustments in your stock allocation in response to big price changes, you never have to wait 30 years to get a good return on your money. You can usually count on a decent return within 10 years or so. I like to have my portfolio moving gradually up over time. I like the idea of being able to see a good return in 10 years rather than having to wait 30 years.
And the Valuation-Informed Indexer also ends up with even more in his portfolio at the end of 30 years. The Passive investor ends up okay at the end of 30 years (if he is able to hold through the terrible downturns he is almost certain to experience if Passive becomes popular). But he still usually ends up far behind the Valuation-Informed Indexer. The reason is that the VII investor gets his good return sooner and is able to invest the differential in stocks at a time of reasonable prices. Then the compounding returns phenomenon works its magic.
Rob
I think we’re going to have to simply agree to disagree.
That sounds fine, Kevin.
I think you asked a lot of good questions and raised a number of important points. I am grateful for the helpful back-and-forth. I hope that I was able to put forward a few words that helped a soul or two out there make some sense of what has been happening to their portfolios in recent years.
Rob
Obviously, Kevin, if you can’t decrypt the code then you are simply not one of the more “sophisticated readers” like Rob is.
Anyone who is capable of earning enough money to have a bit left over to invest is capable of figuring out the code, Lindsay.
People are desperate for any rationalization for overinvesting in stocks at times when prices are insanely high. So there is huge money to be made in spinning things in a pro-stock direction whenever stocks are at the most dangerous possible valuation levels. A good way to de-code what you hear from the “experts” is to assume that whatever they say at times of insanely high prices is wild spin in a pro-stock direction and make the necessary adjustments.
The Old School retirement studies were saying at the top of the bubble that a 4 percent withdrawal rate was “100 percent safe.” The historical data was saying at the time that retirements calling for a 4 percent withdrawal had about one chance in three of surviving 30 years. If you knew to subtract 2 percentage points from what the experts were saying, you would have had a number in the right ballpark. The analytically valid studies put the SWR at the time at about 2 percent.
The “experts” were saying at the top of the bubble that stock allocations of 60 percent or 70 percent or 80 percent made sense. The historical data indicated that investors should have been at allocations of 10 percent or 20 percent or 30 percent. The trick was to know to subtract roughly 50 percentage points from what the experts were saying to adjust for the bull market spin.
At other times, the adjustment needed would be much less. At some valuation levels, you might only need to adjust the expert recommendations by 20 percent or 30 percent or 40 percent. The way you know how much to adjust by is to look at the valuation level that applies on the day the advice is being given. The public pressure for inflated numbers is far greater at times of insanely high prices than it is at times of just somewhat high prices. The higher the level of overvaluation, the more you need to adjust what you hear from the “experts” to know the numbers you would get if you had used analytically valid research to determine the realities for yourself.
The “experts” are human. That’s what some people do not seem to get. Look at some of the comments you see on this thread from people like Lindsay (I am not making reference here to people like Kevin who are asking challenging but appropriate questions, but to those who are seeking solely to intimidate with personal attacks). Would you want to have such anger and hate directed at you? Well, guess what? The investing “experts” don’t like to have it directed at them either. So we should not be too surprised to learn that they shape their investing advice to satisfy the demands of their readers and listeners.
I look forward to a day when most of us no longer insist on misleading stock investing advice and when the experts no longer feel pressure to provide misleading stock advice. The stock market is a public resource. Middle-class people are using it to finance their retirements. I believe that we need accurate investing advice. It is not viewed as “controversial” to report accurate numbers in many other fields today. I believe that there will come a day when it will not be viewed as controversial to report accurate numbers on investing questions either.
We’re not there. But my sense is that we are getting there inch by inch by inch. I hope I’m not just being a cockeyed optimist again!
Rob
“I look forward to a day when most of us no longer insist on misleading stock investing advice”
What can I do to help you stop feeling that you need to give misleading advice, Rob?
(For those of you who are new, rob usually posts under the name “hocus”. “hocus” means to mislead. His self-chosen name certainly fits!)
rob usually posts under the name “hocus”. “hocus” means to mislead.
“Hocus” is a word that most people associate with magic.
I chose this screen-name when I was posting at Motley Fool because of the magic that thousands of us created when we worked together to help people learn what it takes to achieve financial freedom early in life. That board became through our efforts the most successful board in the history of the Motley Fool site.
When I began posting on safe withdrawal rates, the board took off yet again like a shot. Hundreds of community members there said that our investing discussions were the most exciting and illuminating they had ever experienced. The author of one of the Old School retirement studies formed a Goon Squad to burn the board to the ground. Then when those interested in discussing early retirement formed other boards to replace that one, he moved his Goon Squad to those boards and burned those to the ground as well.
A nice bunch of individuals, huh?
This individual has a discussion board to this day where Lindsay and his other Goons meet each day to discuss strategies for attacking the various blog communities at which discussions of the investing realities mined first at the Retire Early and Indexing discussion-board communities are being held.
Here is a link to an article at my site that contains snippets of a sample of the comments made by my fellow community members at the Motley Fool board in the days before the board was burned to the ground:
http://www.passionsaving.com/community-comments-on-the-great-safe-withdrawal-rate-debate.html
People with a genuine interest in learning the realities of stock investing matter to me. Big time. I don’t think the Goons should be permitted to continue to destroy both themselves and the discussion boards and blogs at which they participate. No group of humans should ever be permitted to degrade themselves in such ways. It is an act of cruelty to permit such behavior, in my assessment.
But the ones who made constructive contributions have changed the history of investing with their efforts, in my belief. I am extremely proud of my association with them and I will continue to do all that I can to clear the mud off of the names of the board communities that did this work that was thrown at it by a small number of extreme Passive Investing dogmatists.
It was the best of internet discussion-board debates, it was the worst of internet discussion-board debates….
Rob
““Hocus” is a word that most people associate with magic.”
Yes as in hocus pocus – meaning I am misleading you now.
“When I began posting on safe withdrawal rates, the board took off yet again like a shot.”
Just like this blog entry. He says stuff, people correct, he says stuff, people correct, he repeats… The exhaustion strategy.
“Rob, it’s clear we could go back and forth on this topic all day.”
All day and for many years to come. Rob Bennett has been trolling the internet for nearly seven years already; he’s perfectly willing to go back and forth indefinitely. But only on someone elses board or blog, of course. Mr. Bennett prescreens all comments at his own blog to stifle any opinions that don’t reflect his own beliefs.
he says stuff, people correct
When the Passive Investing dogmatists are able to accept that they do not already know everything that there is to know about investing, they will no longer feel a need to “correct” those who express viewpoints other than their own. If believing in a particular investing strategy makes it impossible for you to be friends with someone who follows a different investing strategy, there is something terribly, terribly, wrong with the investing strategy you are following.
I have never witnessed behavior of this nature from anyone following any strategy other than the Passive strategy. I have seen it on hundreds of occasions in board and blog communities where a large number of Passives congregate. This is not an investing strategy that generally inspires self-confidence in those who adopt it.
Rob
“People are desperate for any rationalization for overinvesting in stocks at times when prices are insanely high.”
And all 7 billion of them told you this personally or you just made that up? How do you measure their desperation?
“A good way to de-code what you hear from the “experts” is to assume that whatever they say at times of insanely high prices is wild spin in a pro-stock direction and make the necessary adjustments.”
OK, so “insanely high prices” is defined by you and you “know” that people are desperate to be lied to so whatever anyone but you says is “wild spin”. And if you read the same book during two different markets, then the author is saying different things. Gotcha.
Or is it when they first transcribed the book? But how can you know how long it took to get published? What if the book is reprinted at a time of different prices? What if there are edits during a time of different prices?
Too bad you can’t come up with something simple like the Da Vinci Code.
It seems to me that it boils down to: The code is ignore them and listen to Rob Bennett.
How do you measure their desperation?
I look at the P/E10 level, Lindsay.
What would you say it tells us when stocks are selling at three times fair value and people are lined up by the millions to buy?
Rob
“Passive Investing dogmatists”
“I have never witnessed behavior of this nature from anyone following any strategy other than the Passive strategy.”
I do not follow a passive strategy. Whoops, Rob was massively wrong once again.
I’ve already told Rob this several times but it doesn’t fit his closed mental model so he just ignored it.
“selling at three times fair value”
says YOU (again.)
OK, so “insanely high prices” is defined by you
There is nothing that stops you from taking valuations into consideration yourself except you, Lindsay.
You have chosen to ignore the most important aspect of the investing project. And the Passive model encourages you in this decision.
I see that as being the wrong way to go. The Rational model insists that investors following it take valuations into consideration when making their stock allocation decisions. That’s the entire difference between the two models. That’s a lot.
Rob
“You have chosen to ignore the most important aspect of the investing project. And the Passive model encourages you in this decision. ”
Once again, you have made the same mistake again in just a few minutes.
says YOU (again.)
That’s the way it works on discussion boards and blogs, Lindsay.
Each community member offers his or her views.
If I were to lie about my views, I would not be honoring my responsibilities to the community as a whole.
Deal with it.
Rob
Lindsay: “says YOU (again.)”
Rob: “That’s the way it works on discussion boards and blogs, Lindsay.”
And that’s what I said earlier.
Rob says stuff.
People correct.
Repeat.
Repeat.
Repeat.
Repeat.
Repeat.
Repeat.
Repeat.
…
“Deal with it.”
Dealing fine. If it wasn’t funny, I wouldn’t still be here.
If it wasn’t funny, I wouldn’t still be here.
The millions of people who have seen their retirement dreams destroyed don’t get the joke, Lindsay.
I think it would be fair to say that they are evidencing a whole big bunch more heart and a whole big bunch more sense than you are evidencing in most of the posts you have put to this thread.
Rob
I observe that Rob has not answered the question of what price level he will personally buy stocks. Therefore, I assume that prices are still too high for Rob and other investors who wish to follow Valuation Informed Indexing.
Schroeder
“And the Valuation-Informed Indexer also ends up with even more in his portfolio at the end of 30 years. The Passive investor ends up okay at the end of 30 years (if he is able to hold through the terrible downturns he is almost certain to experience if Passive becomes popular). But he still usually ends up far behind the Valuation-Informed Indexer. The reason is that the VII investor gets his good return sooner and is able to invest the differential in stocks at a time of reasonable prices. Then the compounding returns phenomenon works its magic.”
It would be interesting to have enough details to check the assertions Mr. Bennett has expressed in the above quote. Of course, as is his custom Mr. Bennett will not supply those details. Mr. Bennett could provide a simple tabular representation of how his method has performed on an annual basis so it could be easily compared to alternative strategies, but he won’t. Mr. Bennett has learned not to divulge too many details of his valuation method or to provide any backtesting to support his many assertions. Thus, he can spend years making wild claims regarding his model that he’s unable or unwilling to substantiate. All the better since his primary goal is to become the center of attention at whatever unfortunate venue allows him to post.
“The millions of people who have seen their retirement dreams destroyed don’t get the joke, Lindsay.”
Lots of people aren’t fans of “Plan Nine From Outer Space” either. So what? We all get our amusement from different things. I think a spammer desperately trying to get famous for something is amusing. If someone else doesn’t, there are plenty of other places on the Internet for them.
I assume that prices are still too high for Rob
Schroeder is a regular at the board described above:
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl
This is a board that Mel Lindauer (co-author of the book “The Bogleheads Guide to Investing”) linked to regularly when he was leading his Campaign of Terror against the Vanguard Diehards community. Mel refers to John Bogle as his “mentor.” Many people who refer to themselves as “Bogleheads” fail to object when he does so.
Rob
“This is a board that Mel Lindauer (co-author of the book “The Bogleheads Guide to Investing”) linked to regularly when he was leading his Campaign of Terror against the Vanguard Diehards community.”
For the record, Mel Lindauer was one of the founders of the Vanguard Diehards. By “Campaign of Terror”, Rob means the Mel was openly correcting Rob’s errors.
Rob once implied that Rob was the founder of that forum, but many people corrected that error as well. I do find it amusing when Rob says stuff that is so blatantly false and so easy to disprove.
“Mel refers to John Bogle as his “mentor.” Many people who refer to themselves as “Bogleheads” fail to object when he does so.”
LOL! Yeah I’m pretty sure that they ALL “fail to object”! 🙂 Rob you need to explain your conspiracy theories more clearly if you expect anyone to follow something as obtuse as that!
By “Campaign of Terror”, Rob means the Mel was openly correcting Rob’s errors.
Here is a link to an article at my site in which a number of community members express their views re the tactics that Mel employs to intimidate those pointing out the flaws in the Passive model at the Vanguard Diehards board:
http://www.passionsaving.com/mel-lindauer.html
The Vanguard Diehards board was at one time the most exciting investing board on the internet.
The Bogleheads.org board was founded because for two years Morningstar.com was unwilling to ban honest posting on SWRs and on the flaws of the Passive model despite Mel’s insistence that it do so.
Rob
“Schroeder is a regular at the board described above:”
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl
Hey, good point! Guess what? Rob is also a regular at that board! And guess what again? He posts under the names hocus and hocus2009? Why? Why it must be just like Motley Fool – he thinks that forum is magic! (see above)
Why two names? Because he thought he had been banned so he figured, if you’re banned, just create a new account. I guess he likes that place a lot. Of course, a few days ago, he thought he was banned from this place too. He excuse for that mistake was that he has been banned so many times, it was the most obvious explanation though it turned out to be a technical glitch.
“Here is a link to an article at my site”
Then we can be sure that it is fair, balanced, and accurate with regards to you and all that places that have banned you. 🙂
Mel Lindauer was one of the founders of the Vanguard Diehards.
Which obviously makes it that much worse than he often does not follow the posting rules that apply in that board community. Board leaders have a greater responsibility to follow the community norms than do regular posters.
Rob
“The Vanguard Diehards board was at one time the most exciting investing board on the internet.”
Indeed, then Rob showed up and disrupted discussions over and over.
Eventually someone (not Mel, by the way) created a new forum and said it would be just like the old one except that Rob and similar trolls and spammers would be kept out. I have never seen so many people move so quickly to a new forum in my life. Each user could make his/her own choice. Nearly every one of them thought a new and untested forum owned by someone they didn’t know was better than the wreckage that Rob had left behind at their existing home.
If you were there it wasn’t a big surprise. Rob’s posts had been compared to locusts devouring all reason in their path. People used to specifically ask Rob not to respond to their threads in their first posts.
Of course Morningstar tried to repair the leak by also banning Rob but it was too late.
Rob is also a regular at that board!
I am. But I have never posted abusively there. I have spoken out against the abusive posting there on numerous occasions. I am the only regular there who is trying to improve the situation.
He excuse for that mistake was that he has been banned so many times, it was the most obvious explanation though it turned out to be a technical glitch.
If you had been banned from as many boards as I have been banned from, you would think that when you couldn’t post at a board for several days and when you received no response to your e-mails to the site administrator for several days that you had been banned too, Lindsay. I see nothing shocking in that.
The shocking thing is that the many abusive posters have never been banned and the guy who corrected the errors in the Old School retirement studies and who has never once in his life posted abusively has been banned at numerous boards.
What does that tell you about the odds that you were hearing the straight story re Passive Investing during a time when stock prices were at the hghest levels ever seen in history?
We don’t learn what we need to learn when those willing to tell the less popular side of the story feel too intimidated to post what they truly believe.
Rob
“he often does not follow the posting rules”
and for years people have been asking Rob for specifically which posting rules the founder/owners aren’t following and Rob’s responses are as vague as his investing responses.
Not following rules seems to be the same as “abusive posting”. It’s just whatever Rob says it is at any given moment.
Then we can be sure that it is fair, balanced, and accurate with regards to you and all that places that have banned you.
It is my intent to write them up fair and balanced and accurate. I am a flawed human, like all the others. So it is possible that I have some blind spots. Others will have to make the call as to how close to my target I came in my efforts re those articles.
Rob
“So it is possible that I have some blind spots.”
For example, your wife calls you an egomaniac but you say you disagree with her.
Rob showed up and disrupted discussions over and over.
Here is an article in which scores of community members from that board community express their gratitude to me for those “disruptions”:
http://www.passionsaving.com/investing-discussion-boards.html
Those people matter to me.
Rob
This is just my personal opinion. But when someone promotes a certain investing approach that calls for buying stocks after a big price crash, you would think that person would have the confidence to follow it and buy stocks. But apparently, Rob does not follow Valuation Informed Indexing with his personal money. This is like a chef who refuses to eat his own cooking.
Schroeder
For example, your wife calls you an egomaniac but you say you disagree with her
Here’s an article at which this question is examined:
http://www.passionsaving.com/rob-bennett-weaknesses.html
Podcast #106 explores the same question in far greater depth:
http://www.passionsaving.com/personal-finance-podcasts-page-fourteen.html
Rob
“Here’s an article at which this question is examined:”
… by the alleged egomaniac. I guess that alone proves that the wife is correct that Rob is an egomaniac.
“Here is an article in which scores of community members from that board community express their gratitude to me for those “disruptions”:”
Oh looky, it points to his web page again. How “surprising” that these people can only be found there.
I guess that alone proves that the wife is correct that Rob is an egomaniac.
Uh-oh. That one actually does sorta kinda follow.
When things that the Goons say start making a little bit of sense, you have to wonder if your mind is finally beginning to go after all.
Yowsa!
Rob
I received an e-mail this morning from a reader at this blog who asked about where to find the information needed to calculate P/E10 for himself. He offered the kind observation that: “I can see that you have differences of opinion with a number of commenters on GRS, but you do very well at engaging them repeatedly in a professional manner. Kudos to you.”
I find it telling that this person did not feel safe asking his question here at the blog. The reasons why are obvious and I certainly do not fault him for feeling the way that he does. But I cannot help but wonder at how much more we all would be learning about how stock investing works in the real world if discussion-board owners and blog owners were doing their job of protecting us from the Campaign of Terror. Some of the comments and questions on this thread are top-notch stuff (I am thinking in particular of the sorts of comments and questions put forward by Kevin, which are obviously constructive). Some are not. It is the job of site owners to distinguish the one from the other and to take appropriate action to protect community members from intimidation tactics.
There was another illustration of the same phenomenon following a thread here that the Goons attacked last week. I had suggested that anyone who had doubts about how serious the Goon problem is try posting about Valuation-Informed Indexing at the Bogleheads.org forum and see what kind of reaction they received. Dave Shafer checked me out re that one. He reported at my blog that he was banned within three days:
http://arichlife.passionsaving.com/2009/05/28/does-stock-price-matter/#comments
Juicy Excerpt: The site administrator posted that “he knew me” and would not allow any lies to be posted.
This is standard procedure at all Retire Early and Indexing boards. The communities at all of these boards have shown great interest in Valuation-Informed Indexing, in Rational Investing, in the Stock-Return Predictor, in the New School SWR Studies and much else that we have discovered as a result of the first seven years of our investing discussions. But a small group of Passive Investing dogmatics has seen fit to decide for themselves what investing ideas are worthy of discussion and what investing ideas are “lies.” The real problem of course is that those who are open to learning experiences fear what the Goons will do to them if they speak up (the Goons have threatened physical violence on those who post their honest investing views on numerous occasions and the site owners have failed to take action).
I have tried to deal with this problem in several different ways. I have been in contact with the police department here in Purcellville, VA. They referred me to a state police department that deals specifically with internet crimes and I spoke with someone there. I have contacted a small number of public interest organizations to explore the possibility of bringing lawsuits to address the problem (I hope to be able to find time to contact more in coming days). I have been in discussions with the FBI. I have sent an e-mail to my congressman (Rep. Frank Wolf) urging legislation to open the internet up to honest posting on investing topics. I attempted to organize a group of blog owners at the Money Bloggers Network forum to help other blog owners who were trying to cope with Goon assaults on their sites. I will continue to do what I can in this regard.
The economic crisis we are living through today is a serious matter. It affects every middle-class worker, Passives and Rational alike. We all should want to see this brought to an end and of course the first step to solving the crisis is permitting honest posting on the cause of the crisis (I am strongly convinced that the primary cause is the hundreds of millions of dollars that were directed to the promotion of the Passive Investing concept, which caused the most out-of-control bull market ever seen in U.S. history). I hope that those of us concerned about the future of our retirement plans, our economy and our political system (there are indeed some who are saying that middle-class people are losing trust in our political system because of the failure of our “leaders” to take effective action to address our problems) will continue to work together to bring some sanity to the discussion of investing topics on the internet.
Should everyone sign on to the Valuation-Informed Indexing strategy this morning? I sure do not think so. Should everyone be able to agree that the sorts of tactics we see being practiced by Lindsay are unacceptable and that site owners have responsibilities to protect their readers from such tactics when Goons invade their sites? I sure do think so. The Campaign of Terror is sub-human. It degrades each and every one of us just to know that there are other humans spending their life energies in this sort of pursuit. We should take effective action to preserve our own dignity and what is left of the dignity of the individuals who have elected to involve themselves in this very ugly and sick and twisted business.
Yes, I kid around about the Goons from time to time. I think that’s healthy. I also care about them. And I also care about the people trying to learn about how stock investing works in the real world. If you care about the Goons, you want to see action taken to help them redirect their energies to more positive pursuits. If you care about the people trying to learn how investing works in the real world, you want to see the internet opened up for honest posting on safe withdrawal rates and all other valuation-related investing topics. It shouldn’t be necessary for me to say this. The validity and importance of this message should obvious to every single person reading these words.
Rob
“I find it telling that this person did not feel safe asking his question here at the blog.”
More invisible people are contacting Rob every day.
Rob: “I find it telling that this person did not feel safe asking his question here at the blog. The reasons why are obvious and I certainly do not fault him for feeling the way that he does. But I cannot help but wonder at how much more we all would be learning about how stock investing works in the real world if discussion-board owners and blog owners were doing their job of protecting us from the Campaign of Terror.”
This is a not-so-vailed slam at J.D. I disagree with Rob. I think J.D. is doing a fine job.
Schroeder
This is a not-so-vailed slam at J.D.
It is a not-so-veiled slam at every human who in any way contributed to the out-of-control bull of the 1990s and to the promotion of the rationalizations we used to fool ourselves into thinking that we did not have a responsibility to do something about it before we destroyed ourselves and our friends and our loved ones. I am in that group. I once invested passively. And I held back from telling what I knew about safe withdrawal rates for several years out of fear of what would be done to me if I dared to report accurately what the historical data says.
So it’s a slam at Rob Bennett. And it’s a slam at J.D. Roth. And it’s a slam at Schroeder. And it’s a slam at Bogle. And it’s a slam at lots and lots of others.
Why do I feel a need to slam all these good people?
Because I care for them. And because I think they have suffered enough.
I think the time has come to forgive ourselves and to get about the pursuit of more enjoyable and rewarding projects.
I believe that there are more and more coming to this conclusion every day, Schroeder. I hope that someday soon we win you over, my old Goon friend.
Rob
“I have tried to deal with this problem in several different ways. I have been in contact with the police department here in Purcellville, VA. They referred me to a state police department that deals specifically with internet crimes and I spoke with someone there. I have contacted a small number of public interest organizations to explore the possibility of bringing lawsuits to address the problem (I hope to be able to find time to contact more in coming days). I have been in discussions with the FBI. I have sent an e-mail to my congressman (Rep. Frank Wolf) urging legislation to open the internet up to honest posting on investing topics. I attempted to organize a group of blog owners at the Money Bloggers Network forum to help other blog owners who were trying to cope with Goon assaults on their sites. I will continue to do what I can in this regard.”
Mr. Bennett, it’s unfortunate none of the entities you contacted directed you to seek the mental health evaluation your messages indicate would be of such great value to you.
“I have been in contact with the police department here in Purcellville, VA. … lawsuits … FBI. … my congressman ”
“It is a not-so-veiled slam at every human…”
Hey Rob,
I think you need to decide whether you are kidding around or not. As far as I can tell, many “goons” are people who honestly think they can reason with you and get you to understand investing if they carefully point out your errors and contradictions.
The other “goons” are the people who are willing to keep responding after you keep saying the same things over and over and over and over. Most people just change the channel, but a few of us enjoy watching a really bad movie repeatedly. I started in the first group, but when I realized after our early conversations that you couldn’t analyze or define your own system, and didn’t understand the systems and people that you were attacking, I switched to the second group.
I also looked at some of those post archives that you kept waving your hands about and found that for years prior you had been saying the same things. I found where others had pinned you down enough (after thousands of posts!) to the point that they could backtest your model, and they found that it underperformed and you simply ignored that information or called them “goons”. In short, it appeared to me that you were uninterested or incapable of having a serious conversation.
As a more general class, “goons” are simply the people who are still willing to respond after they realize how confused your message is. If it weren’t for “us” you would be talking only to those invisible people you like to call “normals”.
Do you remember when you tried to hire that PR woman and she browsed your website and asked: “Why do you do this to yourself?” and for that you labeled her a “goon”? Well, Rob, this “goon” sometimes wonders about that too. I think the answer is the answer that your wife gives: that you are an egomaniac and will do anything for attention. And you yourself wrote on your site that you were lacking “social stimulation” after loosing your job and you turned to the Internet to get it.
So, Rob, if you really wanted to have a serious conversation, then I think you would do the work to define a serious investment system: ie define it precisely, backtest it, and allow people to freely test it going forward. The information could be published on your website, in a book etc. You could open a mutual fund that would allow easy tracking and would bring in profit for you.
But instead, you have spent the last 7 years trolling us “goons” on every forum and blog you can find. When you get banned from one, you move to another. You can’t move the conversation to your own blog because your passive-aggressive personality requires you to ban anyone who disagrees with you. Thus you must seek out other people’s blogs where people can disagree with you, and after doing so, you always complain to the site owners, (and now the police, the FBI, etc.) for allowing this to happen, even though it is the attention that you sought. (Oh sure, you might prefer that the attention be praise, but you would need to do that groundwork mentioned in the paragraph above for that to happen. I think you know that.)
If you don’t want any “backtalk” to your ideas from “goons”, your own website is kept entirely clear of it. It’s kind of ironic that your need to ban everyone from your blog leaves you lonely and always in search of other people’s blogs, but that is completely under your control.
“I think the time has come to forgive ourselves and to get about the pursuit of more enjoyable and rewarding projects.”
Again, that is completely under your control.
the whole scott burns “cookbook”
http://tinyurl.com/ohaa8n
results:
http://tinyurl.com/qmkp43
Rob wrote: “Schroeder, I hope that someday soon we win you over, my old Goon friend.”
And someday you will post the annual returns of Wellesley side by side with your Valuation Informed Indexing. Only then can you hope to win me over.
Schroeder
Only then can you hope to win me over.
Fair enough, my friend.
Rob
Ok, to summarize, several noted individuals including Scott Burns, Bill Schultheis, Paul Merriman, Frank Armstrong and others suggest investing in a broad mix of equity assets (large cap, small cap, value, etc) plus a helping of bonds to mitigate the downside risk along with periodic rebalancing. They post their portfolios publically so any potential investor can easily see their portfolio’s composition and performance.
One guy with a blog on the internet maintains that one should use his system to time the S&P 500. He refuses to provide any backtesting results for how his strategy would have performed against a simple 2-compartment Lazy Portfolio consisting of the S&P 500 Index plus bonds, much less how it would have performed against a Lazy Portfolio containing multiple classes of equity indexes. For that matter, he also refuses to go into any great detail on exactly how to best utilize his method.
Gosh, it’s so difficult trying to decide which strategy offers the best odds of success!
O.M.F.G.
I was a Motley Fool member many years ago and remember this guy. I haven’t been on Motley Fool for years. And he’s STILL posting the same damn wall o’words over and over and over (and over) again over 7 years later???? And hijacking other people’s blogs to do it? The mind, it boggles. This guy’s like a cancer in the personal finance world. Dude, get some help.
I was a Motley Fool member many years ago and remember this guy. I haven’t been on Motley Fool for years. And he’s STILL posting the same damn wall o’words over and over and over (and over) again over 7 years later????
I’m doing the best I can, Cara. I could use a little help!
You might want to go back and take a look at some of those Motley Fool threads. I believe I have a link to an article with some snippets from some of them up above. There were hundreds of people in that community who were very excited about the idea of learning the realities of stock investing for the first time. And, yes, there was the abusive stuff too from a few who had some sort of vested interest in keeping us all in the Dark/Passive Ages. Things change. Things get better. Making things better sometimes means accepting change. The way it is.
Do you remember the focus of the discussions in the early days? It was safe withdrawal rates, the numbers that people use to plan their retirements. Do you remember how there were some then who were claiming that the numbers we all use to plan our retirements are accurate? You don’t hear too many people saying that today, do you? Why do you think we have seen this change in recent years?
We need to allow discussion of the accurate numbers, cara. In retirement planning and in many other aspects of the investing project too. Investing matters. A lot of us have our life savings at stake. Using accurate numbers to construct our plans makes all the sense in the world. That’s my sincere take re this matter.
The hoo-hah? That will be blown away in the wind in time. It’s the work of the hundreds of people at Motley Fool and at other sites who helped up build the methodologies that let us develop accurate numbers that matters. The Campaign of Terror has always been a huge waste of the time for every single person caught up in it. That stuff is Losersville. It’s The Great Safe Withdrawal Rate Debate that is going to change the history of stock investing.
Still, I’ve got a bit of a bone to pick with you, cara. Making me think back to the Motley Fool days and how long ago it was makes me feel old! Yikes!
Rob
I’ll give a more serious response to the points raised by our new friend cara.
I recently recorded a podcast (it’s not yet up at the site) entitled “Taboo.” It explores the reasons why many feel uncomfortable talking about the realities of stock investing or hearing others talk about the realities of stock investing. The short version is — the mistake responsible for Passive Investing is one of the dumbest mistakes ever made in the history of personal finance.
What happened is that there were studies showing that timing doesn’t work. This was a big deal. This was a breakthrough insight. Unfortunately, no one thought to check whether the studies looked at only one approach to timing or at all possible approaches. The reality is that all of the studies that showed that timing doesn’t work looked at one approach — short-term timing. Later on, after many millions of dollars had been directed to promotion of the Passive model, the studies came out showing that just as short-term timing never works, long-term timing always works. What a mess!
People decided (presumably without actually thinking it through) that the thing to do was to cover up the new knowledge. Stocks were doing great in those years. Why fix what’s not broken, right? Plus — there’s an idea in the stock selling trade that to be an “expert” you must never, never, never admit to having gotten anything wrong. To acknowledge that, no, the reality is that timing always works would “look bad.” So people kept quiet,.
But the problem with Passive Investing is always in the long term. Passive always works in the short term. The problem is that it always causes bone-crushing losses for all who follow it (and for the entire economy in which it is practiced) in the long term. And the long term sooner or later always catches up to those who either promote Passive Investing or buy into the idea.
The long-term has now arrived. At least partially.
So what do we do?
I say that we move forward in a positive direction. If you check the numbers, you see that Passive has required the average middle-class worker to delay his retirement by five years or more. Guess what? Making the shift to Rational allows us to make up the entire loss. By permitting discussion of the realities of stock investing on the internet today, we provide a way for those who followed Passive in earlier years to make up for all the losses they have suffered as a consequence of doing so.
We need to find a way to help those who endorsed Passive in earlier days and who are feeling embarrassment over it today to save face. I am in favor of doing anything at all that can possibly be done short of agreeing not to report the realities of stock investing. The reality is that valuations really do affect long-term returns, just as our common sense always told us they must. The reality is that timing (long-term timing only, please!) not only works but is required for those hoping to have some realistic chance of long-term success.
Once a few brave souls step forward and insist (not ask!) that the internet be opened to honest posting on investing topics, it’s over. There is not one person on Planet Earth who does not benefit in a big way from learning the realities. Rational Investing is all upside and no downside.
We’ll find those few brave souls once the word gets out to enough people. Spread the word!
Rob
Another point comes to mind after thinking over cara’s words.
I think it would be fair to say that all of the Goons fervently wish today that they had never become Goons in the first place.
We are all responsible for our own behavior. That’s understood.
But can it not be said that we all played a role in making these people full-fledged Goons by failing to speak up when they tested the idea? Would any of these people have behaved in this manner had the community of people in which they were doing so reacted properly?
There’s a similarity in this respect between the Goon phenomenon and the Passive Investing phenomenon. Lots of people knew about the flaws in the Passive model going many years back. Most either completely silenced themselves or limited their comments to some niche group or said things in so tentative a way that most were not able to make out the full import of what was being said. Millions have suffered huge financial losses as a consequence of behavior of good and smart people that I think can fairly be characterized as cowardice.
We were cowards when it came to speaking out about the dangers of the Passive model and we were cowards when it came to speaking out about the ugliness of the Goon tactics.
So we’re bad people, right?
Not quite right. We have bad in us. There’s no question whatsoever about that. But take a look at the other side of the ledger. Who were these hundreds of people who helped us develop The Stock Return Predictor and the Retirement Risk Evaluator and Valuation-Informed Indexing and all the rest? They were humans plucked from the same communities that generated all the cowards.
The full reality is that we are all cowards (I invested passively at one time). And we are all heroes. We have both good and bad within us struggling with each other to get out at all times.
We took a turn to the dark side in our choice re the investing advice we promoted or tolerated over the past three decades. But the same humanity that produced Passive Investing produced Rational Investing. It’s just a different side of us evidencing itself.
Do we want to remain trapped forever in the dark? Or do we want to work up the courage to leave the shame and the anger and the hate and the ugliness behind and stand up proud and happy and loving in the sunlight of an investing model worthy of humans?
We each make that decision as individuals each day. And the collective voice of all the individuals mixed up together makes it as a community each day too. There’s nothing stopping us from making the change today.
We have the power. The Goons represent only our dark side. The Goons are by no stretch of the imagination all that we are. It’ not even a close call.
Rob
Bennett — “I invest heavily in stocks when the long-term value proposition is amazing. I invest mostly in stocks (but not quite as heavily) when the long-term value proposition is strong. And I invest not too much in stocks at all when the long-term value proposition is poor.
Does that not make sense?
Rob”
Then post your trading records (positions, amounts, prices, dates) or else you are a liar. Your own blog, the blog of those who follow your various attempts to infect other boards, and posts here all indicate that you hold NO stock position whatsoever, and have not for years (if then!). Based on your inane rambling, I consider it likely that you are stll in TIPS and cash. Rob, there is nothing wrong with that, EXCEPT if you happen to be advocating to the rest of the world some insane and non-specific timing scheme for beating passive index investing in equities!
In fact, let’s just cut to the chase: You clearly ARE a liar, and we all know it. Why you are still allowed to spread your noxious brand of passive aggressive trolling here is beyond my understanding.
Bennett: “You’re saying that nothing I could possibly say could ever matter for you. Is that not a different way of saying that you think you already know it all? Would you not find that attitude a turn-off if…”
Yup. Just like when you use even worse ridiculous absolutes such as “The human mind cannot conceive” etc.
What a self-absorbed tone-deaf sad-sack.
Rob (or more properly, Mr. Get Rich Slowly Blog Admin), it is plain to me that Mr. Bennett is… well, insane.
I believe that indulging his mania by allowing him to continue posting forever is not conducive to either the readers, or his own chances for recovery.
let’s just cut to the chase: You clearly ARE a liar, and we all know it.
I’m not persuaded, Russell.
I’m afraid that we are going to need to agree to disagree re this one, my Goon friend.
Rob
Just like when you use even worse ridiculous absolutes such as “The human mind cannot conceive” etc.
The statement of mine that is being referred to here is my claim that “The rational human mind cannot even imagine an alternate universe in which it would be a bad idea to take the price of the stocks you are buying into consideration when making a decision as to your stock allocation.”
I stand by the statement.
I acknowledge that there are millions of good and smart people who believe in and practice Passive Investing today. This is indisputable. I mean no personal offense to these people when I make this statement. But I think it is important to state things clearly and plainly. The claim that investors do not need to take price into consideration when buying stocks is nothing short of preposterous. That’s the reality (or at the very least that is my strongly held sincere take re the reality).
If the Passive Investing advocates can offer me some reasonable argument for believing that Passive might work, I am happy to take it into consideration. In seven years of discussions, I have never heard a reasonable argument. The one thing that has been tried on numerous occasions is that people have said that there are studies showing that timing doesn’t work. This is so. But I looked at those studies to see what was going on. What I discovered is that every study showing that timing never works examines short-term timing strategies. Every study that examines long-term timing strategies has found that timing ALWAYS works. It is every bit as accurate to say that “timing always works” as it is to say that “timing never works.”
If timing always works, then what sense does it make to invest passively? It makes no sense.
I am not God. People are certainly free to hold different viewpoints and to express those viewpoints.
But is there any Passive Investing advocate alive today who is willing and able to do so without engaging in viciously abusive posting practices as part of the bargain? In seven years of discussions of these questions, I have never yet come across one. I have personally run these ideas past lots of big-name experts. The list includes: (1) John Bogle; (2) William Bernstein; (3) Scott Burns; (4) Larry Swedroe; (5) Bill Schultheis; (6) Ed Easterling; (7) Rick Ferri; (8) Mel Lindauer; (9) Taylor Larimore; (10) Michael Kitces; (11) Jonathan Clements; and (12) the editor of Money magazine. Not one of these people has been able to offer a single rational argument in support of the Passive claim that it is not necessary for investors to change their stock allocations in response to big price swings.
That fact alone tells a tale, in my assessment.
Rob
“But is there any Passive Investing advocate alive today who is willing and able to do so without engaging in viciously abusive posting practices as part of the bargain? In seven years of discussions of these questions, I have never yet come across one.”
Rob,
Pointing out when you are making stuff up is not “viciously abusive”. If your vague investing idea had merit, you could simply post the data and wouldn’t have to constantly make stuff like that up. For example, Scott Burns told you that your idea was on very shaky ground and that you are “catastrophically unproductive”. Several of the other names you dropped to try to make yourself sound important just asked you to go away or ignored you. Several have asked you to stop misquoting them. Most “big-name experts” don’t want to be trolled any more than the average person does. It is simply not everyone else’s job to provide you with the constant “social stimulation” that you miss since losing your job. If you miss it so much, you should try to get a new job.
“Not one of these people has been able to offer a single rational argument…”
Only because “rational” means whatever Rob Bennett wants it to mean. Just like “abusive” and many other words and phrases for which Rob insists on his personal definitions instead of the standard ones.
Rob wrote: “If the Passive Investing advocates can offer me some reasonable argument for believing that Passive might work, I am happy to take it into consideration. In seven years of discussions, I have never heard a reasonable argument.”
You haven’t been listening very well, Rob. Here are the returns for the Coffeehouse Portfolio:
Year Return
1991 23.55%
1992 9.57%
1993 15.64%
1994 -0.58%
1995 22.89%
1996 14.53%
1997 17.95%
1998 6.88%
1999 8.30%
2000 7.25%
2001 1.88%
2002 -5.55%
2003 23.56%
2004 14.18%
2005 5.97%
2006 15.002%
2007 2.91%
2008 -20.25%
Annualized 17 Year Return 8.61
http://www.coffeehouseinvestor.com/?page_id=5
So after examining the returns of the Coffeehouse Portolio, you conclude this approach does not work?
Schroeder
Rob to Russell: “You’re saying that nothing I could possibly say could ever matter for you. Is that not a different way of saying that you think you already know it all?”
Not it’s not, Rob. I responded to this just to point out how your logic is faulty even on the simplest of things. Now imagine a person with such faulty logic trying to take on something as complex as investing.
For example, Scott Burns told you that your idea was on very shaky ground and that you are “catastrophically unproductive”.
Scott of course said no such thing.
He said that he agrees with me that valuations affect long-term returns and that he believe that I have added an important layer to our understanding of safe withdrawal rates and that the Old School retirement studies got the safe withdrawal rate wrong by two full percentage points at the top of the bubble.
He also said that he viewed “my approach” as “catastrophically unproductive.” My approach is to tell people that the Old School retirement studies get the numbers wildly wrong and to urge correction of the errors. Scott pointed out that the media rarely reported on the errors in the Old School studies before the crash because the accurate retirement numbers were “information most people don’t want to hear.”
Well, why do most people not want to hear the accurate numbers?
Because they don’t want to know that their retirements are going to fail!
Because they have been investing passively and this has put them in great danger of suffering huge financial losses and learning this causes them great distress!
Given these realities, why keep pretending that Passive can work?
I do indeed believe that the way out of this mess is to tell people the realities whether they find short-term pleasure in hearing them or not. What people really want is for their retirement plans and their investing strategies to work out in the long run.
I acknowledge that it could be said that from a short-term marketing sense it is indeed “catastrophically unproductive” to report the realities of stock investing straight, with no chaser. How about in the long run? In the long run, telling it straight is what work best. I strongly believe that Scott is wrong re this point.
Had we all reported the retirement numbers accurately beginning when we learned that the Old School SWR studies are in error, we all would be in a much better place today. No?
I sure think so. My view is that each day we put off the inevitable task of correcting what we got wrong in the past makes things that much worse for each and every one of us. I see no profit in it at this point from the standpoint of enhancing our understanding of how stock investing works or from the standpoint of marketing. Failing to correct studies that get the numbers we use to plan our retirements wrong is an idea from losersville.
There is no area of human endeavor in which such a claim would be even the slightest bit “controversial.” The fact that it became “controversial” to report numerical calculations accurately during the Passive Investing Era should tell us that we all got on a terribly, terribly wrong track when this investing model became popular.
I want no part of it. I disassociate myself from it in every possible way. I urge all other people of good will to do the same.
We need to get back to basics. We need to develop a model for understanding how stock investing works that does not fill us with shame and defensiveness and anger. We need to begin having fun again and learning together again and enjoying strong returns on our investments again. It all goes together.
And there is nothing “catastrophically unproductive” about it! The catastrophically unproductive thing is to continue on the current doomed course.
Rob
So after examining the returns of the Coffeehouse Portolio, you conclude this approach does not work?
There are always going to be some approaches that in hindset we will be able to say produced better returns than others.
It is impossible for the rational human mind to imagine an approach that does not now call for consideration of the effect of valuations on long-term returns that would not be enhanced by the addition of that element.
I cannot tell you in advance whether the CoffeeHouse Portfolio is going to yield good returns in future days or not. I can tell you with absolute certainty that the CoffeeHouse Portfolio will yield better risk-adjusted returns on a going forward basis if it is modified to take the effect of valuations into account. Taking valuations into account makes bad strategies okay and okay strategies good and good strategies even more wonderful.
It is always a plus to invest rationally. There is no possible downside.
Rob
“Scott of course said no such thing.”
Rob, misquoting and misrepresenting people doesn’t help you. That’s one of the reasons you’ve gotten nowhere in 7 years. Once people see the original quote in context and see that it doesn’t match your representation, your credibility is ruined again.
“The catastrophically unproductive thing is to continue on the current doomed course.”
Which is, indeed, what you have done for these last 7 years. That is exactly what Scott was talking about. Indeed, your last email from Scott consisted entirely of: Unfortunately that is exactly what I was talking about. This was in response to one of your super long emails full of sentences with no actual data to back them up.
Here is a link to one of the articles that Scott wrote describing the New School of Safe Withdrawal Rate Analysis, of which I am the founder:
http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2005/stories/060205dnbusburns.2d233d3c9.html
Here is a link to one of the blog entries at my site quoting from my correspondence with Scott:
http://www.passionsaving.com/200711.html#e518
Rob
your last email from Scott consisted entirely of: Unfortunately that is exactly what I was talking about.
This statement is accurate.
That is indeed how my correspondence with Scott came to a close.
And my interactions with a good number of other “experts” followed the same general pattern.
Rob
This was in response to one of your super long emails full of sentences with no actual data to back them up.
The full text of the e-mail being referred to here is set forth at the blog-entry link provided above.
Rob
Lindsay: “your last email from Scott consisted entirely of: Unfortunately that is exactly what I was talking about.”
Rob: “This statement is accurate. That is indeed how my correspondence with Scott came to a close. And my interactions with a good number of other “experts” followed the same general pattern. Rob”
Thank you for admitting that. I realize that with your ego problem that you see this as a problem with all those experts. (I noticed how you had to put them down by once again putting quotes around the word “experts” for committing the sin of not recognizing your self-presumed brilliance and dominance.)
However, if you read any person who wasn’t Rob Bennett saying those things, you would realize that that person had simply been pestering them and sending the same gigantic information-free messages of the type that we have seen above. Try to step back from your ego and review your correspondence as if it had been just some other person, instead of Rob Bennett.
For that matter, step back and read these hundreds of blog comments as if all the comments labeled “Rob Bennett” were actually posted by someone other than yourself. If you could truly do this, you too would think that guy was just blowing smoke and had nothing. Or perhaps you already realize this and think that as long as you keep typing, a few gullible people won’t notice. Either way, I think your wife is right about the egomania and you should try to do something about it.
“Do we want to remain trapped forever in the dark? Or do we want to work up the courage to leave the shame and the anger and the hate and the ugliness behind…”
Rob, once again that is completely under your control. They always tell you on airlines that when the oxygen masks fall, you should always get yours on before trying to help anyone else. You should take the same approach to the darkness. Once you have left “the shame and the anger and the hate and the ugliness behind”, then I think you will realize that there are far fewer people who are likewise afflicted than you previously assumed.
Thank you for admitting that.
There’s nothing to “admit,” Lindsay. Scott’s statement reflects on Scott, not on me.
I realize that with your ego problem that you see this as a problem with all those experts. (I noticed how you had to put them down by once again putting quotes around the word “experts” for committing the sin of not recognizing your self-presumed brilliance and dominance.)
The “sin” of which today’s “experts” are guilty is pretending to a level of “expertise” that they do not possess.
These guys have studied investing for years. They have lots of resources available to them. Yet it was left to Rob Bennett, some guy who posts stuff on the internet, has no background in investing, and doesn’t even like numbers-related subjects, to discover the errors in the Old School retirement studies.
Huh?
What’s wrong with this picture?
I feel great respect and affection for each of “experts” with whom I have come into contact, Lindsay. Every one of the names listed above has made important contributions. I call each of them “friend.” I have enjoyed my interactions with them and I hope to work with each of them in a far more serious way in days to come.
You are touching on something real here. I think it is fair to say that a lot of today’s “experts” are very forthcoming so long as they are not questioned on the validity of the Passive model but become pretty much non-communicative when hard questions about the validity of the model are directed at them. This is not a good sign.
Passive Investing was a mistake. Advocating this model was a mistake. It is a mistake that has caused more misery than any other mistake even made in the history of personal finance.
We all need to get about the business of fixing the mistake. The very first step is obviously for the “experts” to acknowledge the mistake. We’ve all been waiting for seven years (it’s 28 years if you count back to when Shiller first put forward his research showing that valuations affect long-term returns). Many people are suffering in very serious ways. It’s well past time for the “experts” to begin taking their responsibilities to their readers and listeners a good bit more seriously than they have taken them in recent years.
People make mistakes, Lindsay. We all understand that. We all sympathize. That’s good. That’s healthy.
But there comes a time when the mistakes need to be acknowledged and when we all need to begin moving forward again instead of remaining immersed in all these garbage intimidation and deception and word game tactics.
There is no such thing as an “expert” in the investing field today. Not in a world in which the dominant model says that there is no need for people to change their stock allocations when prices go to truly insane and truly dangerous levels. Even Shiller is not a true “expert,” in my view. He is the master in the field today. But even Shiller knows only a fraction of what he would know if people like Bogle and Berntein and Burns and Shiller were talking frankly and openly and warmly to him and to all the others seeking to put this train back on the right track. We need helpful contributions from these people, not attitude and evasiveness and word games and marketing slogans.
We need an investing model that makes sense, an investing model that works. We don’t get one by patting ourselves on the back in congratulation of all of our wonderful expertise. Like Dylan said, we’re idiots, babe. We are at the most primitive stage of understanding of how stock investing works that we could be at. We have a few important clues as to what works, nothing more.
We can get more. We can follow the clues and we can learn very important things together. But it ain’t gonna happen so long as some of us are so concerned about our reputation for “expertise” that we cannot bear to acknowledge having gotten the retirement numbers wildly wrong for years.
Anyone who cannot figure out why it is important to report the retirement numbers accurately ain’t no investing “expert.” No way, no how. It’s time to drop the pose and get about the business of working together to learn what we need to learn to begin doing a far, far better job on a going forward basis than we have been doing in recent years.
I will do what I can to help any time I see an opportunity to do so. I do not pretend to any great “expertise” in this field. I possess just enough “expertise” to know that it is important to report the retirement numbers accurately. I am happy to say that I possess respect and affection for the “experts.” It would be a lie if I were to say that I believe that they possess “expertise” in their area of knowledge in the way that that term is used in all other areas of life endeavor.
I see more value in the idea of helping these people develop expertise than I do in pretending today that they possess a level of expertise than they have shown by their behavior and by their pronouncements that they do not possess. The things that we have seen happen could never happen in a world in which those proclaiming investing “expertise” possessed it in a meaningful way.
We need to stop congratulating ourselves for all of our wonderful expertise and get about the business of developing some. Experts get the numbers right. Experts correct their errors when they discover them. Experts alway remain open to new ideas and always pursue new knowledge. Experts are not defensive. Experts possess confidence in their ideas.
We need to get about the business of building an investing model in which we all can feel confidence. We will all feel a whole big bunch better about a whole big bunch of things once we turn the corner and get busy doing important, productive, life-affirming work again. Once you know that the model you are using doesn’t work, delaying the day on which you acknowledge this only stretches out the pain for every single person involved. No constructive purpose is served by playing these games any longer.
Rob
“There’s nothing to “admit,” Lindsay. Scott’s statement reflects on Scott, not on me.”
And as you have admitted – so many others.
That’s OK, Rob, I didn’t expect you to be able to see around your vast ego.
“Yet it was left to Rob Bennett, some guy who posts stuff on the internet, has no background in investing, and doesn’t even like numbers-related subjects, to discover the errors in the Old School retirement studies. Huh? What’s wrong with this picture?”
In the unlikely event that there are any newbies still reading along, 7 years ago Rob posted a message that if you used the 30 year safe withdrawal rate, there was one period in history where it would have failed in the 31st year. The response was a resounding “well duh!” Of course, you should withdraw at a lower rate to make your savings last longer! For 7 years Rob has been trying to “prove” that he was right (about something) all along.
By the way, Rob “discovered” the “problem” of 31 being larger than 30 by using an online calculator based on the study that Rob attacks. He used the study’s own calculator to attack the study because he admitted to not even owning a copy of Excel or similar so that he could run numbers himself. The study also provides withdrawal rates for longer periods. Rob’s error was based on simply not understanding the study and the tool based on the study.
Since 31 being larger than 30 is pretty obvious, Rob has tried to obfuscate and attach his private little war to every other issue that people bring up about withdrawal rates or even investing in general. Even if the concern is nothing like his, he claims that his mistaken post 7 years ago gave the rest of the world the courage to question the “experts” (quotes his.)
To anyone with a normal sized ego, it looks pretty sad.
“We need helpful contributions from these people, not attitude and evasiveness and word games and marketing slogans.”
You have just described yourself, Rob. Just scroll up to see your attitude, evasiveness, word games and marketing slogans.
[reiterating what Bennett ignored]: post your trading records (positions, amounts, prices, dates)
Rob wrote: “Passive Investing was a mistake. Advocating this model was a mistake. It is a mistake that has caused more misery than any other mistake even made in the history of personal finance.”
Here are the returns for a model that follows Passive Investing, the Coffeehouse Portfolio:
Year Return
1991 23.55%
1992 9.57%
1993 15.64%
1994 -0.58%
1995 22.89%
1996 14.53%
1997 17.95%
1998 6.88%
1999 8.30%
2000 7.25%
2001 1.88%
2002 -5.55%
2003 23.56%
2004 14.18%
2005 5.97%
2006 15.002%
2007 2.91%
2008 -20.25%
Annualized 17 Year Return 8.61%
http://www.coffeehouseinvestor.com/?page_id=5
So after examining the returns of the Coffeehouse Portolio, you conclude this approach was “a mistake”?
Schroeder
So after examining the returns of the Coffeehouse Portolio, you conclude this approach was “a mistake”?
That’s correct. The element of that approach that calls for no adjustment of the stock allocation in response to big price changes is a mistake.
A decision not to adjust your stock allocation in response to big price changes defies common sense. And the historical stock-return data confirms what common sense teaches us.
I certainly don’t say that those who like the approach just as is should not go ahead and follow it. The person who earns the money obviously gets to make the call as to how to invest it.
But I would not personally give three seconds consideration to following any strategy that did not call for making adjustments to my stock allocation in response to big price change. And I could not in good conscience recommend that anyone else do so.
Each investor should make his or her own investing choices. And each discussion-board or blog poster should post his or her sincere views in the words that he puts forward to the boards and blogs.
That’s my sincere take re that one, Schroeder. It would be fair to say that I am not an advocate of the Passive Investing model. No way, no how.
Rob
By the way, in case you didn’t notice – Rob has attacked the experts that he claims support him. This is classic Rob behavior. 99% of the time he says the experts are wrong, but when one of them says one to ten words in a row that Rob can take out of context and misquote to support himself, then Rob happily announces the support of that expert. Name dropping is about all Rob is capable of, because:
Rob Bennett said: “Rob Bennett, some guy who posts stuff on the internet, has no background in investing, and doesn’t even like numbers-related subjects…”
If Rob had as much number-related skill as the average person who claims to be a successful market timer, then Rob would be able to throw together a timing scheme that outperformed over whatever period is in question. I’ve seen many people do this on the Internet, but Rob is only able to CLAIM over and over that his system outperforms because he doesn’t posses the actual numerical skills and tools to find one. Rob has even admitted that he is trying to find someone with the skills to actually define “his” system. In fact the first person Rob tried to recruit to define Rob’s system was the guy that created the “Old School” system that Rob attacked.
Rob posted a message that if you used the 30 year safe withdrawal rate, there was one period in history where it would have failed in the 31st year.
Here is a link to the Retirement Risk Evaluator, the only analytically valid safe withdrawal rate calculator available today on the internet:
http://www.passionsaving.com/retirement-calculator.html
If you scroll to the bottom of the page, there are links to several articles in which both big-name experts and many of my fellow community members point out the dangers of the demonstrably false claims put forward in the Old School retirement studies. Not one of the Old School studies has been corrected in the seven years since these errors were made public (I have contacted numerous experts during that time in an effort to get the studies corrected).
Rob
Thank you for replying to my statement with a spam, Rob. That is also typical Rob Bennett behavior.
“Not one of the Old School studies has been corrected in the seven years since these errors were made public (I have contacted numerous experts during that time in an effort to get the studies corrected).”
Perhaps if you could learn enough about math to demonstrate an actual error…
But if you didn’t in the first 7 years, I guess I shouldn’t hold my breath. 🙂
Annualized 17 Year Return 8.61%
This number is based on an assumption that the investors using this approach will sell zero stocks no matter how big the extent of the losses they suffer as a result of following it.
In the event that stocks perform this time anything at all as they have performed every other time in history when we permitted stock prices to go to the insanely dangerous levels that applied in recent years, we have another 50 percent price drop coming sometime during the next five years or so.
How many real-world investors following this approach will not sell a single share of stock after we suffer another 50 percent crash in the wake of the huge price crash we have already experienced? My guess is that the answer is — a very, very tiny percentage of them.
Passive has never worked in the real world. It has brought on crushing financial losses on the three earlier times in history when it was tested. My guess is that this fourth test is going to bring similar results.
Could it be that the Passives will be incredibly lucky this go-around? Anything is possible in this crazy mixed-up world of ours.
Would I want to bet my retirement on hopes of that long-odds bet coming through or would I want to see any of my friends invest their retirement money on hopes of that long-odds bet coming through? I would not.
This is high-risk investing. This is not an approach that middle-class people should be using to invest their retirement money, in my opinion.
Rob
@ Rob Bennett
Your hijacking of this comment thread is disgraceful . . .
Do you realize that a majority of the last batch of comments I just received are by “Author: Rob Bennett”? In many cases you have stacked responses on top of your own responses . . .
This is turning into a conversation with yourself Rob. Time to step back and take a breather big fella!
Any more responses from you and I am going to unsubscribe from this topic and I recommend others consider doing the same . . . then you can have the floor all to yourself . . .
Rob has attacked the experts that he claims support him.
In all fields of human endeavor other than stock investing, it is not viewed as an “attack” to point out to someone that he or she got an important number wrong in a study.
John Walter Russell pointed out a calculation error that I made in my book on saving before I published it. I thanked him profusely. I was grateful for him for saving me the embarrassment of having a greater number of people see the error. It never entered my head for three seconds to view his willingness to take time out of his day to help me out as some sort of “attack.”
Rob
“In all fields of human endeavor other than stock investing, it is not viewed as an “attack” to point out to someone that he or she got an important number wrong in a study.”
But you have not done this, Rob. You have CLAIMED that they made an error but you have repeatedly been unable to POINT OUT the error.
“This number is based on an assumption that the investors using this approach will sell zero stocks no matter how big the extent of the losses they suffer as a result of following it.”
Rob, in case you didn’t notice, the biggest drop prior to the end point was 5.55%. Do you think a 5% down year would cause a great deal of panic selling? If they sold at the end, it wouldn’t matter since that’s the end of the calculation of the return.
“In the event that stocks perform this time”
Rob, you seem to misunderstand that the numbers presented already happened. Unlike you who only vaguely promises great things from your undefined portfolio, the portfolio you are attacking has actually and already returned them.
In fact the first person Rob tried to recruit to define Rob’s system was the guy that created the “Old School” system that Rob attacked.
There are tiny bits of truth buried in the mounds of deception being put forward here.
John Greaney is the author of one of the Old School retirement studies (his study is at http://www.RetireEarlyHomePage.com). John is a friend of mine (he does not today consider me a friend but I continue to view him as one). After I pointed out the errors in John’s study and the community confirmed that he did indeed get the numbers wrong, I did indeed invite John to help us develop the New School methodology.
I wish that he had accepted the offer. It would have been a blast had we all been working towards the same constructive goals all these years.
And the general offer remains open today to John and to all the other Goons. We already have the New School calculators in place. So there is no work to do there. But there is lots of other exciting stuff that we need to be doing exploring the implications of what we have learned during the first seven years. I would be happy to have John play a constructive role from this point forward. I would be thrilled.
That’s how a friend responds to this sort of thing, you know? If the others who call themselves his friends had responded in that way a long time ago, I think it would be fair to say that things would have proceeded on a very different track.
John made a mistake. What has happened to him never should have happened to him. But none of this was my doing or the doing of any of the thousands of community members who have expressed a desire that honest posting be permitted at the Retire Early and Indexing boards (and at the various blogs). It was partly John’ doing. And it was partly the doing of people who refer to themselves as his friends but who are not willing to take on the hard work that real friendship sometimes entails.
My sincere take.
Rob
@ Rob
UNSUBSCRIBED!
@ Rob
UNSUBSCRIBED!
Rob wrote: “I can tell you with absolute certainty that the CoffeeHouse Portfolio will yield better risk-adjusted returns on a going forward basis if it is modified to take the effect of valuations into account.”
I am willing accept that challenge. But before I do so, are you willing to outline in complete detail the decision rules that govern your Valuation Informed Indexing approach so we can track both a static Coffeehouse Portfolio and modified Coffeehouse Portfolio using your VII decision rules side-by-side on an annual basis?
Schroeder
Lindsay: “But you have not done this, Rob. You have CLAIMED that they made an error but you have repeatedly been unable to POINT OUT the error.”
By the way, Rob, you just demonstrated this again in your conversation with Schroeder. The Coffee house portfolio has had nice returns yet you claim it is a mistake simply because it is not the portfolio you would have chosen. Yet you also can’t tell us what portfolio you would have chosen or how it has performed. You simply don’t like that one and call it a mistake.
This does not constitute a mistake, Rob. This only constitutes you not getting your own preference every single time. No one is going to change their study or their web site to conform to your every whim, especially in response to your demands, harassment, calls to the police, FBI, congress, etc. The entire world is simply not your playpen, Rob.
This is turning into a conversation with yourself Rob.
No. It is mostly a “conversation” with Goon posters, DivorcedDadFrugalDad. Most of the many community members who would like to make constructive contributions have been intimidated into silence partly by the viciousness of the Goons and partly by the silence we have seen in the face of that viciousness by all the rest of us listening in and failing to take action thus far.
The Greaney Goons have burned numerous discussion-board communities totally to the ground with their abusive posting. There are several other boards (including the board at Bogleheads.org, the largest and most exciting investing board on the internet) at which they have insisted that a ban on honest posting on safe withdrawal rates be imposed and have had their demands accepted by the site owner. The Goon problem is a serious problem.
Here is a link to an article at my site which sets forth the text of an e-mail that I wrote to my congressman (Rep. Frank Wolf) urging that legislation be adopted to deal with this problem:
http://www.passionsaving.com/internet-harassment.html
I tried to organize an effort at the Money Bloggers Network forum to deal with the Goons through a united front. That thread was removed. But I am happy to resume the effort if you are able to get the site owners there to give their sign-off.
The Goons do what they do because it works. The vast majority of community members at every board and every blog has been in favor of the idea of allowing honest posting on investing issues. The published rules at all of the board protect our right to post honestly.
I am happy to work with you in any constructive effort to deal with the problem. I certainly agree that action should be taken. We are seeing sub-human behavior. The Goons should not be degrading themselves and the rest of us should not be sitting on our hands watching them continue to degrade themselves. This is sick stuff.
The other side of the story is that the work that all of those posting constructively during the first seven years of our discussions have done has been truly amazing and wonderful stuff. As ugly and sick as the Campaign of Terror has been, that is how wonderful The Great Safe Withdrawal Rate has been.
We are seeing some signs since the crash that people are getting fed up and working up the courage to take effective action. Please say a prayer for us (and help out in a more concrete way if you feel yourself drawn to do so), DivorcedDad, Frugal Dad.
Rob
Any more responses from you and I am going to unsubscribe from this topic and I recommend others consider doing the same . . . then you can have the floor all to yourself . . .
And will you unsubscribe to the next blog thread that the Goons attack?
And then the one after that?
The Goons have been working to persuade constructive contributors to unsubcribe to the discussions at the Retire Early and Indexing discussion boards for over seven years now. Having good and sincere people leave the threads hasn’t done anything to slow them down. I think it would be fair to say that getting people like you to unsubscribe to the thread is sort of the entire idea.
The Goons are obviously a tiny fraction of the board population. The majority has every right in the world to insist that people participating in discussion threads adhere to the community norms.
I of course would prefer that you continue to participate. But I of course respect your decision to do what you have done. I cannot say that I do not feel any sympathy for the feelings that drove you to it. I just wish that a greater number of us would come to see the need to take effective steps, steps that discourage the Goons rather than steps that encourage them.
Rob
then you can have the floor all to yourself .
If more people spoke up, I could fade into the background. That would suit me jut fine.
How many others have been pitching in since Kevin did some good work a ways back?
E. Roosevelt once said that no one can be made to feel inferior without giving his or her consent. I wonder if it might work the same way with feeling intimidated. Can anyone be made to feel intimidated without implicitly giving his or her consent?
This isn’t a question on which it should be Passives vs. Rationals. All of us interested in learning more about how to invest effectively should be united on this one.
Once the Goons are gone, they’re gone for good. Once the Normals have a place where they can talk about these issue in peace, the Goon Power melts into nothingness. They fight it so hard because they cannot permit even one place to break free without losing their veto power on the investing discussions held on the entire internet.
Some of them are friends of mine from an earlier day. I will miss them. But I can deal with it, you know? Please don’t let any pain that I might feel to see them disappear cause you to hold back on doing what you think is right.
Rob
“No. It is mostly a “conversation” with Goon posters, ”
By definition. As I said many posts back, “goons” are the people who continue to put up with Rob. Unless Rob’s exhaustion strategy works (See the Crank how to guide) and everyone goes away, there will always be “goons” who respond to him.
“If more people spoke up, I could fade into the background. That would suit me jut fine.”
Just like he faded to the background in this blog entry. 🙂 Notice that every time someone speaks up, in reality, we get even more Rob.
Rob wrote: And will you unsubscribe to the next blog thread that the Goons attack? And then the one after that?
Here’s the problem, Rob: You believe there are Goons attacking this thread, but nobody else sees them. Indeed, I’ve received several complaints from regular readers of GRS that you have taken over this thread and made it impossible for them to carry on a conversation. To them, you appear to be the Goon who has attacked the thread and forced them to unsubscribe.
Now, I know that’s not your intention, but it’s the effect. You’re causing my regular readers — people who have been here since long before you arrived — to unsubscribe and leave. That’s unacceptable.
Here are some facts. There were 77 comments in this thread before you entered the fray. Of the 181 subsequent comments, you have made 85 of them, and most of the others are replies to you. In essence, the discussion between you and your “Goon friends” has drowned out the normal conversation here and driven away my readers.
Now, I’m content to let you have this thread and the previous one you were arguing in, but that’s it. I’m not banning you. (And if I were to ban you, it wouldn’t be because of your ideas, but because of your excessive posting.) However, I’m asking you to exercise restraint in the future. If you choose to comment on other threads, please limit yourself to just three or four comments. If your “Goon friends” come along and an argument ensues, then move it somewhere else — like your own blog. If you take over another thread with this nonsense, I will impose a temporary block on you posting here. (And the same goes for Lindsay, etc.)
You’re also welcome to take these arguments to the Get Rich Slowly forums. You can bicker all you want there. But here on the blog, I need for my readers to be able to carry on a normal conversation without being drowned out. This thread is like a bus filled with people carrying on normal conversations when a group of rowdy teenagers comes on and starts yelling at each other at the top of their lungs, so that nobody else can carry on a conversation.
Sound fair?
Just like he faded to the background in this blog entry.
I’m asking that others not be intimidated. I think it’s fair for the others to expect me to lead by example.
There was a thread that I put to the FIRE board a long time back in which I argued that we needed a “Normalization” of our discussions of safe withdrawal rates. That’s still so today. But today the concept needs to be expanded. Today we need a Normalization of our discussions of Passive Investing.
There are lots of good and smart people who believe in Passive Investing with their hearts, minds and souls. And there are some who do not. I don’t know of any who are as strong in their opposition to Passive Investing as I am. I think it would be fair to describe me as an outlier.
The Goon goal is to block The Person Who Pointed Out the Errors in the Old School Retirement Studies from being able to share what he has learned anywhere on the internet. An obviously illegitimate goal.
The Goon strategy is to behave in so ugly a way that all Normals are repulsed and eventually feel a need to Make It Stop.
The Goon hope is that, since the majority supports Passive Investing today, the majority will elect to Make It Stop by banning honest posting by Rob Bennett and any others inclined to make a strong case against Passive Investing (who the Goons see as being enough of a threat to justify their attacks).
That is not an effective long-term way to go for the larger community.
Community discussions don’t bear good fruit if there are some positions that may not be presented.
I oppose Passive Investing everywhere I post. That’s what I bring to the table. It’s a plus for everyone for us to have someone doing that. It helps those who have doubts about Passive feel better about speaking up. And it helps those who love Passive sharpen their arguments and discover any weaknesses in them.
I will continue to bring to the table what I can bring to the table.
I never asked the Goons to bring what they bring. What they bring doesn’t belong. I encourage them to participate at my blog so long as the participation doesn’t take a form that drives other good contributors away. I draw the line at deliberate deception, intimidation and endless, fruitless word games.
When you let them know what you will tolerate, they are capable of staying within the lines. Their personal inclination is not to stay within the lines. When you send signals that there are no lines, you invite mayhem. Yes, they are at fault. But the community as a whole has a role to play here too.
My take.
Rob
I’m asking you to exercise restraint in the future.
I have never for three seconds given thought to doing anything else. As the entire thread here demonstrates. I have had hundreds of people compliment for for the restraint I have exercised in the face of the attacks and threats that have been directed my way for seven years now. Who do you think you are kidding with this comment?
If you choose to comment on other threads, please limit yourself to just three or four comments.
I will answer the questions that are put to me. These are important questions and there is great confusion among many people about these questions. I am okay with ignoring the stuff that is so out there that not one reasonable person could be taken in by the deception. But the standard Goon practice is to mix three parts ugliness with one part questioning over matters that lots of people are confused about. I am going to continue to respond to the legitimate questions. I have no objection if you delete posts that contain legitimate questions but that are mixed in with stuff that obviously is intended to do harm to the board. That’s your job. You should have been doing that all along. You obviously would have no problem here if you had earned the Goons’ respect from the first shot.
If your “Goon friends” come along and an argument ensues, then move it somewhere else – like your own blog.
They don’t pay attention to my suggestions, J.D. If you want the Goons off your blog, you need to push the buttons to get the Goons off your blog. I will applaud you for it. If you want to give me the ability to push the buttons that need to be pushed, I am happy to take on the job. I know what sorts of comments are genuine and what sorts of comments are Goon trash. it’s not hard for anyone who has spent any time talking to real people to figure out the difference.
If you take over another thread with this nonsense,
I haven’t posted one word of nonsense in the entire thread or in any other thread. I first suggested that the nonsense be put to an end on the afternoon of May 13, 2002. As you know, I took steps to put an end to the nonsense at the Money Bloggers Forum. If you asked that those efforts be brought back to life, I think that effort would win the day. Your blog is certainly not the only blog that has been attacked.
I will impose a temporary block on you posting here. (And the same goes for Lindsay, etc.)
That will reflect on you. I will always work to help both you and all other community members concerned about these issues. I will report what needs to be reported to help people learn what has happened. And I will work hard to be as fair to you as I can possibly be. If I state anything improperly, I would be grateful if you would let me know how I can restate things in a way that you think would be more fair. If you request space at my blog to state your side of things in your own words, I will be happy to provide it to you.
If you block Lindsay and any other Goons without blocking me, you obviously will get the good discussion that you should be seeking. I will argue my case as effectively as I can and those posting from the other side will post a reasonable number of question and then let it drop and there will obviously be no problem. In fact, you will see some wonderful stuff appear before your eyes.
If you ban both me and Lindsay, you encourage the Goons, Lindsay obviously has no interest in making a constructive contribution anywhere. So banning him means zero to him. I am reporting the important work done by hundreds of my fellow community members over seven years of time. When you ban me, you are banning all of them too. I oppose it. I think it is the worst thing you could possibly do.
Rob
“I’m asking that others not be intimidated. I think it’s fair for the others to expect me to lead by example.”
You do that by calling the police, the FBI, congress, the ETF etc. to force websites to bow to your wishes as well as creating mountains of words attacking any idea or poster your don’t like, and asking website owners to ban people who ask you for any proof of your claims, claiming that people who point out your errors and contradictions are abusive and violating some rules that you can’t specify. Uh huh. Sure. That’s the way to ask that others not be intimidated.
“I encourage them to participate at my blog”
That’s an obvious lie, Rob. I have posted to your blog. Not a single one of my posts has appeared. Many others have noticed the same. That’s why your blog is so empty and why you are always looking for attention on other people’s blogs.
Sorry about mess, J.D. I had assumed that since you didn’t do anything about Rob in the earlier train wreck that you didn’t care. I’m afraid Rob’s response was 100% predictable and the same as every other time he has been asked to control himself.
“When you ban me, you are banning all of them too.”
You can ban Rob but point out that his hundreds of invisible friends are still welcome. 🙂
JD, I don’t think he heard you. I’m not surprised. I think you have your answer.
the discussion between you and your “Goon friends” has drowned out the normal conversation here and driven away my readers.
That part is of course 100 percent true.
This if of course precisely what happened at every board or blog that imposed a ban on honest posting on safe withdrawal rates and on the flaws in the Passive Investing model.
It is of course the intent of the Goons to do exactly this.
The question is why you have not take action to deal with the problem in an effective manner.
If there are zero sincere questions directed to me in the next thread at which I participate, I should respond to zero questions. If there are five sincere questions, I should respond to five questions. All community members should do what they can to respond to sincere questions. That is a plus, not a minus. That is what you should want me to do.
The Goons exploit the confusion that many have over these questions by mixing in their deceptions and their acts of intimidation with questions that many really are unsure about. What would you have me do, J.D.? Should I ignore the legitimate questions (after #4) so that people form false impressions of the realities (impressions planted by the Goons)? How does that help anyone? I am trying to help people learn, not to cause more confusion.
If you took appropriate action, we would still have lots of doubts about things I say. But you obviously would not see what you see in this thread. Lindsay is obviously not posting with good intent. You insult our intelligence to suggest that you have not been able to figure that out.
I’ll do anything I can to help your blog and to help the people who come here to learn, which is obviously the vast majority. I did not bring the Goons here. They follow me because they do not want people to learn the realities of the safe withdrawal rate studies and this is the option left to them.
You should be writing about the safe withdrawal rate studies. All of the work has been done and is available at my site. You could write that you agree with me or you could write about any doubts you hold. Anything you did that was honest would be a help. What hurts the Goons most is exposure. If you write that you disagree with things I say, that helps because it gets other people looking at the questions and that encourages a learning process.
It is undeniable that there is a big issue with the safe withdrawal rate studies. Look at the people who have pointed out the problems with them. Scott Burns. Ed Easterling. William Berntein, Michael Kitces. That’s something you should be writing about at your blog. And writing about that is a constructive way to deal with the Goon problem.
Rob
Now, I know that’s not your intention, but it’s the effect.
Precisely so.
My intent is good and the effect is bad.
Because I cannot deal with the Goon matter. Only you possess the power to do that here. And you failed to do what needed to be done.
Rob
Of the 181 subsequent comments, you have made 85 of them, and most of the others are replies to you.
How many of those “replies” appear to you to have been offered by a community member using the blog for the purpose for which it was intended — to help people learn about personal finance questions?
Would there be any problem whatsoever if you had dealt with the problem promptly? Why did you not do so? What makes you want to deal with the problem in this other way that blocks the community here from learning about things that they very much need to learn about?
Rob
And if I were to ban you, it wouldn’t be because of your ideas, but because of your excessive posting.)
No.
You are banning honest posting on safe withdrawal rates and on the flaws in the Passive Investing model by granting the Greaney Goons veto power over what appears at your site.
If I were posting in support of Passive Investing, you never in a million years would have permitted so much ugliness to appear in this thread. You have allowed your personal sympathy for the position being “defended” by the Goon to influence you to compromise the integrity of the discussions held at your site.
That’s not the right call.
Rob
You’re also welcome to take these arguments to the Get Rich Slowly forums.
I will give that a shot.
I can give you a 100 percent guaranty that the Goons will engage in the same trickery there. And most community members will feel the same revulsion at the sub-human behavior. So you end up in the same place.
You can bicker all you want there.
I don’t want to bicker at all, J.D. There is no one who has spoken out against this garbage as often as I have or in as strong language as I have.
None of the readers interested in the subject of personal finance want to either.
Why not take the steps that we need you to take so that we do not need to be exposed to such ugliness? Why not just permit us to discuss the personal finance questions in peace? That’s the obvious question here.
Rob
J.D. “the discussion between you and your “Goon friends” has drowned out the normal conversation here and driven away my readers.”
Rob: “That part is of course 100 percent true. This if of course precisely what happened at every board or blog that imposed a ban on honest posting on safe withdrawal rates and on the flaws in the Passive Investing model.”
So, the obvious logic here is that Rob is claiming that J.D. has imposed a ban on honest posting.
J.D. “And if I were to ban you, it wouldn’t be because of your ideas, but because of your excessive posting.)”
Rob: “No.”
Rob knows you better than you know yourself, J.D. Rob knows everyone better than they know themselves. Just look how many thoughts he inserted into other people’s heads in the posts above. You didn’t think you were immune did you?
J.D. “You can bicker all you want there.”
Rob: “I don’t want to bicker at all, J.D. There is no one who has spoken out against this garbage as often as I have or in as strong language as I have.”
LOL! 🙂
Excuse me while I get some popcorn!
@Rob
None of my regular readers has expressed appreciation for the ongoing discussion, neither via e-mail nor via comments. The only feedback I’ve received is negative.
Also, I don’t “want the Goons” off of my blog. I want the endless derailing of threads off my blog. You’re just as responsible for this as “the Goons” are. As I said, my readers are complaining about you, not about any other commenter.
I wrote: I will impose a temporary block on you posting here. (And the same goes for Lindsay, etc.)
To which Rob replied: That will reflect on you.
Yes, it will. It will reflect positively on me. It will demonstrate that I put the welfare of this community ahead of any one poster (or small group of posters). A blog is not a democracy. This is a benevolent dictatorship. I am the dictator. And I am very benevolent. But I’m not above using my power to keep the community safe and sound.
Rob wrote: This if of course precisely what happened at every board or blog that imposed a ban on honest posting on safe withdrawal rates and on the flaws in the Passive Investing model. It is of course the intent of the Goons to do exactly this. The question is why you have not take action to deal with the problem in an effective manner.
I’m confused, Rob. It is the intent of the Goons to force you to flood a board or blog with comments, thus drowning the normal discussion? It’s their intent for you to dominate the discussion?
As for why I haven’t dealt with this before: Nobody has complained until the last few days, when you took over this thread. Again: they’re complaining about you, Rob, not about the Goons. And they’re not complaining about your arguments, but about your tactics. These are normal people who have been reading GRS for years, who have no personal vendetta against you. And you’re bugging them. Is this what you want?
It’s ludicrous to suggest that the correct response here is to ban your critics from responding to you. The correct response is to ASK YOU ALL to exercise restraint, and if you’re unable to do it, to impose restraint upon you from the outside.
Rob wrote: You should be writing about the safe withdrawal rate studies.
No, I shouldn’t. I should be writing about the things that I interest me, and the things that interest my readers. Safe withdrawal rates may be one of those things, but I’m not about to devote my blog to it. You have a blog, Rob. You can write about that stuff there. Don’t tell me what I should write about.
@Lindsay
To be honest, I don’t actually mind this back-and-forth, which is why I’m content to let it continue in the two threads that already have it. However, my readers do mind it. When something endangers my community here, I’m going to take action. I didn’t say anything earlier because people hadn’t begun to complain.
Rob, you are wrong. If you are ever banned from Get Rich Slowly, it will be because you are posting too much and destroying the ability of the community to function. It won’t be about your ideas. I don’t find your ideas offensive. They’re vague and unsubstantiated, but they’re not fundamentally flawed. I don’t care if you share them. But I do care if you share them 100 times in a single thread. That’s gratuitous.
And now, if you’ll excuse me, I have to write about personal finance…
This thread is like a bus filled with people carrying on normal conversations when a group of rowdy teenagers comes on and starts yelling at each other at the top of their lungs, so that nobody else can carry on a conversation.
That’s a fair description of the problem.
You need to toss the rowdy teenagers off the bus.
It’s not appropriate to toss the people using the bus for legitimate purposes that the rowdy teenagers have elected to harass.
Pointing out the flaws of the Passive Investing model is not being a rowdy teenager. That’s personal finance stuff. That belongs.
Rob
Rob, the fact that you don’t see your behavior as part of the problem is…part of the problem. When Scott Burns told you your approach was “catastrophically unproductive”, he wasn’t talking about your beliefs. He was talking about the way you express your beliefs. And he’s right.
Rob, you are wrong. If you are ever banned from Get Rich Slowly, it will be because you are posting too much and destroying the ability of the community to function. It won’t be about your ideas. I don’t find your ideas offensive. They’re vague and unsubstantiated, but they’re not fundamentally flawed. I don’t care if you share them. But I do care if you share them 100 times in a single thread. That’s gratuitous.
These words all sound sincere to me, J.D. I am grateful to you for putting them forward.
I of course agree that I should not have a large number of posts with my name on them appear in a single thread. This goes without saying. I of course have no desire at all to have more than one or two of my posts appear in a thread in normal, healthy circumstances. We both want the same thing. The question is — how do we get there given that the Goons want to do everything they can to destroy any threads in which I participate?
I’d be grateful if you would tell me how you think I should deal with the attacks if you are not willing to take any action against the Goons.
These people have devoted seven years of their lives to following me everywhere I go on the internet and destroying every board or blog at which I participate. How would you handle that if it were you they were after?
We had a discussion at my blog in which you pointed out (quite properly) that your reputation is all that you have on the internet. That obviously goes for everyone else. Would you not respond if the sorts of things that are said about me in posts above were said about you? Would you not expect the blog owner to take action if defamatory statements were made about you when you participated in a thread at his blog? Is there some reason why you feel that this is not your job re this matter? Do the people who post at your blog have no protection against this sort of thing?
You can go back to the posts up higher in the thread and see how these people operate with your own eyes. I am trying to help people with legitimate questions come to a better understanding of some stuff that a great many people do not understand well. Do you not see that if I fail to respond to deceptions that I know about because I was there but that your other readers do not know about because they were not that people will think there is something to the deceptions? Does it help people to understand things if they are deceived?
Having no rules whatsoever for people who post on blogs with bad intent is like trying to play baseball without foul lines. It just becomes total craziness. These people are exploiting people’s lack of background on these matters. They shouldn’t be permitted to do so.
Have you ever once seen me post inappropriately? I have been banned from numerous boards. Never once have I had a site owner remove a post of mine on grounds that it was abusive. Do you not find that strange?
If you are willing to delete all questions put to me after the fourth on a thread, I am fine with that. I would prefer that sincere posters be able to ask as many questions as they want. But a limit on the number of questions that could be put to me would be more reasonable than what you are proposing. What I do not want is for the Goons to be able to post phony questions and make phony deception character attacks and have people taken in by them because the only one here who knows the history is me and I am not able to respond.
Is it right to permit a group of Goons to defame someone and not to give that someone any means to point out the realities? It sure does not seem so to me.
Rob
Rob, the fact that you don’t see your behavior as part of the problem is…part of the problem. When Scott Burns told you your approach was “catastrophically unproductive”, he wasn’t talking about your beliefs. He was talking about the way you express your beliefs. And he’s right.
Can you please explain what it is that you think is right about what he said?
Is there something that I am doing that you don’t think is proper?
The Goon attacks started when I pointed out the errors in the Greaney SWR study., Do you think it would have been better if I had not done that?
I think you are getting at something that you really believe. But you are not spelling it out any more than Scott did. Unless you are saying that I should not try to get the Old School SWR studies corrected, I am not able to figure out what you are getting at. And it does not seem to me that it could possibly be right not to let people know that the numbers are wrong in the retirement studies they are using.
That’s why I always circle back to saying that this is a ban on honest posting. My honest view is that the numbers in the Old School studies are wildly off the mark. If I am banned because I say that, am I not being banned for posting honestly?
Is there some way that I could say it that would be acceptable to you?
Rob
J.D. OK, no problem. I have a website which I wouldn’t want to have hocused either. So far Rob hasn’t found us. I tend to think of it as “fighting them over there so we don’t have to fight them over here”. But I have to remember that the “over there” has innocent civilians too. I particularly failed to take into account how many people have apparently selected the email subscribe so I’m sorry in contributing to crowded email boxes. I thought it was just Rob and a few of us amused folks for the last few days.
I just pasted the comments into word and got 93 pages. The previous thread was over 70. Rob, it seems like you could get that investing book out within a week at the rate you generate text. And nobody can talk back to you in a book. And you can sell it. Sounds like a win win win to me but what do I know.
Dave Shafer sells his wealth creation kit for two thousand or five hundred dollars and he doesn’t even pay for printing and binding but just sends you ebooks. It seems like there’s gold out there if you can just tear yourself away from the bickering that you claim you don’t want anyway.
Just some thoughts.
Rob: “If you are willing to delete all questions put to me after the fourth on a thread, I am fine with that.”
Rob, you weren’t answering the questions anyway.
And no one really expected you to. We have 7 years of history to fall back on.
Why not just answer all the questions in that investing book you’ve been promising?
Rob wrote: “The Goon attacks started when I pointed out the errors in the Greaney SWR study., Do you think it would have been better if I had not done that?”
I don’t understand what safe withdrawal rates or the Greaney SWR study has to do with this blog entry J.D. wrote on Lazy Portfolios. Rob, part of your problem is that you derail the discussion to these type of unrelated topics.
My personal opinion is that you don’t engage in good faith. You make a statement or claim and then others quote your words and ask a question. But you ignore them or fail to answer the question in a direct manner. Evidence comment numbers 139, 146, 167, 188, 253.
Now I think this is a good discussion if only Rob can stay on-topic. So let’s start again where we left off.
Rob wrote: “I can tell you with absolute certainty that the CoffeeHouse Portfolio will yield better risk-adjusted returns on a going forward basis if it is modified to take the effect of valuations into account.”
I am willing accept that challenge. But before I do so, are you willing to outline in complete detail the decision rules that govern your Valuation Informed Indexing approach so we can track both a static Coffeehouse Portfolio and modified Coffeehouse Portfolio using your VII decision rules side-by-side on an annual basis?
None of my regular readers has expressed appreciation for the ongoing discussion, neither via e-mail nor via comments. The only feedback I’ve received is negative.
That’s a certain sign that you are not dealing with it properly, J.D.
I have an article at my site that quotes snippets of posts that were put to the Motley Fool board in the days before the abusive posting got totally out of control. There were hundreds of people saying that the discussions were wonderful, the best that we had ever had at that board. If you reined in the ugly stuff, I can guaranty that you would be getting some positive comments.
In fact, you can look at reactions that we are seeing at other blogs in the current day to see positive reactions. If you want to see these, let me know and I will provide some links. Or, if you want me to do that by e-mail, let me know that.
There are lots of people who want to engage in discussions of the substance questions. I don’t say that that is universal or anything close to it. This stuff is controversial and you will see some negative reactions no matter how you play it.
But it is the ugly and inappropriate stuff that people truly hate. That’s the stuff that you should be reining in.
Rob
As I said, my readers are complaining about you, not about any other commenter.
You yourself said in comments you put to my blog that your reputation is all that you have on the internet.
It is now your position that it is perfectly fine for a group of thugs to use your blog to smear someone’s reputation and that you have no problem with that whatsoever?
And that the reason is because the person who is having his reputation smeared is saying something that runs counter to what people were told in a marketing campaign that was backed with millions of dollars by the Stock Selling Industry? That makes it okay?
You can’t have it both ways, J.D. Either it is wrong for people to smear someone’s reputation or it is not. If you think it is wrong (and you are on record saying this when it is your own reputation in question), then you have a responsibility to do something about it when you see it happening in front of your eyes at your own blog.
If you gave some signs to the people who have doubts about Passive Investing that you were on their side, they would feel more inclined to speak up here and to send you e-mails asking that you do something about the Goons. Have you done anything to lead them to believe that you are willing to stick up for them? If not, they why are you surprised that they are not talking with you as much as the ones you have been siding with since the first word was posted?
The community members who see the flaws in the Passive model are not in the majority today. We all know that. That doesn’t mean that they should not have a right to post their sincere views at this blog. And it doesn’t mean that you do not have a responsibility to do something to protect them from the sorts of behavior we have seen evidence itself on this thread.
If you are not getting e-mails objecting to the trash that the Goons have been posting to this thread, you should be asking yourself why that is? That’s an exceedingly odd report. I don’t say it is not true. I say that you have not been doing enough to point out the weaknesses of the Passive Investing model to get people who know about them to become regulars at your blog. If you want the blog to achieve its full potential, you need to do more to reach out to the people who today do not feel comfortable coming here. Those people are out there. I have run into them everywhere I have gone. If they are not coming here or they do not feel comfortable confiding in you, there is something wrong in how you have been playing it.
Investing realities are not decided by public opinion polls. Your job is to tell both sides of the story to the extent possible. It is of course natural for you to favor the position that you personally support. But when we see the sort of behavior we have seen here and you are not getting any complaints about it, that is a sign of a massive imbalance. That should be addressed. Some of the stuff on this thread is totally over the top. It should greatly concern you if your readership is not sickened by some of what we have seen posted on this thread.
Rob
I don’t “want the Goons” off of my blog.
That says it right there.
I want the endless derailing of threads off my blog.
But you don’t want the Goons off your blog.
That makes sense, J.D.
Rob
“If I am banned because I say that, am I not being banned for posting honestly?”
Seriously, Rob, a couple of things:
You’ve never specified any precise error. There are some things you don’t like about the studies. Fine. You would have done them differently. Fine. But the studies are also fine unless you can find an actual error – not just a difference in preference. The studies document the way they are done. I had absolutely no trouble understanding the studies and their limitations. And I understand that there will ALWAYS be limitations in studies that are used to predict the future. I can read multiple studies and decide for myself which ones seem most appropriate and well thought-out. I don’t need you to keep hammering me.
Let’s keep in mind too that the original “error” you found was simply a huge blunder on your part. (31 being longer than 30) and then you made several additional blunders as people kept explaining the errors to you. Unfortunately it seems that you got all excited about the idea that you had found some critical error and then you just couldn’t deal with the reality that it was your misunderstanding.
No one has ever banned you for posting honestly. You have been banned for making yourself and your issue of preference the center of attention everywhere you go. You simply hijack threads and turn them into threads about you and your preference and you generate unlimited numbers of words in response to anyone asking you not to do that.
You claim to have a better system, but because you are “not a numbers guy” you can’t define it. Nonetheless you keep telling us over and over that you have it. Fine, you’ve told us, we know, we get it, we bow down to your financial greatness. We don’t have to be told 20 more times this year, let alone 20 more times this day.
If anyone asks you questions, you evade and bring in other things and start waving your arms about post archives and historical data trying avoid answering any question by making infinitely complex.
You accuse people who point these things out as being “Greaney Goons” and you claim that they are conspiring to keep you down and/or to cover up an error and/or to prevent people from retiring. To my knowledge most of the current people you call goons don’t even know Greaney. You’ve simply picked us up at the various blogs and forums that you’ve attempted to make all about you. Some of us are amused. Some think we can make you see reality. But none of us are engaging in some kind of campaign of terror for Greaney or the “stock selling industry” as you sometimes assert. You claim that the “Greaney Goons” number as high as 1.3 billion people when I can only see evidence of about a dozen people that pay you any attention on a regular to semi-regular basis.
You quote people out of context to make them appear to support you when they don’t. You’ll reject 99% of what someone says and then take as little as one word he said in a live interview and apply it to absolutely anything you want. You’ll boil a book down to a sentence on a single page and then you won’t even quote the sentence correctly in order to make it support you to the fullest.
I once pointed out that “the other side” had credentials, peer review, data, mathematics, etc. and all you had were words. I was surprised that you agreed with me but later disappointed when I realized that you thought that meant that you should type even more words.
Remember that that Greaney guy that bugs you so much is just a guy who did some good work and put the results on a website. You could become just as famous or even more famous than him if you just did some even better work and put it on your website. At present, though, your website looks like these blog comments. Lots and lots of words, but the underlying work is still missing.
I realize almost all or all of the above has been said to you before on numerous occasions and it has simply resulted in a great deal of additional words. Nonetheless, hope springs eternal. I did start off as the type of “goon” who thought I could get you to see reason, though I ended coming back for the entertainment. So, whether you keep the hocomania up or have a breakthrough, I will find satisfaction.
Sorry to everyone with the email subscription. I think J.D. is saying it’s OK to keep this nonsense going here as long as we don’t spread it to the newer blog entries. If not, let me know. *I* can stop.
Rob, I also suggest you read Scott Burns’ email again. He specifically talks about your behavior.
A blog is not a democracy. This is a benevolent dictatorship. I am the dictator. And I am very benevolent. But I’m not above using my power to keep the community safe and sound.
It shouldn’t be a democracy. And it shouldn’t be a dictatorship either. It should be a community.
In healthy communities, everyone doesn’t share the same viewpoint. In healthy communities, those who hold one viewpoint don’t rely on Goon Squads to keep representatives of the other viewpoint from expressing themselves.
You posted something just the other day about how you learn from people who post comments to your blog. That learning process doesn’t happen without you taking some steps to protect the people who are taking time out of their day to post comments here. No one should ever be subject to the type of abuse you permitted to appear on this thread. That’s not “benevolent,” J.D. Not in any way, shape, or form. If you view your behavior in failing to act on the trash that appears in this thread as “benevelent,” you are kidding yourself in a very serious way.
You’re keeping the community “safe and sound” by turning over the keys to the Greaney Goons. They don’t want your readers finding out about the errors in the Old School retirement studies. So you are going to go along.
That’s not benevolence. That’s cowardice. I say it that way because you leave me no choice. There are responsibilities that come into play when you open up a blog dealing with personal finance questions. One responsibility is to protect people from demonstrably false retirement claims. Another is to protect posters at your blog from vicious smear campaigns. You have failed to honor your responsibilities here, J.D.
I say that with no personal animus. I say it because I think you are doing wrong and I would like to work with you to bring you and the blog and the community that meets here to a better place. You are better than what you are representing yourself to be in your behavior here. You never should have permitted yourself to be have been pulled into this mud. It’s bad news and I am confident that there is a part of you that recognizes that to be so. I hope you will reconsider your thinking here.
Rob
t is the intent of the Goons to force you to flood a board or blog with comments, thus drowning the normal discussion? It’s their intent for you to dominate the discussion?
It is their intent to make the discussion so unpleasant that people cannot stand to think of themselves as human when they see what some of their fellow humans are doing in public.
I put up a post that was 100 percent relevant to the subject of the blog entry.
The Goons responded with ugly vicious attacks.
Why?
Why do they not respond with points of substance?
What would you do if you had no substance to offer but knew about some internet trickery that works like a charm at blogs where the owners are not willing to take responsible steps to protect their community members?
Why is it always ugliness? Why is it always low?
You have said publicly that you believe that reputation is everything on the internet. So your know perfectly well why someone would feel a need to respond to personal attacks that are 500 times worse than the sort of thing you were worried about having someone say about you. And you ask what it is the Goons want?
The Goons want the discussions stopped.
I do not. I want the discussions to be focused on substance. I am asking you to do your job and remove the trash that was posted to this thread. And then to do the same when it appears on any subsequent thread.
And then to stand back and enjoy the flood of wonderful stuff you will see appearing when you take action against the people who came here with zero good intent and for the people trying to share with your community some important ideas that they have not heard about before.
Rob
It’s ludicrous to suggest that the correct response here is to ban your critics from responding to you.
A Goon is not a critic.
A critic adds to a discussion by offering another view.
A goon shuts down a discussion by putting forward so much ugliness that people are too intimidated to participate.
You should be trying to encourage these discussions, not shut them down.
Rob
I have neither the time, the resources, nor the interest to continue this debate.
The bottom line is this: Rob and “the Goons” (whom I do not actually view as Goons) may continue to use this thread to debate. They may even comment in other threads.
However, if another prolonged argument develops anywhere else on this blog, I will impose a temporary block on the participants. I neither endorse nor condemn Rob’s viewpoint, but his shotgun approach to discussion is alienating my existing readers, and I will not permit that to continue.
No, I shouldn’t. I should be writing about the things that I interest me, and the things that interest my readers. Safe withdrawal rates may be one of those things, but I’m not about to devote my blog to it. You have a blog, Rob. You can write about that stuff there. Don’t tell me what I should write about.
Why are you defensive on this point, J.D.?
This is the elephant in the living room.
I should not have to sell you on the need to write about retirement studies that get the numbers wildly wrong. Of course you should write about things that interest you. You aren’t able to develop any interest in helping your readers avoid busted retirements? Are you joking? What more important topic could there be for a personal finance blog?
What you are saying here fits with the reason that Scott Burns gave for why the media in general has not written about the errors in the Old School studies. Scott said that “it if information that people don’t want to hear.” I think that between the lines what you are saying is that you will write about the errors in the Old School studies after stock prices have fallen further and it will no longer make anyone unhappy with you for you to report the realities.
That’s a marketing concern. I have no problems with marketing. But there are times when you need to tell people the straight story too. This is one of those times.
Your reluctance to tell this story is really the entire deal here. If you tell the substance side of things, all the ugliness goes away. Because the purpose of the ugliness is to keep people from hearing about and understanding the substance.
And this points to the real problem in how we learn about stock investing too. Passive Investing pretends to be rooted in science. But all the numbers are slanted to serve marketing purposes. When stocks are insanely overpriced, most people want to hear a wild pro-stock spin. You’re saying that it’s fine to give them that, that blog owners have no responsibility but to write about what interests them.
I do not agree. I think we have responsibilities to our readers. And not always just to tell them what they want to hear. I believe that there are times when we have responsibilities to tell them what they need to hear regardless of whether they enjoy hearing it or not.
That’s why they call me a “troublemaker.” But, again, the idea of reporting the number accurately would not be viewed as “controversial” in any other field of life endeavor. This is what makes investing in stocks so dangerous at times of insanely high prices (and at times when people have not yet come to terms with what they did to themselves during a recent time of insanely high prices).
I’m handing you a huge story on a gold platter. The work has all been done. You obviously are under no obligation to go with the story. But I certainly am doing you no wrong by offering to help you with it. I think you should be jumping at the opportunity.
Rob
The studies document the way they are done.
I agree that they document the way they were done. And when you check that documentation you learn that the studies include no adjustment for the valuation level that applies on the day the retirement begins. The studies are analytically invalid. They get all the numbers wrong.
I had absolutely no trouble understanding the studies and their limitations.
The Post Archives of the board discussions show that there were many community members who believed that these studies were reporting accurately what the historical data says about safe withdrawal rates. And, if there are many in our community who thought that, there are obviously millions in the outside world who thought it. The studies should be corrected before they do more harm to more people.
And I understand that there will ALWAYS be limitations in studies that are used to predict the future.
The studies do not predict the future. That report inaccurately what will happen in the future in the event that the future turns out something like what we have seen in the past. If the future turns out something like what we have seen in the past, we will see millions of busted retirement as a result of the demonstrably false claims advanced in the Old School SWR studies.
I can read multiple studies and decide for myself which ones seem most appropriate and well thought-out. I don’t need you to keep hammering me.
I don’t post just for your benefit, Lindsay. There are many community members who were happy to learn about the errors in the Old School studies. And there were many excited to see that the SWR can be calculated accurately using an analytically valid methodology.
Rob
I’m defensive, Rob, because you’re trying to tell me how to run my blog. Why do you think?
You wrote: I should not have to sell you on the need to write about retirement studies that get the numbers wildly wrong.
Let’s try this in slow motion.
Point me to one of the retirement studies that gets the numbers wildly wrong. Point me to one. Don’t add any color. Just point me to it. I’ll take a look, and if I have questions, I’ll ask you for more info.
the Goons” (whom I do not actually view as Goons)
That’s it right there.
I neither endorse nor condemn Rob’s viewpoint
I am grateful for that much.
I will impose a temporary block on the participants.
What I am going to do the next time I post a comment here is to watch and see if a Goon comment appears or not. If I get a question or two that appears legitimate, I will respond. If I see something that appears to be a possible Goon comment, I will put up a note saying that J.D. received complaints about an earlier occasion on which the Goons attacked a thread and that J.D. said that he is going to impose a temporary block if he sees it again and so I am not going to post any further comments on that thread. I will add a line inviting people to come to my site to learn about the background of both the substance and process questions if they care to do so.
No one ever said that reporting the realities of stock investing on internet discussion boards and blogs was going to be easy!
Rob
I’m defensive, Rob, because you’re trying to tell me how to run my blog. Why do you think?
I was making a suggestion. I think it would make a great article. I obviously understand that I cannot tell you what to write about. I wish there didn’t have too be so much friction over this sort of thing. I am not trying to tell you how to run your blog. I am trying to figure out what is going on here.
Point me to one of the retirement studies that gets the numbers wildly wrong. Point me to one. Don’t add any color. Just point me to it. I’ll take a look, and if I have questions, I’ll ask you for more info.
The one that we have all examined in great depth is the one by John Greaney at http://www.RetireEarlyHomePage.com. I believe that there’s a basic version for free at the site and there’s a more in-depth version that he charges $5 for.
Thanks for being willing to take a look. I think that’s a great idea.
Rob
Rob wrote: “I can tell you with absolute certainty that the CoffeeHouse Portfolio will yield better risk-adjusted returns on a going forward basis if it is modified to take the effect of valuations into account.”
Interesting. So you are saying that your PE10 information correlates equally to all the equity asset slices of the Coffeehouse Portfolio and not just the S&P 500 Index? Do you have data to support that claim? Like the returns for a Rob Bennett valuation-modified Coffeehouse Portfolio vs. the real McCoy? LOL!!!! Of course not, just something else we’re supposed to accept without question since Rob Bennett says it’s so!
By the way Mr. Bennett, do you ever take a break from spamming other peoples discussion boards and blogs to enjoy enjoying activities in the world outside the online version? Swimming? Hiking? Biking? I thought not….
“The Post Archives of the board discussions show that there were many community members who believed that these studies were reporting accurately what the historical data says about safe withdrawal rates. And, if there are many in our community who thought that, there are obviously millions in the outside world who thought it. The studies should be corrected before they do more harm to more people.”
But of course. Why would they not? You have continued to evade that “little” question about what the alleged error actually is, Rob.
Thanks J.D.! Your patience in the face of those insults is amazing!
I think if Rob decides to hide behind your request as an excuse to evade the same old questions, I’ll just post the following and then we can be done with the repeated hocomania in new blog entries:
—
Hi Folks,
If you find Rob’s comments of interest, I suggest you review:
https://axis-monolith.live/the-lazy-way-to-investment-success/%3C/a%3E%3C/p%3E
As you will see in this 200+ comment blog entry, just about any question you might care to ask Rob has already been asked many times. (Though most have not been answered.)
While Rob may invite you to his blog, you should note that his blog is heavily censored and he only allows comments that agree with him or that he thinks he can recast as agreeing with him. If you are interested in having a discussion with him on equal footing where he can’t simply choose not to post your comment, then please don’t derail this blog, but instead try the best of Hocomania forum at:
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl
That forum is dedicated to trying to understand what’s going on with Rob and his investment ideas. Some of the people at that forum have experience with Rob’s ideas and tactics going back to the 1990s so it’s a good place to come up to speed quickly.
Thank you.
Okay, Rob. I’ve read the report at this page:
http://www.retireearlyhomepage.com/restud1.html
My first question is: Who is John P. Greaney, and why should I care? There’s nothing here that would lead me to consider this study or its author authoritative.
Regarding this study: It seems to show the theoretical 100%-survivable maximum inflation-adusted safe withdrawal rates under ideal conditions. That is, if everything were perfect, a retiree could use the withdrawal rates listed here — but no more — based on simulations of past data. These “ideal-condition” safe withdrawal rates are generally less than 4%.
Real-world application means that safe withdrawal rates would necessarily be lower — perhaps much lower if an investor has does not use the “optimal stock allocation” indicated. The report doesn’t go into what real-world safe-withdrawal rates might be, though I’m guessing that one should drop at least a full point to be safe, yielding very conservative actual withdrawal rates of less than 3%. (And possibly lower.)
Does this assessment of the report match yours, Rob? If not, please explain briefly how your view differs.
Also, now that I’ve read this, please state succinctly what your beef with this is. (By succinct I mean: If you write a l-o-n-g comment, I’m not going to read it. Tell me in just a few sentences why you don’t like this report.)
My first question is: Who is John P. Greaney, and why should I care? There’s nothing here that would lead me to consider this study or its author authoritative.
John is some guy who posts stuff on the internet, just like you and just like me.
The methodology he uses in his study is the same methodology that is used in the Trinity Study (the most famous of the Old School SWR studies). The Trinity Study used a peer-reviewed methodology. John’s study is highly ranked by Google. Lots of people looking for retirement planning advice are led to it every day. A good number of big names in the field have linked to John’s study. Those people include Scott Burns, Mel Lindauer, Jonathan Clements and others.
The findings reached in the Old School studies have been cited in countless articles on retirement planning — the number is in the tens of thousands at least. What matters is not John Greaney, but the methodology used in the Old School studies (of which John’s study is one).
What brings John into this is that John is the leader of the Goon Squad. If I were questioning the Old School studies and John had not written one, this issue would be like thousands of others discussed on the internet every day. What makes this one different is that the most abusive poster in the history of the internet happens to be one of the people with his name on an Old School study. So in this case we have all the trickery that you see being employed by Lindsay to block discussions of the analytical errors in the methodology used in all of the Old School studies. What John has been adding to the story for seven years now is the Goon posting thing.
John gets the numbers wrong but not because he did not apply the methodology properly. All of his calculations check out. The problem is that the methodology he uses (the one used in ALL Old School studies) is analytically invalid. What matters re your readers is not that John’s study in particular gets the numbers wrong but that ALL of the Old School studies get the numbers wrong. There are millions of people who have relied in some way on the Old School findings to plan a retirement.
The reason why John’s study is the one that we happened to focus on is that John and I posted at the same board at Motley Fool and that is where these discussions got started. John always framed the discussion as being a case of Rob “attacking” John. I have of course never attacked John. I think of John as a friend (and he used to think of me as a friend). What I am criticizing is the flaws in the Old School methodology. The flaw is the failure to include an adjustment for the valuation level that applies on the day the retirement begins.
The same flaw applies in the case of the Trinity study and all the others. The only study that include a valuation adjustment is the study done by John Walter Russell that is the engine of the calculator (“The Retirement Risk Evaluator”) at my web site. Michael Kitces has recently done research that includes a valuation adjustment in only one direction (Michael goes halfway between the Old School and New School approaches). Michael is planning additional research in this area. Ed Easterling has published material that includes a valuation adjustment but that probably is not done in a formal enough way to be called a “study.” William Bernstein in his book “The Four Pillars of Investing” looked at what the safe withdrawal rate would be if a valuation adjustment were applied. Bernstein’s findings are generally in accord with those of John Walter Russell (Berntein used a different valuation adjustment but his numbers are in the same general ballpark).
Rob
Does this assessment of the report match yours, Rob?
No.
My beef with ALL of the Old School SWR studies is that they do not include an adjustment for the valuation level that applies on the day the retirement begins. The historical data shows that the valuation level that applies on the day the retirement begins is the single biggest factor affecting the safe withdrawal rate. Studies that do not include such an adjustment cannot possibly get the SWR right (except in rare cases by pure accident when the valuation level is where it needs to be for the number to actually be “4”). The SWR is not a stable number. It is a number that VARIES with changes in valuation levels.
Here is a link to The Retirement Risk Evaluator. This is the only analytically valid SWR calculator on the internet:
http://www.passionsaving.com/retirement-calculator.html
Here is a link to an article quoting a number of big names in the field as to why the valuation level that applies on the day a retirement begins must be considered in identifying the safe withdrawal rate:
http://www.passionsaving.com/stocks-in-retirement.html
Here is a link to an article in which a large number of my fellow community members discuss their concerns with the approach used in the Old School studies:
http://www.passionsaving.com/retirement-risks.html
Here is a link to a blog entry by Michael Kitces (a financial planner based in Maryland who has done SWR research) praising the Risk Evaluator as “a fascinating retirement calculator.”
http://www.kitces.com/blog/index.php?/archives/29-Is-the-Safe-Withdrawal-Rate-too-safe-Or-too-aggressive!.html
If you were to write about the New School findings, you would never again see this ugliness at your blog. All of the ugliness that we have seen for seven years now has been put forward by “friends” of Greaney trying to stop people from hearing about the flaws in the Old School studies (they need to stop me from posting on ANY issue because if I am permitted to post there obviously is going to come a time when I am going to post what I know about SWRs).
The question of whether those planning retirements need to look at valuations is the substance issue. This is the issue that matters for your readers. This is the issue we all should be talking about, not that other stuff that is intended as a distraction from the substance questions.
Rob
Rob, I asked you to give me short answers that got to the point and you’re not doing it. I’m trying to carry on a conversation with you, but if you’re going to post long, rambling screeds about Goons, I’m going to stop. I don’t have time to parse that sort of thing. Please give me short answers.
It sounds to me as if what you’re saying is that John Greaney is just some random guy on the internet who isn’t exactly an authority on anything. And the reason you’re pointing me to his study is because you have a personal history with him and don’t like him. This is a weak reason to choose to use his numbers.
In your comment #298, you did exactly what I asked you not to do. You posted a long comment that didn’t answer my questions. Let’s try again.
Here’s my evaluation of the report you linked to:
I asked you if your assessment of the nature of the report matched mine, and if not, how your assessment differed. You’re response was “no”, but you didn’t offer any explanation as to how your assessment differed. Please tell me in just a few sentences what you think the report says since you don’t think I’ve managed to describe it properly.
The rest of your comment #298 is a long comment about your beef with the report. Again, I asked you NOT to post a long comment, but you did it anyhow. I don’t want to read your long comments, Rob. I don’t have the time or the energy.
I’ll take the first paragraph of your response, though, to be your answer. You wrote:
I don’t care about “studies”. I care about the study you pointed me to. We’re not talking about anything else here. We’re breaking this down and taking it one piece at a time.
In this case, the study you pointed to does seem to take into account valuation levels. It doesn’t mention a 4% safe-withdrawal rate in any context. The study shows safe withdrawal rates based on worst-case scenarios, and nearly all of those rates are less than 4%. It doesn’t actually show withdrawal rates for more favorable stock-market valuations, but it’s clear that the author believes the rate would vary if the stock market weren’t overvalued at retirement, or if inflation remained low, etc. There’s nothing in this report to indicate the author is advocating a fixed 4% SWR or is ignoring valuation levels.
SHORT ANSWERS THAT GET TO THE POINT, ROB.
My 2 cents on the last 7 years:
Rob: “Studies that do not include such an adjustment cannot possibly get the SWR right (except in rare cases by pure accident when the valuation level is where it needs to be for the number to actually be “4″).”
Rob do you still not understand this or are you just making stuff up? The study you so hate includes all historical valuation levels and simply reports the MINIMUM withdrawal rate that worked for every year in the history of the US stock market. (This is clearly stated.) It includes every historical valuation level, every historical change in politics and policies, every historical war, famine, crop failure, invention, corporate failure, fad etc. And then it takes the MINIMUM. (I keep emphasizing MINIMUM because Rob, has sometimes implied that he thinks it’s the average.) It, of course, suffers from the problem that things may be different in the future.
Rob’s preference is Robert Shiller’s idea to take one variable and correlate withdrawal rates to that via a linear regression. The one he likes is P/E10, chosen and made famous by Shiller, and from this you get an R^2 of around 0.2. So, according to Rob, an R^2 of 0.2 for one valuation measure is supposed to be immensely superior to a model that bakes in ALL variables including P/E10, all other valuation measures, and all the other stuff listed above. Other people have found STRONGER single correlations than 0.2 and even stronger correlations using multiple indicators but Rob says we’re all supposed to use his (really Shiller’s) chosen valuation metric.
Rob: “If you were to write about the New School findings, you would never again see this ugliness at your blog.”
Not historically accurate. For example Rob spent 2 years spamming his stuff at Morningstar and just kept going until the day he was banned. Scott Burns wrote briefly about Rob’s stuff and still had to ban Rob from his blog because Rob was telling Scott Burns whom to ban from his own blog within 24 hours of joining.
By the way, Rob’s stuff is really John Russell’s stuff. John is not banned at Morningstar, like Rob is and still freely talks about the stuff that Rob tells you is being suppressed (via “ban on honest posting”). John isn’t banned because, while he brings his stuff up frequently, he doesn’t go on and on and on about it in almost every thread. He has some self control. Some “Restraint”. (Where have I heard that word before?) Robert Shiller, is likewise, not banned anywhere and indeed welcomed and published and interviewed far and wide. I’ve spent a lot of time looking at John’s stuff and when Rob isn’t bloviating about how it’s the best thing in the world, and it’s all due to Rob, it’s “OK” (not great) given it’s limitations.
People at Morningstar have taken issue with John’s math and methodology, and John has made some blunders that indicate that his math and statistics knowledge are weak, but no one has banned him for any of that. John uses “eyeballing”, and has indicated that he doesn’t like academics and peer reviews because they make you do it “just right”. He used to do quick SWAGs for the army where time was of the essence and precision was a luxury. That’s fine, and again, he hasn’t been banned at Morningstar and he still has his own web site as well.
Rob likes John’s stuff but Rob has admitted that his math is beyond weak. Rob also stated on Morningstar that math can only be correct if it agrees with your common sense. This explains how he latched on to John’s work so hard regardless of the limitations.
Rob: “All of the ugliness that we have seen for seven years now has been put forward by “friends” of Greaney ”
Never met the guy. So I guess Rob is saying that I haven’t put forward any ugliness? According to his website, Greaney spent the last year traveling in South America and Antarctica but Rob still thinks he’s the “goon leader” and that anyone who finds any flaws in Rob’s ideas is getting instructions from him. Supposedly, people like John Bogle and William Bernstein are supposed to be afraid of John Greaney and so, according to Rob, they speak in “code” in their books and interviews so as to get past this guy that you never heard of. Think about that.
No, my reaction to Rob, is simply a reaction to Rob. Sorry Rob, but the whole “conspiracy”/”campaign of terror” is really that simple.
J.D., far be it for me to speak for Rob, but I believe the following excerpt that Rob wrote in comment 172 summarizes Rob’s criticism with the Old School withdrawal rate studies such as Greaney’s . . .
Rob wrote: “The Old School retirement studies were saying at the top of the bubble that a 4 percent withdrawal rate was “100 percent safe.” The historical data was saying at the time that retirements calling for a 4 percent withdrawal had about one chance in three of surviving 30 years. If you knew to subtract 2 percentage points from what the experts were saying, you would have had a number in the right ballpark. The analytically valid studies put the SWR at the time at about 2 percent.”
Now of course, Greaney’s study, nor do any of the Old School studies, examine the 30-year period starting at the top of the bubble (March 2000). The Old School methodology is backward-looking only. It has no predictive ability.
Hope this helps to clarify.
@Schroeder (#301)
My problem is that I’m not aware of any studies — Old School or otherwise — making the claims that Rob says they are. The one he sent me too (which is presumably the one he has the most complaints with) in fact says the opposite. It basically agrees with Rob, so I’m not sure why he doesn’t like it.
Based on my own experience, reading books and interviewing planners, I’ve never heard anyone advocate a 4% withdrawal rate as anything other than a rule-of-thumb for making estimates. So, to me, it seems like Rob is fighting an enemy that doesn’t exist. And he’s asking me to fight it with him.
The study you so hate includes all historical valuation levels and simply reports the MINIMUM withdrawal rate that worked for every year in the history of the US stock market. (This is clearly stated.)
The study says that a 4 percent withdrawal rate is safe regardless of the valuation level that applies on the day the retirement begins. The historical data shows that a the top of the bubble a retirement plan calling for a 4 percent withdrawal had only a 30 percent chance of surviving 30 years.
There is no reasonable person who would claim that a retirement plan with only a one in three chance of working out is “safe.” Such a plan is risky. The words “safe” and “risky” are not synonyms. They are antonyms.
In no field of human endeavor other than investing would it be viewed as “controversial” to warn people of studies recommending reckless retirement strategies. The root problem here is the Passive Investing concept, which encourages us to ignore the effect of valuations. It doesn’t work.
Rob
(I keep emphasizing MINIMUM because Rob, has sometimes implied that he thinks it’s the average.)
The study uses the average rate of return as its implicit return.
At times when valuations are where they need to be for the investor to earn the average return, a 4 percent withdrawal is indeed safe. At times when valuations are where they were from 1995 through 2008, this is obviously not the case and the retirement strategy being promoted as “safe” is high risk stuff.
I do not approve.
Rob
Rob likes John’s stuff but Rob has admitted that his math is beyond weak.
I don’t know about “beyond weak.” I would certainly agree that my math skills are not strong.
Rob
I asked you to give me short answers that got to the point and you’re not doing it.
I am going to continue giving you accurate answers, J.D.
If you want to know the answers to your questions, you will put in the effort it requires to read the words that are needed to answer them correctly.
It is far more time effective for everyone concerned for me to provide accurate answers. One of the reasons why we have wasted so much time with the defamation posts is that too many have been unwilling to spend the time needed to learn the basics about SWRs. A small amount of time doing that relieves you of the need to spend the far larger amount of time you have been required to spend wading through the dozens of defamation posts set forth in this thread.
You are of course free not to read anything you care not to read. If you ask a question, I am going to interpret that act as a desire on your part to learn the realities and respond accordingly.
Rob
The Old School methodology is backward-looking only. It has no predictive ability.
This is an accurate statement of the realities.
The claim that the studies tell us what is “safe” is a predictive claim. It is quite correct to say that the studies do not even make an attempt to tell us what is safe, they do not even look at the factors that need to be examined to determine what is safe.
There are millions of middle-class investors who are going to suffer busted retirements in days to come as a result of the demonstrably false claims made in these studies, in the event that stocks perform in the future anything at all as they have always performed in the past. The word games do not impress me.
Rob
“The study uses the average rate of return as its implicit return.”
No. Rob, Most Monte Carlo simulators do this, but not the study you are complaining about. After 7 years you should be able to come up with complaints that actually apply but I think you’re just too emotional about an argument you lost to Greaney 7 years ago. No one cares about that except you.
“demonstrably false claims”
Please list those claims and provide the demonstrations that they are false.
Pasting this into Word, we are at 113 pages. I think it’s time to get to an actual demonstration.
For example Rob spent 2 years spamming his stuff at Morningstar
This is of course one more case of defamation, on top of dozens of earlier cases that appear in the thread above.
J.D. has told me that he opposes defamation on the internet.
Yet we see no action in response to this type of post.
And I told J.D. about the Greaney goons well in advance of the time this blog entry went up. He knew that these people were out there, he knew about their methods, I had even provided a link to the discussion board at which the Goons meet each day to plan their strategies for attacking whatever blog is on the list for that day.
People should be permitted to discuss the substance of the questions raised by this blog entry. For that to happen, we need action taken re the defamation problem.
Rob
“The word games do not impress me.”
113 pages of blog comments so far.
“This is of course one more case of defamation, on top of dozens of earlier cases that appear in the thread above.”
Rob, according to posters at Morningstar, you frequently hijacked threads about other subjects to talk about your stuff. You have also said on another blog that you keep naming your investment system on the internet so that it will pay off big time when people search for it because only your page discusses it. Thus, I used the word “spam”. If you think this is inaccurate, please correct me. I am open to discussing a more accurate term if there is one.
It sounds to me as if what you’re saying is that John Greaney is just some random guy on the internet who isn’t exactly an authority on anything.
I don’t see how he is any more or less random than you or me.
There are certainly some big names in the field who treat him as an authority. Scott Burns linked to his study. Jonathan Clements linked to FIRECalc, which is a calculator that was developed based on Greaney’s study. Mel Lindauer has linked to him. Motley Fool has quoted him in articles on its site. He was held up as an authority at the Vanguard Diehards board when there were hundreds of us asking that honest posting be permitted and the “leaders” in the community were citing John’s study as evidence and inviting John to bring in more Goon posters to stop the questioning of their investing views.
He is not the biggest authority in the world. But his study is widely used. And he made use of the Old School methodology in a perfectly proper way. If the Old School methodology were analytically valid, his study would serve a very good purpose. He has done a great job of popularizing the Old School methodology. I don’t see how any lack of authority on Greaney’s part is of any concern here whatsoever. When he uses the Old School methodology, the authority of the people who developed the methodology carries over to him. The Old School studies passed peer review. Is that not a form of authority?
Rob
“And I told J.D. about the Greaney goons well in advance of the time this blog entry went up.”
Thank you for admitting again that you try to manage site owners to control other people. I haven’t gone behind your back, like that, Rob.
“I had even provided a link to the discussion board at which the Goons meet each day to plan their strategies for attacking whatever blog is on the list for that day.”
Could you provide the link to that site here? Since you have called me a “goon”, it seems only fair that I should know about it.
“There are certainly some big names in the field who treat him as an authority. ”
Rob, this only indicates that some “big names” find his work to be credible. They don’t link to him because they are afraid of him!
And the reason you’re pointing me to his study is because you have a personal history with him and don’t like him.
I like him just fine. I had a lot of good times with John at the Motley Fool board. His name is the first name mentioned on the Acknowledgments page of my book. Where did you get the idea that I do not like him?
You probably got that idea from listening to the Goons. Do you see why it is a bad idea to permit posting from people who have a long record of doing whatever is necessary to destroy discussion board and blogs on which people are posting honestly on safe withdrawal rates? If the Goons misled you on this one simple point, how many other things do you think they have misled you on?
You frequently express a concern re the amount of time it takes you to read accurate and honest posts, J.D. Think how much time you would save if you paid less attention to the inaccurate and dishonest ones. A lot of my words are directed to explaining to you why things that you have been told by the Goons are not so. Perhaps known Goon posters should not be trusted to tell it straight?
I of course do not approve of John’s Campaign of Terror against the Retire Early and Indexing discussion-board communities. I find the Campaign of Terror a stone cold drag. Please feel free to quote me re that one. (And, yes, I implored my friend John not to walk down dark path he has chosen to walk down — on numerous occasions.)
Rob
Rob, I apologize for calling your activity spamming until we determine a better term for it. Will you apologize for calling me a goon and a thug?
From the dictionary:
goon: a hired hoodlum or thug.
thug: a cruel or vicious ruffian, robber, or murderer.
You certainly didn’t mean to tell people that I am a hired (by Greaney???) to rob or murder you, did you?
I don’t want to read your long comments, Rob. I don’t have the time or the energy.
There’s no law that says you need to read anything you don’t care to read, J.D. Take a breather, for heaven’s sake. Return when you are refreshed if that seems like a good thing to do at the time.
Rob
Rob, you’re making my brain hurt.
I’m merely repeating what you said about Greaney, and now you’re telling me I’m wrong. You are the one who said that Greaney is a random guy on the internet, but now you’re telling me he’s an authority. You are the one who characterizes Greaney and his supporters as Goons, so naturally I assume that you don’t care for him or his analysis. When I ask you to name a study that you don’t like, you mention his. How else am I supposed to take it other than you don’t like him? Especially when a few sentences later you say that he’s conducting a Campaign of Terror? I got he idea that you don’t like him from you, not from the Goons.
SHORT ANSWERS THAT GET TO THE POINT, ROB.
ACCURATE AND REASONABLE AND BALANCED AND HONEST ANSWERS THAT HELP PEOPLE LEARN THE REALITIES OF STOCK INVESTING, J.D.
ROB
Accuracy, reasonableness, balance, and honesty are not synonymous with length. You can be just as accurate, reasonable, balanced, and honest with short answers, Rob.
“I like him just fine. I had a lot of good times with John at the Motley Fool board. His name is the first name mentioned on the Acknowledgments page of my book. Where did you get the idea that I do not like him?”
I don’t know, Rob. Here are some quotes from a few years back:
“I am anti-intercst. I find his vision of early retirement a dark, narrow-minded, hateful vision. ”
intercst, was John Greaney’s user name back then.
“I reject intercst’s vision of early retirement out of hand. If our boards are intercst boards, I should take my leave of the community and go about building my own vision elsewhere.
I will go about building my own vision elsewhere. There are no boards left for me to post on. I tried everything that could be tried to steer us in a more positive direction, and by the end of today there will be nothing that I will be physically capable of doing to help in the steering effort any longer. That chapter of our little saga has come to an end. ”
“In general, however, it is A-OK by me if you all come to refer to me as the anti-intercst. Just about everything he is for, I am against. And just about everything he is against, I am for. Is that frank enough? ”
“We all get it that hocus is anti-intercst, as anti-intercst as it is possible to be. ”
Posts like that gave me the impression you didn’t like him.
Based on my own experience, reading books and interviewing planners, I’ve never heard anyone advocate a 4% withdrawal rate as anything other than a rule-of-thumb for making estimates.
There is no reason why a rule of thumb cannot be calculated accurately.
There are many areas of life endeavor in which people use rules of thumb and in which those rules of thumb are calculated accurately.
I think it would be fair to say that InvestoWorld is the only world in which those promoting inaccurately calculated rules of thumb are given free reign to promote their work but those urging the use of accurately calculated rules of thumb are banned from the discussions.
I will continue to report accurately what the historical data says re safe withdrawal rates.
Rob
???
A rule-of-thumb is by definition just an estimate. It’s not meant to be accurate. It’s an approximation. And if you wouldn’t use 4% as a rule-of-thumb for this, which number would you use? 3.5%? 3%? 5%?
Accuracy, reasonableness, balance, and honesty are not synonymous with length. You can be just as accurate, reasonable, balanced, and honest with short answers, Rob.
This is a false claim, J.D.
Balance often requires presenting both sides of the story. That takes a few words. The same is true with accuracy. “Yes” and “No” answers with no explanation are often misleading answers.
I will continue to give the best answers I am able to give to any questions you direct to me regardless of any pressures you attempt to impose on me not to do so. That’s the right thing to do for you as well as for me, in my assessment.
Again, in any other field of human endeavor, the idea of providing accurate answers to questions posed would not be in the slightest bit “controversial.” Passive Investing — ain’t it grand?
Rob
A rule-of-thumb is by definition just an estimate. It’s not meant to be accurate. It’s an approximation. And if you wouldn’t use 4% as a rule-of-thumb for this, which number would you use? 3.5%? 3%? 5%?
There are many rules of thumb in which accurate calculation is both permitted and encouraged.
I would use the accurate numbers.
If we permitted the use of accurate numbers, we would have spared millions of people from suffering one of the worst life setbacks imaginable.
Rob
How else am I supposed to take it other than you don’t like him?
By reading the responses to the questions you ask.
Especially when a few sentences later you say that he’s conducting a Campaign of Terror?
I certainly do not approve of the Campaign of Terror. I have also said that I urged John not to wage the Campaign of Terror against us. And I asked other community members to help persuade him not to do so.
Does that sound to you like the actions of someone who does not care for the guy, J.D.?
I care for John. I also care for the thousands of community members who will be suffering busted retirements as a result of his demonstrably false claims. Both things are so.
And I shouldn’t have to choose between the two.
Rob
Rob, do you plan to answer my two main questions from #296 and #299. (They’re the same in both posts. You ignored them in your reply to #296, so I repeated them in #299.) Here they are again:
1. You say that I haven’t accurately summarized the report you linked to. What do you think the report says?
2. What is your complaint about this particular report? (Not other reports, but this report.)
I’m particularly curious why you think this report advocates a 4% safe withdrawal rate. There’s nothing in it that mentions anything like this at all.
“I am anti-intercst. I find his vision of early retirement a dark, narrow-minded, hateful vision. ”
The quotes in this post are accurate.
I do indeed think it is fair to characterize me as the anti-intercst. And I do indeed think that he offers a narrow hateful vision of early retirement today.
That was not true in an earlier time. I was very excited on the day I discovered John’s web site. I immediately printed out every page. I talked about nothing else to my wife on our drive home from work that day. I had lots and lots of fun times with John during the year when we were building up the Motley Fool board together. And I think that his SWR study has done a lot of good too. We would not have the New School studies today had we not had the Old School studies before them. The New School is built on the shoulders of the Old School.
John is wasting his life with all this hate stuff and this attack stuff and this self-degradation stuff.
Everyone of course knows this. The difference with me is that I try to do something about it.
John has done good things in his life and John has done bad things in his life. The reality of the good things does not negate the reality of the bad things. And the reality of the bad things does not negate the reality of the good things.
I am always going to carry some fondness for John within me because of the good times we had together. I think it would be dishonest to pretend that those things did not happen or to pretend that he never made positive contributions.
And I am always going to urge him to direct his life energies to more constructive pursuits than the Campaign of Terror against his fellow community members. That is indeed dark and hateful stuff
Humans!
Rob
I’m particularly curious why you think this report advocates a 4% safe withdrawal rate. There’s nothing in it that mentions anything like this at all.
I am not even a tiny bit impressed by the word games, J.D.
Thousands of my fellow community members used the Greaney study to plan their retirements. Many of those people are friends of mine. A busted retirement is a serious life setback.
Rob
Rob, your response in #330 doesn’t answer my question. I’m not playing word games. Earlier, you wrote: The study says that a 4 percent withdrawal rate is safe regardless of the valuation level that applies on the day the retirement begins.
This simply isn’t true. On the page you sent me to:
http://www.retireearlyhomepage.com/restud1.html
THERE IS NOTHING HERE THAT SAYS A 4% WITHDRAWAL RATE IS SAFE. Nothing. You’re making this stuff up. One or two of the time periods (10 years and 20 years) in the table do in fact show that under ideal conditions, a 4% withdrawal rate would have worked in the past. But in every other case, they would have failed.
Here’s my evaluation of the report you linked to:
I asked you if your assessment of the nature of the report matched mine, and if not, how your assessment differed. You’re response was “no”, but you didn’t offer any explanation as to how your assessment differed. Then you ignored my second request for an assessment. This is my third request.
Please tell me what you think the report says since you don’t think I’ve managed to describe it properly.
I’m not playing word games. I’m trying to understand what it is you’re seeing on this page, and how it differs from what I’m seeing. I’m trying to make sure we’re on the same page before we move to the next stage of the discussion.
THERE IS NOTHING HERE THAT SAYS A 4% WITHDRAWAL RATE IS SAFE. Nothing.
Good point, J.D.
Thanks for pointing that out.
Rob
Rob: “Good point, J.D.
Thanks for pointing that out.”
After 332 comments, will Rob finally let it end with one of his boilerplate sarcastic retorts? Stay tuned!
In reading my Sunday Las Vegas Review-Journal this morning, I found this column, “Personality disorders difficult, sometimes impossible, to treat” written by praciticing psychologist, author and former Episcopalian priest, Steven Kalas to be quite relevant to one Rob Bennett.
http://www.lvrj.com/living/47141212.html
The column begins with a story;
[i]Comedian Ron White is setting up a joke about visiting some 3,000 soldiers on a military base. A femaile heckler shouts from the audience, “Yeah, well every one of them is (unsatisfactory in bed)!”
White pauses, his face frozen in that collision of droll and impish that has me laughing already. “Wow,” he ponders aloud. “You’d think after 2,037 or so (unsatisfactory experiences in bed) the average person might think, ‘Hmm, maybe it’s me!’ ” [/i]
Not Rob Bennett. Despite multiple bannings from personal finance discussin boards and blogs, Rob still is able to place all the blame on others. Despite the behavior displayed by Mr. Bennett in the comments above, it’s not Mr. Bennett, it’s everyone else who is at fault.
Mr. Kalas goes on;
[i]After I finish laughing, I start thinking. White’s spontaneous aside to a heckler makes me think of a population of people with whom I struggle both professonally and personally, because these people are difficult and exhausting in interpersonal relationships.[/i]
That in a nutshell is why Rob invaribly finds himself unwelcome wherever he posts. It’s simply exhausting to deal with his passive-aggressive personality over any length of time. And given that he offers nothing to further the discussion of personal finance matters, banning him is the only way that topics such as PE10 valuation strategies, safe withdrawal rate studies and others may be discussed. Otherwise, Mr. Bennett requires that all such discussions center exclusively around him and his beliefs and opinions.
Several additional passages written in the column are as though they could have been written specifically about Rob.
He’s not really a Goon, J.D.
You oppose defamation.
Rob
Rob,
You’re demonstrating one of the reasons people have had difficulty talking to you for all these years. First we get the mountains of words that don’t really address the questions, then we get the strange sideways evasions like:
J.D.: “Especially when a few sentences later you say that he’s conducting a Campaign of Terror? ”
Rob: “I certainly do not approve of the Campaign of Terror.”
Then we get the insulting phrases like “word games”, and then we get the sarcastic one-liners and silence on actual issues and questions.
This is fantastic material.
It all works to the benefit of the middle-class investor.
Something else.
Rob
Rob@284:
“You’re keeping the community “safe and sound” by turning over the keys to the Greaney Goons. They don’t want your readers finding out about the errors in the Old School retirement studies. So you are going to go along.
That’s not benevolence. That’s cowardice. I say it that way because you leave me no choice. There are responsibilities that come into play when you open up a blog dealing with personal finance questions. One responsibility is to protect people from demonstrably false retirement claims. Another is to protect posters at your blog from vicious smear campaigns. You have failed to honor your responsibilities here, J.D.
I say that with no personal animus. I say it because I think you are doing wrong and I would like to work with you to bring you and the blog and the community that meets here to a better place. You are better than what you are representing yourself to be in your behavior here. You never should have permitted yourself to be have been pulled into this mud. It’s bad news and I am confident that there is a part of you that recognizes that to be so. I hope you will reconsider your thinking here.”
Get Rich Slowly is not Rob’s first rodeo. Most sites ban Rob following weeks or months or even years in which he hijacks every conversation which he then turns into a discussion of Rob Bennett and Rob Bennett’s beliefs and opinions. Faced with Mr. Bennett’s unrelentess and self-absorbed drama, the Financial Webring Forum took the following action to short-circuit Mr. Bennett’s unwillingness or inability to exercise any self-restraint;
“The Management
Site Admin
Joined: 16 Feb 2005
Posts: 146
Posted: Sun Mar 30, 2008 10:12 am Post subject: Hocus: A Permanent Ban
——————————————————————————–
We have taken the unusual step of banning a member based on expected behaviour rather than actual behaviour. Based on what we have seen elsewhere and at his own blog, we have permanently banned hocus from FWF. What we have seen unfolding in Technical analysis anyone? is consistent with what we have seen unfold at other forums. Rather than wait and incur similar chaos, we have acted now. We accept that this will probably not sit too well with some of you (and we ourselves don’t feel entirely comfortable in not giving the benefit of the doubt) but we try to act in a way that keeps conversation flowing in an orderly way. No conversation can exist in a free-for-all. If anyone is interested in carrying on a discussion with hocus, please feel free at his blog.”
J.D., good luck to you. If you find time to read the column by Steve Kalas I mentioned in my post above, you’ll see that individuals like Mr. Bennett can try the patience of even professional psychlogists. It’s unlikely there’s anything any of us can do to alter his self-destructive behavior patterns. But please do note that Mr. Bennett has in the past nearly or totally destroyed the readership of more than one discussion board. His prowess as an internet troll should not be underestimated.
Rob: “You’re keeping the community “safe and sound” by turning over the keys to the Greaney Goons. They don’t want your readers finding out about the errors in the Old School retirement studies. So you are going to go along. That’s not benevolence. That’s cowardice. I say it that way because you leave me no choice.”
I had totally skimmed past that bit of nastiness the first time. It’s funny because my very first attempt to have a conversation with Rob years ago was to ask him specifically what the error(s) was/were. Rob led me on a merry chase just like these blog comments and left me totally dazed and confused but never answered the question. In the years since I have never been able to get an answer out of him nor to find an answer in those post archives that he’s always pointing people to.
Soon, he had identified me as one of those Greaney Goons who are out to destroy the world even though I had never met Greaney. In fact I might not know the guy’s name if it weren’t for Rob. I certainly wouldn’t know about the Best of Hocomania forum if it weren’t for Rob. It’s funny too because Rob occasionally says that he goes to all these blogs and forums to recruit troops to go back and take over forums that banned him in the past, but it seems that all his recruitment attempts just end up recruiting us goons! Many of the current goons weren’t around during his earliest bannings.
Rob has said it only took him a few minutes to skim the study and know that it was wrong. He has also stated the date when this revelation occurred: 1996 – oddly enough, the study was published in 1998. He never did explain that one either. He then waited about 6 years to reveal the truth. Why? Because he was afraid of the Greany Goons. Yes, Rob knew he would be attacked for telling the truth before the first time he attempted to tell the truth. And he knew he would be attacked by Greaney’s goons even though he claims that during that time, he and Greany were friends. Confused enough yet? Noticed that we still don’t know what the error is/was? Yep, me too! It just goes round and round like that. 🙂
JD: “which number would you use? 3.5%? 3%? 5%?”
Rob: “There are many rules of thumb in which accurate calculation is both permitted and encouraged. I would use the accurate numbers.”
Some other poster: “Rob can you post a comparison of the Lucky VII System results with those of, say, the Coffee House Portfolio?”
Rob: “My methods put you far ahead of any sort of passive approach.”
Yet another quizzical reader: “Rob, you say on your blog that you ‘retired’ with $400K, all in cash and TIPS earning less than 3.5%/yr aggregate; and then have a consumption rate of around 8%/yr for around a decade. How is your nest egg holding up with that apparently unsustainable burden on it? Are you, for instance, now in stocks? Was your income augmented by the book writing or authorship (no, it was an net expense)? Can you tell us how you, a person who wrote a book on saving using yourself as an example, please favor us with the same sort of information regarding your retirement figures?”
Rob: “I can’t tell you. People will lie about it. I’m far better off now than I would have been passively investing, tho’ — by golly, I’ll tell you that, for sure!”
Everyone in unison: “Um. Uh. Well, thanks for that ‘information’ Rob. We guess… gotta run now…”
I’m still waiting for Rob to answer the question I asked in post #130:
“How is the average investor supposed to discern when stocks are ‘insanely overpriced,’ or even just mildly overpriced, for that matter?”
I know the answer is the PE/10 ratio, but what’s the magic number that indicates a market/stock is “overpriced?”
Rob, can you answer this question, with an actual, numerical value?
It seems to me that such a value would be absolutely pivotal in the explanation of Rob’s pet valuation-informed investing model. I can’t for the life of me understand why it hasn’t yet been addressed, in any of Rob’s 100+ posts in this thread.
Rob,
You are a lonely creature. My guess is : you are either single or married but your wife does not talk to you much.
I sympathize with you. See a Shrink, and get some help.
Rob, can you answer this question, with an actual, numerical value?
No. To pretend to be able to do so would be dishonest, Kevin.
About 90 percent of investors today buy into the Passive concept (that it is not necessary to change your stock allocation in response to big price swings). About 10 percent follow the Rational model (they understand that the long-term investor MUST adjust his allocation from time to time to keep his risk level roughly constant).
The 10 percent have no problem at all understanding how this works. Those in the 90 percent sometimes find themselves dealing with a lot of confusion when they try to understand precisely how to go about investing rationally.
The idea that there needs to be some sort of “system” is dangerous nonsense. It is black-and-white thinking. It is this way of approaching investing questions that causes Passives so many problems.
Would anyone ever dream of asking Bogle “what is the one right stock allocation?” The question is obvious nonsense. We all understand that different allocations are right for different sorts of investors facing different sorts of circumstances at different times. So it is with the allocations chosen by Rational Investors.
There is no one allocation chosen by all Valuation-Informed Indexers facing all possible circumstances and that applies at all times. The GOAL of the asset allocation decision-making strategy is what always remains the same.
The GOAL is to keep the investor’s risk level roughly constant.
It is obvious that stocks are many times more risky when they are selling at three times fair value than they are when they are selling at fair value. So no Rational would ever give thought to sticking to the same stock allocation at both valuation levels (this would be Passive investing).
But no Rational would give a moment’s thought to the idea that there might be One Right Stock Allocation at all of the different valuation levels either. That idea is just about as absurd as the idea that there is no need to change allocations in response to big price changes. It is more dangerous dogmatism.
The goal of the Rational Investor is to invest effectively. Rationals see little appeal to the idea of sticking with some crazy “system” whether the system in question is Passive Investing or some alternate version of craziness in which all investors switch to some other equally messed-up asset allocation strategy.
If honest posting on these matters were permitted on the internet, there would be 100 different boards or blogs you could go to where people would be discussing different ways of keeping their risk level roughly constant and thereby investing effectively for the long run. The reason why you cannot take advantage of all those discussions today is that the Passive dogmas have sucked all the oxygen out of the room. None of us can talk about these matters and learn about these matters until we are able to persuade the Passive dogmatics to calm down enough to let us talk in peace about the investing questions that matter most.
We can say with certainty that Passive can never work in the real world. We can say with certainty that all investors should be trying to Stay the Course by keeping their risk levels roughly constant by changing their allocations in response to big price changes. We cannot set forth some phony “system” that tells us one stock allocation that works in all possible circumstances.
The idea that, when you give up on one phony “system,” you must replace it with some equally phony “system” that is a bit different is a fear-based idea, Kevin. The idea of Rational Investing is to overcome the most negative of the investing emotions, not to give in to them at the start point. There is no one magic “system” for how to invest effectively. There never will be one. The quest for one is a futile endeavor,in my assessment.
I wish you the best of luck with your investing strategies whichever way you elect to go with your decisions, my new friend.
Rob
See a Shrink, and get some help.
The Old School safe withdrawal rate studies do not claim to tell us the safe withdrawal rate.
You’re making this stuff up.
Rob
Rob, I’m completely baffled by your responses over the past 24 hours.
You complained that I wasn’t taking you seriously, so I agreed to listen to what you had to say, starting from the beginning. I asked you to point me to a study that you had a complaint about. You did. I read it. I summarized what I thought was there. I asked if you agreed with my assessment. You said “no”, but you’ve refused to tell me what you think the study says.
You’ve continued to talk about the myth of the 4% safe withdrawal rate, but the study you sent me to says nothing about it, and when I pointed that out, you clammed up. Why? What’s going on? What am I missing?
You want people to talk about this, but when we finally agree to, you refuse to. This doesn’t make sense.
Rob: “About 90 percent of investors today buy into the Passive concept”
I would guess that it’s in the 5-10% range.
Rob: “About 10 percent follow the Rational model ”
I would estimate that that’s about 0%. Even Rob has admitted that he doesn’t follow his own model. In any case if you can’t define it, there’s no way to assign a percentage of people who follow it.
Rob: “The 10 percent have no problem at all understanding how this works.”
Then why don’t you ask one of them to come over and answer these questions for us, since you are unable?
If it’s 10%, then there are hundreds of millions of them who can answer the questions. If it’s 0%, well that would be harder.
You want people to talk about this, but when we finally agree to, you refuse to. This doesn’t make sense.
I will continue to report accurately what the historical data says re safe withdrawal rates, J.D.
Rob
I would guess that it’s in the 5-10% range.
If you took a poll of U.S. investors asking “Is it necessary to change your stock allocation in response to big price changes to have a realistic hope of long-term investing success?” I can guaranty you that more than 5 percent would answer “no.”
That’s Passive Investing.
The stock allocation is the thing that Passive Investors are passive about.
Rob
@Rob
I agree with your recent post that says replacing one system with another system is a fool’s errand. Investing is a process; a process which requires consistent intellectual input and reaction to current environments.
However, having said that, you will never get people to engage you properly until you start speaking their language. That is going to require you to demonstrate what you are talking about using a system approach. Pick out some PE10 levels that demonstrate your thinking on when to buy and sell. Run it through the calculator and report the results. Compare it to what folks are currently doing.
Only then can you get some of the folks to be open enough to engage in a fruitful conversation. Until you do that all conversation will be stilted.
Just my opinion.
“I can guaranty”
That’s just something you say, Rob. Like everything else, you don’t back it up.
Besides your poll question as stated is muddled. What exactly is a “big price change”, what is “realistic” and what is “long-term” and what is “success”. With a question that badly written, I’m not even sure how I would answer it.
And why does your question ask about a price change when your whole “rational” thing is about valuations? You do know that the two are different, right? And big price change from what to what? up? down? to “normal”, from “normal”?
Rob: “I will continue to…”
J.D., this may be a new phrase to you, but Rob has said it many many times in the past in other discussions. As far as I have been able to determine from all the other times he has typed it, it means he can’t come up with anything to say to you that actually applies so he’s just going to ignore you and continue on
Only then can you get some of the folks to be open enough to engage in a fruitful conversation. Until you do that all conversation will be stilted.
Just my opinion.
Thanks very much for sharing your thoughts on this, Dave. You are not the first supporter of mine who has urged me to do this. When people whose intent you know for certain is good are imploring you to take a certain step, it is hard to say “no.” I certainly will continue to think the matter over.
Norbert Shenkler is a part owner of the Financial Webring Forum and one of the nastiest of the Greaney Goons. He once did something that I believe addresses the question being asked here. I gave him one set of allocation choices that I said might make sense in a lots of cases (it was a set of choices in which the investor went with a 30 percent stock allocation at high prices, 60 percent at moderate prices and 90 percent at low prices). He put together a graphic showing that this allocation strategy beat buy-and-hold over a long time-period. There was a long thread about it at the forum in which lots of people asked lots of great questions and offered lots of great comments.
Still, at the end of the thread Norbert banned any further posting on Valuation-Informed Indexing at that site. Norbert also has influence at another recently formed Canadian forum. I signed up there and Norbert stepped in to have me banned before I put up my first post. He put up a post at the Goon Central board indicating that he might reconsider if I were willing to post dishonestly on the SWR matter. I of course declined this “compromise” offer.
Someone posted a link to the thread at the Bogleheads.org forum and one of the posters there observed that “hocus was right — amazing!” But that did not persuade the “leaders” of that forum to lift the ban on honest posting that applies there.
Anyone who cares to can create all the graphics they like. They are all obviously going to show the same thing. If the strategy tested does not make sense, the graphic will show poor long-term results. If the graphic tested makes sense, it will show good results. I don’t know what else anyone would expect to see.
It’s not that I have anything against the idea of people producing tests of different strategies. John Walter Russell has generated tons of them at his site (www.early-retirement-planning-insights.com). The tests can help people understand things better (they certainly help me). Still, the reality remains that there is no one “system” that will work for all investors in all circumstances at all times. Such a thing is obviously a crazy thing to want to see and I don’t think it does anyone any good for me to suggest otherwise.
ALL investors should want to learn what works. If all those who would like to learn would unite in a demand that all of the site owners take effective action against the Greaney Goons, we all would be learning on a daily basis at every board and blog at which the community has expressed a desire that honest posting be permitted on these questions.
For so long as the Goons are permitted to pollute any discussion we try to have, we are just not going to be able to get people of intelligence and integrity to participate. No one should be subject to death threats or defamation or long-running smear campaigns because they took time out of their day to help their fellow community members with their investing questions. For so long as we make the price for helping out as high as we have made it during the seven years in which we have failed to take effective action against the Greaney Goons, all the graphics in the world are not going to help, in my assessment.
Graphics are a learning tool. They are a positive. But the Goons have demonstrated on many occasions that they can take any positive and turn it into a negative with a large enough dose of abusive posting. I think we all need to stop pretending that it is possible to do constructive work while ignoring the elephant in the living room and get about the business of honoring our promises to the people who come to our communities to help us all out.
This is my sincere take re this one, Dave. I WILL keep thinking it over, however. It is possible that I am wrong about this and that you are right. A good number of people of obvious good intent agree with you. I think that it is entirely possible that I am a bit off base re this one. I’m doing the best I can but I do not know it all and I do not always make the right call on the first attempt.
Rob
Dave,
To give a recent example of what happens when Rob gives specifics: On another blog a few weeks back, Rob said the “rational” would have set the stock allocation at 25% in 1995 and then not rebalanced as the stock market advanced:
http://www.four-pillars.ca/2009/03/20/the-curse-of-pretend-money/
Evelyn (at four pillars): “Your “inclination” would lead to a portfolio that had a much higher percentage of stock, just at the time that the market was reaching a peak.”
As you can see, the devil is in the details for Rob.
Still, I agree with you that if Rob could take the time off from typing to actually find a set of parameters that make his idea work, then he would have a much easier time selling it. I said that to him years ago and I’m still hoping, though no longer expecting.
J.D. wrote: You want people to talk about this, but when we finally agree to, you refuse to. This doesn’t make sense.
Rob wrote: I will continue to report accurately what the historical data says re safe withdrawal rates, J.D.
I’m not saying you shouldn’t do that. But I’ve asked you two easy specific questions that you are pointedly not answering. That’s not reporting accurately — or inaccurately. It’s not reporting at all.
I’m puzzled as to why you sent me to that report. What did you want me to see there? What do you think it says that is different than what I think it says?
Only then can you get some of the folks to be open enough to engage in a fruitful conversation.
Dave —
If you check out the articles at the “Banned at Motley Fool!” section of my site, you will see that we have never had any problem whatsoever getting large numbers of middle-class investors interested in learning about the realities of stock investing. We have had hundreds of community members make excellent contributions to our discussions going back to the very first day (May 13, 2002). We have had thousands express a desire that honest posting be permitted at all of the various boards and blogs.
There’s always been one rub. The more people who express an interest in learning the realities, the more enraged the Greaney Goons become.
How do deal with the problem without dealing with the problem?
The problem is not middle-class investors. Yes, many do not possess a full understanding of the realities today. But most have demonstrated an interest in being permitted to talk things over in peace and thereby to engage in a Learning Together experience. This has been shown to be true at every single community in which these matters have been discussed. I am 100 percent confident that it is true here at Get Rich Slowly. If J.D. took action against the Greaney Goons, the tone of the discussions would change from hateful to wonderful in about two minutes.
There is a reason why all civilizations since the beginning of time have adopted social norms prohibiting the tactics that the Greaney Goons have employed to terrorize our board and blog communities for seven years now. It is because humans are not able to engage in productive work for so long as such predators are able to maintain the upper hand in a community.
Rob
I’m not saying you shouldn’t do that.
I’m grateful to you for saying so, J.D.
Rob
Rob: “But the Goons have demonstrated on many occasions that they can take any positive and turn it into a negative with a large enough dose of abusive posting. I think we all need to stop pretending that it is possible to do constructive work while ignoring the elephant in the living room and get about the business of honoring our promises to the people who come to our communities to help us all out.”
Rob, that’s just silly. Everyone wants better investment returns. If you build a better mousetrap, the world will beat a path to your door. However, you’re trying to beat the world into coming to your door when you haven’t built the mousetrap yet.
Actually, Rob, it appears that if I “banned the Goons” from Get Rich Slowly, there would be no discussion on this topic at all since you seem to be unwilling to respond to my questions. There’d just be a deafening silence.
Everyone wants better investment returns.
It is this sort of thinking that causes the Passive Investing “studies”to get all the numbers wrong. If only this were so!
John Greaney is the leader of the Goons. He has devoted the last seven years of his life to destroying board and blog communities in which large numbers of community members have expressed a desire to be able to learn the realities of stock investing.
I asked John not too long ago how much he lost in the crash. His answer was “well in excess of $1.3 million.”
John would rather be right than be rich.
He’s not the only one. Not by a long shot.
It is humans who own stocks. That’s always true. There are no exceptions.
Any model that ignores the human factor gets it all wrong.
The way it is.
Rob
Actually, Rob, it appears that if I “banned the Goons” from Get Rich Slowly, there would be no discussion on this topic at all since you seem to be unwilling to respond to my questions. There’d just be a deafening silence.
If you agree to give it a try, I will agree to bet you $20 that you will be proven wrong re this one in a big way, J.D.
I’ve seen where these discussions go when people are permitted to talk things over in peace many times.
I don’t put $20 at risk lightly. I think it is fair to describe this one as a sure thing.
Rob
“John Greaney is the leader of the Goons. He has devoted the last seven years of his life to destroying board and blog communities in which large numbers of community members have expressed a desire to be able to learn the realities of stock investing.”
Based on his travel photos, he spent 2008 doing this from South American and Antarctica. 🙂
However, I can find almost no signs of activity from him on the Internet at all, and if he’s my leader, why do I never get any messages from him? 🙂
Rob, were you saying something about defamation????
“John would rather be right than be rich.”
Gee, from those travel photos, I’d say he’s both.
Meanwhile, you’ve admitted that you can’t even afford plain fare within the US. Come on, Rob. This stuff is silly. Where’s the actual mousetrap????
Mr. Bennett, please read this bit of advice from Mr. Shafer;
“However, having said that, you will never get people to engage you properly until you start speaking their language. That is going to require you to demonstrate what you are talking about using a system approach. Pick out some PE10 levels that demonstrate your thinking on when to buy and sell. Run it through the calculator and report the results. Compare it to what folks are currently doing.”
Rather than trying to hide behind a wall of words, do some backtesting of your strategy and compare it to some of the existing passive portfolio strategies J.D. mentioned in the original article. Do your remember that article? It appears at the top of this page of comments which you hijacked and turned into a discussion of you and your beliefs. That is, before this became a Hocomaniafest!
As an example, look at this backtest by a poster, Trev H, over at Bogleheads;
http://www.bogleheads.org/forum/viewtopic.php?t=38374&mrr=1244427261
See? If you cannot flesh out your strategy in enough detail to backtest it, and then compare those results against existing strategies, why do you think anyone should attempt to use it? Or is your true goal just to spam personal finance discussion boards and blogs, not to provide any useful information regarding your valuation strategy?
You aren’t the only individual promoting or discussing PE10. One can find conversations about it on Bogleheads, Morningstar’s Vanguard Diehards Board and no doubt scores of other places courtesy of Google. But only when those discussions include Rob Bennett do we see all the ancillary topics you bring to the table; alleged death threats, wrong numbers in SWR studies (which you are unable to point to), attacks on experts, yada yada yada.
If you don’t feel qualified to do a backtest of your valuation model, perhaps you could hire someone to do it for you. After all, you found the funds to publish a vanity book and to pay for a review of that book and to hire a PR company to tout that book and your blog. None of those paid activities would be of greater value than a concise, backtestested example of how your strategy would have performed.
By the way, I’m referring to an honest backtest here, not merely running numbers through the calculator at your blog. It would come as no surprise if that caluclator spits out favorable results, given that you and Mr. Russell have carefully constructed it to ensure that it does. Use the historical data for the S&P 500 (or simulated data for the period prior to the existence of the S&P 500) to conduct your backtest.
Mr. Bennett, we’ll all be waiting on the edges of our seats to see if you’re capable of producing anything besides words to back up your investment strategy.
Whoops that’s plane fare. Sorry.
Rob said if he won a million dollars he would take his first trip involving airplane travel.
look at this backtest by a poster, Trev H, over at Bogleheads;
I am willing to help Trev and the other Bogleheads out at any time, Lindsay. It’s a great community.
So long as the ban on honest posting remains in effect there, the matter is out of my hands.
Rob
But only when those discussions include Rob Bennett do we see all the ancillary topics you bring to the table; alleged death threats, wrong numbers in SWR studies (which you are unable to point to), attacks on experts, yada yada yada.
I don’t apologize for having been the one to discover the errors in the Old School studies, Carlyle.
Given what has followed from that discovery, I think that was probably my most important contribution to date.
Rob
Rob, I give up.
You won’t reply to my questions. You won’t even reply to my questions about why you won’t reply to my questions. It’s clear you don’t want to discuss this, and I have no idea why that’s the case since you’re the one who asked me to engage. That’s fine. I have other things to do with my time.
But remember: you cannot complain that I didn’t try to understand your position. I did. But when I gave in and tried to discuss it, you simply stopped talking. This isn’t on me — it’s on you.
Completely baffling.
I give up.
I understand., J.D.
Rob
“I am willing to help Trev and the other Bogleheads out at any time, Lindsay. It’s a great community.”
Indeed it is. And their community banned you from the beginning, as it’s clear from your comments here that you post only to disrupt and bring attention to yourself, not to further the discussion of any personal finance topics.
By the way, Trev H doesn’t need any help with his backtests. It’s you Mr. Bennett who have proven incapable of providing any such useful information as does Trev H. I take your response (or lack thereof) to indicate you have no intention of providing any evidence to support your claims about the performance of your investment system. It seems your specialty lies in producing a wall of words designed to hijack every discussion so you and your beliefs become the center of attention. As J.D. has discoverd, you routinely refuse to answer even the most simple of questions. Instead, you spew a wall of words. That’s apparently why people familiar with you have dubbed your routine, Hocomania!
Indeed it is.
At least we agree on that one, Carlyle.
Soul brother!
Rob
For anyone else who has been reading this far, I just did a Google search for ‘backtest pe10’. I found one thread over on the Morningstar Forum . . .
http://socialize.morningstar.com/NewSocialize/forums/p/235244/2633798.aspx?
I only skimmed just a part of the thread, but it looks like the poster, norbertc, is quite willing to provide decision rules and answer questions. Plus as an added bonus, there are no side-discussions about SWRs, John Greaney, Goons or death threats.
Schroeder
“I give up.”
“I understand., J.D.”
Rob
—————————————————-
I’m reminded once again of the article I mentioned in a previous comment. The psycholgist Steven Kalas says;
“…White’s spontaneous aside to a heckler makes me think of a population of people with whom I struggle both professionally and interpersonally. Professionally, because these people are difficult and sometimes exhausting to treat in therapy. Personally, because these people are difficult and exhausting in interpersonal relationships.
White makes me think of people with personality disorders.”
Rob Bennett has a carefully honed passive-aggressive routine. He IS exhausting to deal with. That’s why he finds it necessary to continually spam new discussion boards and blogs, for after awhile everyone just grows weary of dealing with his particular brand of personality disorder. Most venues simply ban Mr. Bennett at that point. I don’t know what the future holds here for Mr. Bennett and his routine. But if past is prologue, history suggests he’ll be unable to restrain himself from hijacking every discussion even remotely related to one of his beliefs/delusions and turning the comments into a discussion of Rob Bennett and Rob Bennett’s beliefs. For as you can see, HIS beliefs are honest and true and anyone who disagrees is a goon. Good luck….
Rob used his tin ear and lying mouth to say: [someone at Bogleheads.org once posted] “hocus was right – amazing!” But that did not persuade the “leaders” of that forum to lift the ban on honest posting that applies there.
Rob,
That was because it was clearly sarcasm. The author of that post as wells as regular readers, and the board moderators understand irony and humor. You, on the other hand, seem to be stuck in the infantile “poop joke” phase with your own attempts at being funny. Most kids pass through that one around when they become teens, but you seem to have never moved on.
I think that is a helpful clue.
“I am willing to help Trev and the other Bogleheads out at any time, Lindsay. It’s a great community. So long as the ban on honest posting remains in effect there, the matter is out of my hands.”
You responded to the wrong person, but I’ve got to wonder: if they let you in that forum, would you be as “helpful” as you were here? My guess would be yes. It was your “help” in the Vanguard Diehards forum that led them to create the Bogleheads forum, and the promise that the new forum would be hocus-free is what caused everyone to move to it.
It was your “help” in the Vanguard Diehards forum that led them to create the Bogleheads forum
Had the “experts” told middle-class investors about the academic research dating back to 1981 that shows that long-term timing works, there never would have been a problem.
Had the Vanguard Diehards forum permitted honest posting on what the academic research says, there never would have been a problem.
Had J.D. taken action on this thread to protect those who are seeking to learn the realities from those who are seeking to block people from learning about the realities, there never would have been a problem on this thread.
The problem from the first day has been the dominance of marketing considerations. Yes, people have a desire to believe during runaway bull markets that there is no big price to be paid for staying at the same stock allocation. That doesn’t mean that the risk of doing so is not extreme. And that doesn’t mean that it is not possible for us to learn from our mistakes and start today teaching people about more realistic long-term investing strategies.
I will continue to report accurately what the historical data says re SWRS.
Rob
1. If by “long term timing works” you mean “buy and hold is a rational and even intelligent choice, given that the market return averaged over several decades will likely be around 6 or 7% net,” then Bogle and a small cadre of very smart, very well-educated, and very helpful experts have been sharing that information with the investing public for a long time. It is however, largely ignored or twisted by every doofus with some ‘scheme’ to ‘beat the market’ that comes down the pike. I give you exhibit “A”: the Dyspeptic Duo, Rob Bennett and his nutty sidekick JWR, retired government pensioner from Florida — neither which appears to have any substantial equities holdings.
2. Vanguard Diehards, Bogleheads, Motley Fool, Retire Early Homepage,Early Retirement Forums, Financial Web-ring, and the various other forums who ultimately had to ban you, and therefore are now disparaged routinely by you, would not last long if they actually removed or withheld posts based on controversial but relevant and on-topic material. Much as is the case with wannabe financial advisors and authors, a reputation and actual policy of honesty is crucial for success. You might want to read that last part several times.
3. Disparaging JD for his even handed and clever method of containing you to just this thread is out of line. He is allowing you to bloviate to your heart’s content and not be able to complain you are being squelched (a favorite Hoco-tactic). Yet, he still preserves other current and future threads. This is sheer Solomon level-justice/genius, and he deserves applause, not the Bronx cheers and disrespect you are continuing to pile on him in typical, predictable, and sad Rob Bennett passive-aggressive habit.
4. Your ‘market brainwashing by the evil stock-selling-industry’ is just another in a long line of completely invented Hoco-canards that you first invent, then use to beat innocents over the head with until observers shout out “No more!” and either take their leave of you, or ban you from their sites. I could make a list of your various ludicrous straw men, but then, why give you additional press? As you often say, the “historical record” is already replete with an entire catalog of Rob Bennett’s past mania. A *very* slight sampling of Bennett’s “work”:
http://www.bing.com/search?q=hocomania&go=&form=QBRE
http://www.bing.com/search?q=%22rob+bennett%22+liar&go=&form=QBRE
http://www.bing.com/search?q=hocus+sewer+board&go=&form=QBRE
If you only have time for one link, at one site, and for one thread, then this one will do nicely.
Here, Rob is 100% in charge. He has been given complete autonomy over someone else’s Bulletin Board S/W, their host, the storage space, the member list — everything. Hocus has sole power to moderate, to ban, to censor. All of that was provided to him, just to placate his claims that those were obstacles to previously getting his world-altering message heard, and being able to convert the masses to his clearly superior approach.
Let’s tune in to 2005, and see how that works out for him:
SeWeR Research Group
hocus2004
Moderator
http://s162532268.onlinehome.us/Sewer/viewtopic.php?p=49#49
Schroeder,
Thanks for the link. He has operationalized the idea that price matters into a fairly easy system to follow. The results speak for themselves with a much better outcome. He also has added a momentum component to the value component and come up with a better system using back testing.
These ideas are of course are exactly what Graham/Buffett et al. have used to beat the market.
However, to accept this one has to accept that EMT is not true and that market timing does work. Two of the main components of the index/DIY communities ideology. You also have to accept some more complexity into your investment strategy, something that many people don’t want to take on! It is much easier to keep it simple with a buy-and-hold philosophy or just adding in annual asset allocation adjustments.
Personally, I suggest folks learn about investing and become active investors. But, I recognize this is not going to work for the majority of folks.
By the way, one might note that the average return is similar for stocks and the value system, but the overall value is different because his system keeps variation lower. In other words looking at average returns doesn’t give one a very good picture without looking at drawdowns. It’s the drawdowns that kill you!
“Had J.D. taken action on this thread…”
J.D. did take action on this thread. J.D. requested that you explain what your long-winded rant was about and you blew it. You’re always blaming others for your bad marketing.
However, to accept this one has to accept that EMT is not true and that market timing does work. Two of the main components of the index/DIY communities ideology.
You said that perfectly, Dave. You got right to the heart of it in a very concise statement.
Valuation-Informed Indexing is what makes sense.. It is exactly what should work. And it is exactly what the historical data shows always has worked.
There’s one problem. The Stock-Selling Industry has directed hundreds of millions of dollars to promoting something different. And lots of web sites and blogs have piggy-backed on that multi-million dollar marketing campaign and have been promoting the same discredited junk for years now. And they do not want to admit they got it wrong.
The downside with the idea of middle-class investors not insisting that the errors in the Old School studies be corrected, is that, until the errors are acknowledged and corrected, it remains impossible for anyone to move forward. Bogle cannot say what he knows about what works without having bricks thrown at him. Bernstein cannot say what he knows about what works without having bricks thrown at him. J.D. Roth cannot say what he knows about what works without having bricks thrown at him.
We all have to play dumb and see millions of people suffer busted retirements and see the entire U.S. economy go over a cliff because The Stock-Selling Industry initiated a huge marketing campaign for a model that doesn’t work before all of the studies had been completed and we came to learn that it was rooted in a false premise and that it could never work in the real world. The “deal” that I have been offered on numerous occasions is that, if I would just jeep quiet about the errors made in the Old School studies, I would be permitted to post again at all of the boards and we could all just go back to pretending that we see nothing wrong, we hear nothing wrong, and we know nothing about what is wrong.
No thanks. Not this boy. Find someone else. I can’t go for that. No can do.
I formed lots of friendships at the Retire Early and Indexing boards during my years of posting at them. A failed retirement is a serious life setback.
We all should insist (not ask!) on our right to post honestly on investing topics on the internet. It is degrading for those of us who know about the flaws in the Passive Model to keep quiet about what we know. It hurts us and it hurts the people listening to the bad advice and it hurts the people promoting the bad advice. There is not one person on Planet Earth who benefits from seeing the U.S. economy go over a cliff.
Teaching the Passive Investing dogmatists how to pronounce the three magic words is an imperative business. Not just for all investors. For all citizens. Our economy is today in a state of crisis. The word “crisis” signifies something. This is not optional anymore. This is mandatory.
My sincere take.
Rob
“The Stock-Selling Industry has directed hundreds of millions of dollars to promoting something different”
Yesterday it was “Greaney”, today it’s the “Stock-Selling Industry”.
“J.D. Roth cannot say what he knows about what works without having bricks thrown at him.”
What an amazing lack of shame. J.D. gave you the opportunity to make an unlimited rant about whatever you wanted and you completely blew it, so you blame it on him.
You also have to accept some more complexity into your investment strategy, something that many people don’t want to take on!
It’s true that in a surface sense there is a tiny bit of added complexity for those following a valuation-informed strategy.
Passive investors make no allocation adjustments. Valuation-Informed Indexers need to make on average one allocation change every 10 years or so. It’s fair to describe that as an added complexity.
But look at the financial payoff! The VII investor gets to retire at least five years sooner! Is there someone who is going to say that it is not worth making one allocation change every 10 years or so to be able to achieve financial independence at least five years sooner? It sure seems worth it to me.
And there is no need for the individual investor to figure out for himself when the allocation change is needed. Once we all openly acknowledge what the academic research has been saying for close to 30 years now, there is no longer any need to pretend that Passive Indexing can work. So the experts can say out loud what they know from studying the literature. So they can tell us when we need to make the occasional allocation changes. Bogle can do this. And Bernstein. And Clements. How complex is it to turn on the television once every 10 years or so and then just make the change that the investing experts tell you to make? Is this really such a big deal?
Plus, we need to consider that the tiny added complexity applies only in most surface of senses.
The reality is that Passive Investing is 20 times more complex!
Look at all the anxiety and confusion that the Passives are feeling now that they see that their investing strategies do not work in the real world. Is not all this fussing and fretting a form of complexity? It sure seems to me that it is.
Adopt a rational investing strategy and all that goes away. VII investing is based on what has always worked. So, in the event that stocks continue to perform in the future anything at all as they always have performed in the past, the VII investor is protected from the huge “surprises” that all through history always plagued Passive Investors. Once investors understand and are willing to accept that valuations have always affected long-term returns, all the “surprise” that the Passives experience when stocks perform once again just as they always have disappears.
There is a tiny, tiny bit of extra mechanical simplicity to the Rational approach. It is a trivial thing. But in an emotional sense the Rational approach is far, far, far more simple.
There is no reasoned case that can be made for Passive now that the academic research has shown for 28 years that it cannot work in the real world. Again, this is my sincere take.
Rob
“Is not all this fussing and fretting a form of complexity?”
Look who’s talking! 🙂
J.D. gave you the opportunity to make an unlimited rant about whatever you wanted and you completely blew it, so you blame it on him.
If we open up the internet to honest posting on stock investing, J.D. can run hundreds of blog entries teaching people about the Rational Investing model.
What’s the downside?
Rob
“If we open up the internet to honest posting on stock investing, ”
Here on Earth, the Internet is already open to honest posting on stock investing.
“J.D. can run hundreds of blog entries teaching people about the Rational Investing model.”
Why would a sane person want that? We’re at 383 comments so far in this blog entry and we have nothing except readers who have expressed annoyance at the content-free bloviation. For anyone who is not an egomaniac, what’s the upside of these comments?
Rob wrote: “Look at all the anxiety and confusion that the Passives are feeling now that they see that their investing strategies do not work in the real world.”
Here are the returns for a model that follows Passive Investing, the Coffeehouse Portfolio:
Year Return
1991 23.55%
1992 9.57%
1993 15.64%
1994 -0.58%
1995 22.89%
1996 14.53%
1997 17.95%
1998 6.88%
1999 8.30%
2000 7.25%
2001 1.88%
2002 -5.55%
2003 23.56%
2004 14.18%
2005 5.97%
2006 15.002%
2007 2.91%
2008 -20.25%
Annualized 17 Year Return 8.61%
http://www.coffeehouseinvestor.com/?page_id=5
To which you replied in comment 230: “I can tell you with absolute certainty that the CoffeeHouse Portfolio will yield better risk-adjusted returns on a going forward basis if it is modified to take the effect of valuations into account.”
Repeating what I replied in comment 253 . . .
I am willing accept that challenge. But before I do so, are you willing to outline in complete detail the decision rules that govern your Valuation Informed Indexing approach so we can track both a static Coffeehouse Portfolio and modified Coffeehouse Portfolio using your VII decision rules side-by-side on an annual basis?
Schroeder
I am willing accept that challenge. But before I do so, are you willing to outline in complete detail the decision rules that govern your Valuation Informed Indexing approach so we can track both a static Coffeehouse Portfolio and modified Coffeehouse Portfolio using your VII decision rules side-by-side on an annual basis?
The decision rules are the same as those advocated by John Bogle, except that I add that investors need to take valuations into consideration when setting their allocations. Bogle says (and I agree) that the following factors need to be considered in setting one’s stock allocation:
1) The investor’s life goals (which are influenced by things like his age);
2) The investor’s financial circumstances; and
3) The investor’s risk tolerance.
An investor who gives consideration to the four factors that I say should be considered (the three that Bogle says should be considered plus valuations), will always obtain better risk-adjusted returns than an investor who only takes the three Bogle-approved considerations into effect. It is not possible for the rational human mind to imagine how there could ever be an exception to that rule.
Ignoring the price of something you buy can never be a good thing. Passive Investing can never work in the real world. This should not be a controversial observation. It is pure common sense.
Rob
“except that I add that investors need to take valuations into consideration when setting their allocations”
After 7 years and 386 comments in this thread alone, that’s as specific as you can be?
That’s it?
Rob wrote: “Passive Investing can never work in the real world.”
Here are the returns for a model that follows Passive Investing, the Coffeehouse Portfolio:
Year Return
1991 23.55%
1992 9.57%
1993 15.64%
1994 -0.58%
1995 22.89%
1996 14.53%
1997 17.95%
1998 6.88%
1999 8.30%
2000 7.25%
2001 1.88%
2002 -5.55%
2003 23.56%
2004 14.18%
2005 5.97%
2006 15.002%
2007 2.91%
2008 -20.25%
Annualized 17 Year Return 8.61%
http://www.coffeehouseinvestor.com/?page_id=5
As everyone but Rob can see, Passive Investing using the Coffeehouse Portfolio can work in the real world.
Rob wrote: “The decision rules are the same as those advocated by John Bogle, except that I add that investors need to take valuations into consideration when setting their allocations.”
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.
Schroeder
After 7 years and 386 comments in this thread alone, that’s as specific as you can be?
If I were open to the idea of posting dishonestly, I could satisfy every one of your demands, Lindsay.
Rob
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 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
Lindsay: “After 7 years and 386 comments in this thread alone, that’s as specific as you can be?”
Rob: “If I were open to the idea of posting dishonestly, I could satisfy every one of your demands, Lindsay.”
Why do you say that explaining your investment model in detail, requires you to be dishonest, Rob? Doesn’t that fact give you a little hint that your system has a little problem?
391 comments so far with the majority by or about Rob Bennett. Nothing strokes a veteran internet troll’s ego more than being the center of attention, good or bad. Rob Bennett has little traffic at his own blow, he’s in hog heaven over here as he spams Get Rich Slowly!
Doesn’t that fact give you a little hint that your system has a little problem?
It would be fair to say that I’ve encountered a bit of a “problem” in helping middle-class investors learn the realities of stock investing at any board or blog at which a significant number of Passive Investing dogmatists congregate, Lindsay.
Rob
391 comments so far with the majority by or about Rob Bennett.
I wonder why.
Rob
Egomania?
(my best guess.)
Rob: “The decision rules are the same as those advocated by John Bogle, except that I add that investors need to take valuations into consideration when setting their allocations.”
OK since Rob has stated that he would have to be dishonest if he were to give any more detail then that, then lets see where it leads us.
Many (possibly most) investors increase their stock allocation when stock valuations increase, thus leading to expanding bubbles, and as valuations decrease at the beginning of a bear, many investors (possibly most) sell, leading to an accelerating decline.
Since these investors have clearly taken “valuations into consideration when setting their allocations”, (ie: up is good so buy more) we can see that most investors are, in fact, VII investors and that VII leads to bubbles and bursts and poor overall investor returns.
This, of course, is not where Rob would have HOPED his logic would go, but now you can see why he’s been unsuccessfully pushing this on people as his “new” idea for 7 years. Rob will CLAIM that this isn’t what he meant because the human mind can only conceive of an egomaniacal system outperforming the market. Therefore, even though he can’t tell you what it IS, he’ll claim that this is what it ISN’T.
This is just another example of what was noted in comment 353. Rob just hasn’t thought this stuff through at all. He just never takes time out from typing to actually work out a system that has actually outperformed even historically. I’ve seen many market timing trolls on the internet, though never one who was this bad at it.
Schroeder wrote: “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.”
Rob replied: “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.”
I understand, Rob; I read your comment 208.
Rob wrote: “I have been in contact with the police department here in Purcellville, VA. They referred me to a state police department that deals specifically with internet crimes and I spoke with someone there. I have contacted a small number of public interest organizations to explore the possibility of bringing lawsuits to address the problem (I hope to be able to find time to contact more in coming days). I have been in discussions with the FBI. I have sent an e-mail to my congressman (Rep. Frank Wolf) urging legislation to open the internet up to honest posting on investing topics.”
So because, in your view, the internet has not yet been opened to honest posting on investing topics, you are unable to provide detailed instructions (decision rules) for an investor to follow your Valuation Informed Indexing.
Schroeder
“Egomania? (my best guess.)”
Well, let’s see, It’s either:
1: John Greaney, whom I have never met, and whom most people haven’t heard of, is paying 1.3 Billion people (Rob’s estimate) to serve has his goons and to go around the Internet and stopping Rob from posting honestly because John has a page on his website with an unspecified error and paying 1.3 Billion to cause Rob not to post honestly is a better solution for him than editing the page. Rob has never specified how these people cause him not to post honestly or why John doesn’t want a more effective investment system. Rob claims that John would rather be right than rich but given that he employs 1.3 Billion people, it is difficult to see how he can not be VERY rich. John Bogle, William Bernstein, and apparently nearly all website owners are also afraid of John Greaney and is 1.3 Billion hired thugs. The police, the FBI, the ETF, Congress etc. have all been contacted by Rob but have made an “error” in not doing anything to help Rob defeat the 1.3 Billion goons who cause him not to post honestly.
2: Rob is an egomaniac, like his wife says.
Hmm… It’s a toughie, but I think I’ve got to go Occam’s razor on this and go for door number 2.
Rob wrote:
“Valuation-Informed Indexing is what makes sense. It is exactly what should work. And it is exactly what the historical data shows always has worked.
There’s one problem. The Stock-Selling Industry has directed hundreds of millions of dollars to promoting something different.”
Wait a second, that doesn’t make sense. Your model directs investors to adjust their stock allocation in response to changes in market valuations, while “buy-and-hold” advocates a constant allocation. Thus, your model would result in more “churn” – that is, more buying and selling of shares. Wouldn’t that generate MORE money for the “Stock-Selling Industry”, in the form of commissions?
An increased stock turnover would also result in triggering tax obligations, resulting in increased revenue for the government.
So if your model produces more money for the “Stock-Selling Industry,” more money for the government, and bigger profits for investors …. who exactly has any motivation to suppress your system?
I think I’ve got to go Occam’s razor on this and go for door number 2.
Door Number Three is that lots of people were taken in by a huge marketing campaign financed by the people in the business of selling us stocks and now don’t want to admit that this happened no matter what the cost of not doing so.
Rob
your model would result in more “churn” – that is, more buying and selling of shares.
Not so, Kevin.
The “buy-and-hold” aspect of Passive Investing is 100 percent fiction.
Investing emotionally causes investors to sell at the worst possible time for doing so.
Sticking with a strategy for the long term is realistic only for those willing to keep their risk levels roughly constant, those who adjust their allocations as needed to do so.
Rob
who exactly has any motivation to suppress your system?
Not one human being alive has any rational motive for opposing Valuation-Informed Indexing, Kevin.
The motive that some feel is the human reluctance to saying the three magic words — “I” and “Was” and “Wrong.”
All learning experiences begin with a pronouncement of the three magic words.
There are no other three words in the English language potentially so enriching to so many.
Rob
Rob, you’ve been asked repeatedly and pointedly for specific “price points” that should trigger asset reallocation under your model, and every time, you’ve dodged the question. You’ve refused to provide any actual numerical guidelines with respect to valuations, price changes, or PE10 ratios. Yet you insist this is the way to go.
My final question for you, Rob, and I’ll be as clear and direct as I can. I’ll even make it a yes/no question for you:
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?
(P.S. – 400 comments, is that a record?)
Bennett said: “lots of people were taken in by a huge marketing campaign financed by the people in the business of selling us stocks and now don’t want to admit that this happened no matter what the cost of not doing so.”
Rob,
I say this not to hurt you, but to assist you. Please take it in that spirit. When I read your quote above, my first impulse is to laugh out loud. But then I consider the source, and your apparent earnestness in saying this over and over.
Rob, our most vigorous claims of shortfall that we cast onto others are often just a reflection of our own inner demons and issues. I think the psychologists call that “projection.” I readily admit that I certainly would not expect to be immune to it myself; I am very far from perfect. But with that said, does your premise REALLY even seem remotely plausible to you? Really, Rob? That millions of people are somehow collectively and JOINTLY conspiring to avoid correcting or admitting to a common self-induced lie that they somehow all share, only because of the embarrassment that might come from correcting it, even though they would all make out better financially if they did?
That is your stance?
Really? Or does it seem more plausible that your claim (that I doubt even you really believe) stems from your OWN… well… ‘psychosis’ is the only word I can accurately use here, I’m sorry to say.
Unlike JD above, I won’t even bother to ask you to answer this question directly, publicly, and truthfully — I realize that your fragile (but hugely outsized!) ego just couldn’t allow that.
Me: “Your model would result in more “churn” – that is, more buying and selling of shares.”
Rob: “Not so, Kevin. The ‘buy-and-hold’ aspect of Passive Investing is 100 percent fiction.”
But … it’s NOT. Just because you say it is, doesn’t mean it is. I’m living proof. I’ve been investing for a decade. Every month, I buy more stock. I’ve never in my life ever sold a single share of anything. But I’ve bought hundreds of thousands of dollars in stocks and mutual funds. Am I fiction?
If I were “rebalancing” my portfolio, I would most definitely be generating more “friction,” because not only would I be selling occassionally, I’d be re-buying (other assets) with that money. So wouldn’t a broker encourage that kind of activity, over my current activity, which just has me buying and sitting on them for decades?
Rob: “The motive that some feel is the human reluctance to saying the three magic words – ‘I’ and ‘Was’ and ‘Wrong.'”
So, you believe that the financial services industry would rather give up BILLIONS in potential commissions than admit they were wrong?
Can you understand why I find that hard to believe?
I’m living proof. I’ve been investing for a decade. Every month, I buy more stock. I’ve never in my life ever sold a single share of anything. But I’ve bought hundreds of thousands of dollars in stocks and mutual funds. Am I fiction?
Ten years of investing does not a long-term investor make, Kevin.
You’re kidding yourself.
And 90 percent of today’s “experts” are cheering you on every step of the way.
Not this boy.
Rob
[i]So, you believe that the financial services industry would rather give up BILLIONS in potential commissions than admit they were wrong?
Can you understand why I find that hard to believe?[/i]
Billions is nothing, Kevin.
The Passive Investing Mistake is in the process of sending the entire U.S. economy over a cliff. A global depression will in all likelihood lead to World War Three. That’s Game Over.
Is it hard to believe that we would do this to ourselves?
I can’t say otherwise. I find it hard to believe.
Are there precedents?
Do you think that World War Two was a good use of human resources?
Humans have a hard time with this “I Was Wrong” business. Historical fact.
Rob
All learning experiences begin with a pronouncement of the three magic words.
Really?
From reading your Blog, I know you were raised in some sort of strict Catholic environment, but even so…
That just seems a twisted and inaccurate view of what learning is all about, Rob.
Capitulation to legitimate authority, admission of personal sin, owning of wrongdoing — hey, those might be very good and character building and all, so I do not gainsay some strict upbringing and maybe even corporal punishment if warranted.
But LEARNING — the joyous, wonderful, assimulative, transformative, creative, expansive, enriching, enlightening, intellectual, curiosity-driven exploration that in my mind is the hallmark of a worthy human existence, does NOT stem from some sort of admission of original sin, Rob.
Either someone did a job on you early in life, or else you are just wired wrong. But in either event, I think you would do well to seek out some secular (non-puritanical, non-judgmental, non-threatening) professional counsel that might inspire you to rethink some of your ways of thinking that perhaps even you can see are not only not mainstream, and causing you difficulty in expressing yourself and being accepted and understood, but that are seriously hampering your ability to enjoy life. It seems to me that you are making out a very stifling and dark life for yourself.
Have you noticed I just asked you a series of yes or no questions, and you’ve failed to provide direct yes/no answers to any of them?
Did you notice this was another one?
Rob wrote: “The Passive Investing Mistake is in the process of sending the entire U.S. economy over a cliff. A global depression will in all likelihood lead to World War Three.”
I am willing to entertain this possibility. Which country (or countries) will be the aggressor and which country (or countries) do they intend to attack?
Schroeder
Rob wrote: “The Passive Investing Mistake is in the process of sending the entire U.S. economy over a cliff. A global depression will in all likelihood lead to World War Three.”
Mr. Bennett, what are you wasting your time posting here for? You should be in Washington. Our leaders and economists remain blissfully unaware that all the economic turmoil was caused by passive investing strategies. And adopting your Lucky 7 strategy is our only hope of salvation from the predicament we find ourselves in. You hurry there to D.C. without delay and demand to be heard. Rob Bennett, you hold the fate of the world in your hands. Godspeed!
Rob wrote: “The Passive Investing Mistake is in the process of sending the entire U.S. economy over a cliff. A global depression will in all likelihood lead to World War Three.”
It this were most places on the internet, I’d have to give a big golf clap to the anon troll using screen name “Rob Bennett” or Hocus. I’d give up the props for carefully trolling people (including me) into spending huge quantities of bandwidth, time, and consternation in dealing with some bizarre yet strangely compelling extended flights away from logic and sense.
But I have just looked at his history. I see that he has been cross-referenced, verified and ascertained to be a *real* person, with a *real* history, and a real desire to be seen as a legitimate figure in Finance. All notwithstanding his hyperbole, innumeracy, lack of logic, lack of personal success or specialty knowledge, lack of acceptance by anyone of merit or note, etc.
That makes it just sad.
Mr. Bennett, can’t you see the folly in your methods, thinking and conclusions on… well, on just about EVERYTHING, frankly. From the right way to write and publish a book, to the right way to retire, to the right way to invest. Your personal lack of success in all of those areas indicate that prudent people should stay away from your advice, even if it seemed plausible, which it rarely does.
I only wish I could give you the gift of vision; to see through my eyes and the eyes of pretty much every other participant on this thread to see what I think must surely be categorized as embarrassing. Instead however, if history is any predictor (and it is), you will instead be claiming you made ‘many friends’ and had ‘terrific discussion’ on this thread. Nothing could be further from the truth. It was not the goal of the thread, but even had it been, you made no friends. You created animus — for yourself, for your message of nonspecific arm waving unsubstantiated vague claims, and of course, for your methods of lying, trolling, and obfuscation.
Is that any way for a grown man to act?
I don’t know what all this has to do with the efficacy of what Rob suggests? But in the interest of facts versus fiction, there was indeed discussion in the board rooms of major finance companies about how to entice the middle class to invest in stocks after the great depression made it clear to everyone how risky stock investing is. For the most part stock ownership was considered akin to gambling by the public at large. Like any business they wanted to enlarge their sales. Then they had a gift dropped in their lap; mutual funds. They could get away with telling people about the reduced risk in mutual funds, still make huge amounts of money, and buy and sell large amounts of stocks. Later Bogle started his own marketing plan which we can call the Wal-Mart plan [even though his pre-dated Wal-Mart] where he would sell folks on reducing fees to increase performance. Cheap mutual funds just like cheap goods has its own kind of ideology! Now add in dollar cost averaging [giving folks a reason to buy stocks every month] and asset allocation [giving a reason to buy and sell periodically] and you have a pretty nice marketing plan for selling stocks!
Now I know this will shock some people who believe that index investing is based on mathematical reasoning, but index mutual funds are nothing more than a marketing strategy getting people to buy stocks.
Having described all that history doesn’t in any way devalue any strategy folks choose to use for their own investing. Personally, if folks want to invest using index funds with or without asset allocation it is fine by me, even a good thing because it magnify’s ups and downs to the point it is easier for me to adjudicate my buy and sell decisions!
Did anyone even look at the link posted earlier that demonstrates dramatic improvement in returns using price as a main consideration for buy and sell decisions? Pretty interesting stuff!
Now I know this will shock some people who believe that index investing is based on mathematical reasoning, but index mutual funds are nothing more than a marketing strategy getting people to buy stocks.
What does this statement have to do with index funds? It would seem to apply to all equity mutual funds.
Did anyone even look at the link posted earlier that demonstrates dramatic improvement in returns using price as a main consideration for buy and sell decisions?
Do you mean the Morningstar link? If so, where is the “dramatic improvment”?
Shafer, I had you pegged long ago:
Rob sent you as his pre-announced emissary over to Bogleheads, the Home of Passive Index Investing. You then said:
“..if you have looked at all the above and have decided on passive index investing [or passive index investing with asset allocation] you can’t find a better place to learn about that strategy. Just do yourself a favor and don’t buy into the ideology!” You then crowed on your blog: “my snide remark about ideology and opposing viewpoints was ironically proven by my banning.”
Dave, they don’t hise what they are about, and they do not suffer fools gladly who denounce their methods, rules, principles, and then brag about it on their home blog, after being dispatched to raise havoc by the single person who was pre-banned before the site was even instantiated. Is Rob a sore point there? You bet your boots. If you are really a straight shooter, then you ought to go there and read the posts. They are quite liberal about what they allow as part of LEGITIMATE discourse, NOT a trolling mission from an active trader sales dude with an axe to grind, a book to sell, and a client base to attempt to build uop by bad mouthing the forum’s principles…
“If you still believe the old save and invest in mutual fund philosophy makes sense I strongly urge you to purchase my book.”
And there we have it.
BTW, were you in those board rooms? Did not think so.
Also, are you saying that indexing, DCA’ing and AA *don’t* make good mathematical sense? And are *just* marketing fluff, hmm? Right.
Look, I am not talking about an analysis like the pre-ordained crap on your site where you try to pump up an annuity to look like it’s beating the S&P by making ridiculous assumptions. Talk about ‘fanciful’ number manipulation!
http://shaferfinancial.wordpress.com/2008/02/20/a-hurricance-of-reactions-to-my-life-insurance-post/
And what about you shamelessly hawking LIFE INSURANCE all over your blog, as an investment vehicle, with the argument “well, wealthy people do it” — what a bunch of cargo-cult-crap!
http://www.shaferfinancial.com/eiuls.php
Dude, I have seen your type many times over. Good luck hitching your wagon to JWR and Rob — they are exactly what a guy like you deserves.
“Shafer Wealth Academy”, my butt. Typical huckster come-on, ala “The Secret” , “Kiyosaki” et al.
http://www.shaferfinancial.com/shafer-wealth-academy.php
Yup, good luck with that (rolls eyes)
Dave Shaver wrote: “I don’t know what all this has to do with the efficacy of what Rob suggests? But in the interest of facts versus fiction, there was indeed discussion in the board rooms of major finance companies about how to entice the middle class to invest in stocks after the great depression made it clear to everyone how risky stock investing is.”
So you agree with Rob that the marketing of Passive Investing led to the 1929 crash and thus a direct cause of World War Two. And following this logic, you agree with Rob that the marketing of Passive Investing led to the 2008 crash and therefore will soon cause of World War Three.
Schroeder
@theprofessionalskeptic
“What does this statement have to do with index funds? It would seem to apply to all equity mutual funds.”
Yes, the whole universe of mutual funds including index funds.
“Do you mean the Morningstar link? If so, where is the “dramatic improvment”?”
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. The second chart which starts in 1920 would indicate an extra $5.2M.
Of course when you add in his momentum strategy the portfolio is supercharged.
Dramatic improvement for me!
@schroeder
I have no idea what you are talking about????????
Rob, I have a small question. You assert the following sequence of events . . .
1. The stock selling industry markets Passive Investing.
2. This causes stock prices to rise to dangerously high valuations. Which inevitably causes stock prices to crash.
3. With investor’s wealth depleted, the economy goes into a depression.
4. Depressions cause world wars.
So my question is this: Why wasn’t the 2000-2002 crash directly followed by a depression and world war?
Schroeder
@RusselJohns
You are welcome to attack any of my ideas. It matters little to me. Nor your personal attacks. It only demonstrates what kind of person you are.
PS Rob didn’t send me nor could he ever get me to do anything. I barely know the dude.
Investing is 100 percent rational.
The market is efficient.
Staying at the same stock allocation at all price levels makes sense.
There are studies.
We should put our faith in the experts.
They don’t suffer fools gladly.
It’s the lazy way to investment success.
Everything else is financial porn.
The Old School SWR studies don’t purport to tell us the SWR.
I’m making this all up.
Rob
“Not one human being alive has any rational motive for opposing Valuation-Informed Indexing, Kevin”
And yet 1.3 billion people are supposedly doing just that and the rest of the population of the Earth is too scared to speak out against them.
Uh huh.
Thank you.
Next fantasy claim, please.
Rob Bennett: “I’m making this all up.”
300+ posts of gibberish and then we finally get the truth.
Next fantasy claim, please.
If someone described to me the behavior evidenced on this thread and I hadn’t seen it with my own eyes, I would say that they were engaging in a fantasy.
Yet it’s here. It exists.
Rob
The Old School SWR studies don’t purport to tell us the SWR.
Let’s state this more accurately, Rob. The one study that you pointed me to contains nothing about a 4% safe-withdrawal rate, although you claim it does. When I asked you to explain this discrepancy, you refused to respond.
“If someone described to me the behavior evidenced on this thread and I hadn’t seen it with my own eyes, I would say that they were engaging in a fantasy.
Yet it’s here. It exists.”
And it has a name: hocomania.
That’s what people have been telling you for years, Rob.
The one study that you pointed me to contains nothing about a 4% safe-withdrawal rate, although you claim it does.
There are tens of thousands of threads on the internet in which that study is cited as purporting to tell us the SWR. If you enter a Google search for the phrase “safe withdrawal rate,” a link to that study will come up near the top of the listings. Hundreds of my fellow community members have used that study to plan their retirements, saying that they believed that it reported the SWR. Financial planners on a daily basis use studies employing the same methodology as the one used in that study to inform their clients of the SWR. I have been banned from about a dozen boards for pointing out that the Greaney study reports the SWR inaccurately.
You are the first person in seven years of discussions in dozens of different places who has ever said that the Greaney study does not even purport to tell us the SWR.
There are millions of people who are going to suffer busted retirements because of the demonstrably false claims made in the Old School SWR studies. Your response to learning this is to say that the Greaney study does not purport to tell us the SWR. And reasonable people are to believe that investing is a 100 percent rational endeavor, that the market is efficient, that the experts are telling us what we need to know, that Passive investing might work, that’s it’s all going to turn out different this time?
I don’t buy it. There’s something in this model for understanding how stock investing works that ain’t quite right.
I’m sure of it!
Rob
And it has a name: hocomania. That’s what people have been telling you for years, Rob.
And I have been giving the same response for years too.
That response is —
“I will continue to report accurately what the historical data says re SWRs. We’ll see where that takes us.”
Rob
Rob, you’re putting words in my mouth, which is odd since you only need to scroll up what I actually wrote.
I never said this study doesn’t offer safe withdrawal rates. What I said was that it doesn’t mention a 4% safe withdrawal rate, which is what you told me it contains.
I wrote: that the study seems to “show the theoretical 100%-survivable maximum inflation-adusted safe withdrawal rates under ideal conditions”. That is, it shows maximum withdrawal rates for a variety of time-frames. Your response to this is no response at all. When I ask if this is what you see, you refuse to answer.
If I’m wrong, tell me how I’m wrong. I’m trying to understand what you want me to understand, but you refuse to explain it. It’s as if you’re shouting, “Somebody please listen to me” and then when somebody finally does, you don’t have anything to say.
“”“I will continue to report accurately what the historical data says re SWRs. We’ll see where that takes us.””
Yes that is a standard aspect of hocomania. And a typical response is that to “continue” an activity, you must have done said activity at least once already.
Another standard aspect of hocomania is that nothing changes year after year. The response quoted above has been posted day after day, year after year.
It is typically given when Rob has no specific objection or counterargument, but just wants to let you know that he’s not going to admit he’s wrong anyway – so there.
Dave Shafer wrote: “@schroeder
I have no idea what you are talking about????????”
I know it’s somewhat hard to follow. So go back to Rob’s comments.
Rob @ 408: “The Passive Investing Mistake is in the process of sending the entire U.S. economy over a cliff. A global depression will in all likelihood lead to World War Three. That’s Game Over. ”
Rob @ 133: “The key to successful stock investing is being willing to stick with the rational choice even when the media and the Stock Selling Industry are pumping put marketing slogans aimed at enticing you to abandon your common sense”
Rob @ 141: “I say that ignoring valuations altogether (investing passively) is a 100 percent emotional approach. I am not able to come up with any rational justification for this approach. I mean no personal offense to anyone when I say that. It is my sincere view and I believe that, given the marketing dollars that have been directed to the promotion of the Passive approach, it needs to be said.”
Do you follow Rob’s logic? We have the stock selling industry promoting Passive Investing which calls for sticking with the same stock allocation even at dangerously high valuations. Therefore stock prices rise and then crash. Rob says this leads the economy over the cliff and into a depression. Rob says that depressions leads to world wars.
Now I’m still waiting for Rob to answer my question at comment 419. Why wasn’t the 2000-2002 crash directly followed by a depression and world war?
Schroeder
It’s as if you’re shouting, “Somebody please listen to me” and then when somebody finally does, you don’t have anything to say.
There’s universal agreement that the Old School studies get the numbers wrong. We’ve known this for years now.
If we let the people who were taken in by the studies know about the correct numbers, we can save lots of people from experiencing one of of the worst life setbacks imaginable.
I’m saying that we should let people know.
Rob
It can be tough for a newbie to understand how sweeping, Rob’s “ideas” can be. ie: 1.3 Billion goons. World wars, goons can be identified by their green tongues, honest posting banned on the internet etc. But these sweeping ideas lead to sweeping contradictions. For example given that honest posting is banned on the internet, how is it that Rob has told everyone thousands of times on hundreds of websites that honest posting has been banned? Why would he pester the FBI since surely the FBI is needed to maintain a ban of such magnitude? etc.
Rob: “There’s universal agreement that the Old School studies get the numbers wrong. We’ve known this for years now.”
If so, then your mission would be complete, and you would have nothing to argue about.
(I just love how Rob keeps typing himself into corners.)
There’s universal agreement that the Old School studies get the numbers wrong. We’ve known this for years now.
But, Rob, you don’t even seem to know what the Old School studies say! If you aren’t getting their numbers correct, then how do you really know they’re wrong? And how do we know that you’re getting your own numbers correct?
How did I get drawn back into this?
How did I get drawn back into this?
You’re in it because you write a personal finance blog, J.D..
You took on the job. Nobody forced you.
You write for people and those people are being hurt. That’s the story.
How you respond is up to you. But it is your own set of life choices that got you in it.
I reported a story that happens to affect developments in your field. I certainly didn’t do that to cause you any trouble. You have no beef with me.
I think you feel discomfort for a perfectly good reason. The realities just are what the realities are. The discomfort comes about as a result of your reluctance to cope with the realities in a straight way.
My take has always been that, once the fever breaks, it’s all good stuff. I have long been arguing for Normalizing the discussions. I think it works great for everybody once we do that. What you now see as a negative becomes the best thing that ever happened to you and to lots of your friends and to lots of people you respect and to your readers and to all the other personal finance bloggers (and even to the Goons, although they cannot bear to see it that way today).
But I do not have the power to make that happen by myself. I have always done everything that I could. But I obviously do not possess super powers.
Rob
You have no beef with me.
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.
J.D., Ahhh, now you know why Rob’s primary hangout seems to be “Rob Bennett’s Best of Hocomania Forum.”
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl
Hocomania is an acquired taste. Rob’s MO is to respond to any serious question posed to him with either a wall-of-words or a short non sequitur. Most folks find this routine quite frustrating and soon weary of it and him. His non-responses and his passive-aggressive personality disorder largely account for why he has been banned from so many venues and must now seek out blogs such as yours to spam. But Mr. Bennett does have a small, loyal following who find his act to be somewhat amusing and enjoying playing Poke-the-Troll with him at that web site. If you can look beyond his limitations as a personal finance guru and instead just ponder what could possibly be his motivation for having spent the past 7 years of his live trolling personal finance discussion boards and blogs then I think you can see why some folks still have some interest in his Hocmania Routine. He’s like an online psychological case-study.
You won’t answer my questions.
The answer to every possible question you could possibly have is contained on this thread, right at your own blog, J.D.
As the thread appears at the moment, it would take you a long time for you to work through the muck.
You have The Magic Button needed to make all the muck disappear. If there is so much of it on the thread that the owner of the blog is not able to locate the material that provides him the answers to his questions, there’s far, far, far too much muck.
You need to work on your Magic Button pushing skills, J.D. I’ve had these thugs show up at my blog. I showed them that I know how to push The Magic Button and now they know that they need to show some respect to the community there or I am forced to honor my obligations to the community.
Here’s a link to a discussion we had yesterday at The Four Pillars blog:
http://www.four-pillars.ca/2009/06/08/blog-showcase-and-linkstuff-for-monday-june-8/
Phil at the Weakonomics blog know how to work The Magic Button to protect his blog community from internet predators. So it’s not just me, J.D. Lots of people understand what we need to do to make this thing work.
When you clear out all of the muck, all of those answers are going to appear before your eyes and you are going to wonder why you didn’t make it easier for yourself and for all the good people who have been listening in to the proceedings here so much earlier.
That’s my sincere take re this one, J.D. I wish you the best of luck with it.
Rob
Dave said: “PS Rob didn’t send me nor could he ever get me to do anything. I barely know the dude.”
The fact you both say that and also believe it shows me two things:
1) You are not nearly as bright as you like to presume over on your blog,
2) You are suggestible and weak. The market loves to snack on the type.
Rob has been praying for a tool like you to fall into his hands for a long time now. He even tries to make the “Goons” do his bidding by ‘inciting’ or ‘daring’ them to make posts about his nutty theories (using his SEO phrases, too!) over on Bogleheads and other legitimate investment/retirement forums to ‘prove’ it is banned. Which of course is just the exposure he salivates over.
Good luck to you, Dave; I predict that eventually there will come a time when the scales slip from your eyes, and you will be surprised at what you hooked up with. Sorry for getting personal, but I really do mean what I say — that the material on your blog I feel is in line with what is wrong with our culture today — hawking ‘inside techniques’ to ‘beat the market’ and get the rewards you deserve, once you buy my book and sign up for my newsletter and pay for my private counseling, etc. I am not against a guy making a buck, or especially not against fee-only planners — that is the way to go. But the message is certainly more important than the means, and IMHO, what you are selling is all sizzle and no meat.
J.D., you are just going to have to accept that Rob will believe what he wants to believe about what John Greaney’s study says about “safe” withdrawal rates. Even though you correctly point out that 4% is not the number reported there.
This is the summary chart . . .
http://www.retireearlyhomepage.com/recht5.jpg
Reading the chart, the “100% safe” number for 30 year payouts was 3.8%.
And just to repeat, Greaney’s study reports what has been “safe” in the past. The study does not claim to predict (and cannot claim) what will happen in the future.
Schroeder
Here’s an interesting thread regarding Safe Withdrawal Rates over at Boglheads;
http://www.bogleheads.org/forum/viewtopic.php?t=20311&highlight=
Oddly enough, one can find many threads on that topic at Bogleheads and various other sites. Very peculiar, since according to Mr. Bennett, discussions of Safe Withdrawal Rates have been banned from Planet Internet. Go figure.
“But I do not have the power to make that happen by myself. I have always done everything that I could. But I obviously do not possess super powers.”
Poor Rob is the only adult in the world who doesn’t have to power to stop himself from bloviating random junk.
J.D. “How did I get drawn back into this?”
Rob: “You’re in it because you write a personal finance blog, J.D..”
Very true. It’s nothing personal. Rob is just going through a huge list of finance blogs. He babbles on each one until the owner controls him and then he moves on to the next one. Rob said a few years ago that he was trying to get in the Guinness Book of World Records for the most bans but since he claims there’s a ban on honest posting, I’m not sure that was an honest post.
The study does not claim to predict (and cannot claim) what will happen in the future.
The millions of people who will be suffering busted retirements because of the demonstrably false claims advanced in the study (and in others using the same methodology) will be excited to hear that, Schroeder.
So will the many thousands who spent years of their life energy building up the various Retire Early and Indexing boards only to see them burned to the ground or to see their integrity compromised because John Greaney and his “defenders” felt so strongly that, given that his study makes no effort to tell us what is safe, no study actually doing so may be discussed at any of those boards.
All of the pieces of the puzzle are finally beginning to snap tightly into place.
Rob
Hey, Rob. I think maybe you missed my last couple of questions, so I’ll repeat them here. They’re simple yes/no questions, no need to expound on any topic. You’ve already provided us with a great deal of background material.
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?
Hocus: “All of the pieces of the puzzle are finally beginning to snap tightly into place.”
Uh, that snapping noise, followed by a tightening sensation may not be exactly what you think it is, Rob… 🙂
http://i39.tinypic.com/e7l3ed.jpg
Rob wrote: “The millions of people who will be suffering busted retirements because of the demonstrably false claims advanced in the study (and in others using the same methodology) will be excited to hear that, Schroeder.”
Well, it could be a lot worse. What with the Passive Investing Mistake sending the entire U.S. economy over a cliff and into a global depression leading to World War Three. I mean, that could cause a lot more damage than millions of people suffering busted retirements, you think?
Schroeder
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
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
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????
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.
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
“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.
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.
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…
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
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
Rob: “Rob (453): “I was wrong.”
He was wrong”
And instead of acknowledging his bad quote usage, he just blathers on more about it.
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
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.
“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?
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?
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.
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.
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
@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!
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.
@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.
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
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?
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! 🙂
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.
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
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
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
“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
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.
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.
Rob,
If you’re ready to discuss this seriously, I suggest we do it here, as J.D. requested:
https://axis-monolith.live/the-lazy-way-to-investment-success/%3C/a%3E%3C/p%3E
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.
Ooops – the above was meant for the other thread.
JD, has anybody ever told you you’re awesome?
the patience you have put up for troll rob is amazing.
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
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.
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!
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
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.
I’m wondering — what would a socially responsible “lazy portfolio” look like?
I’m glad to see you using Vanguard index funds in your examples above. It’s tough to beat their low fees.
Based on the advice from this blog and the Get Rich Slowly Gang of Commenters…I moved 30% of my retirement funds into Vanguard Institutional Index Fund and received a 15% return last year. Nothing else compared. Thank you!
I just discovered the Fidelity 4 in 1 today. I had 100% of my ROTH in a target fund but then noticed how high the expense ratio was.
I was looking at the Vanguard equivalent of a 4 in one but it’s transaction fee would kinda kill my semi-monthly automatic investment, so I went with the Fidelity