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Old 12-27-2010, 10:31 AM   #21
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What ever floats people's boat, I don't care. Personally, the core of my portfolio consists of index funds. I add a pinch of high beta stocks to the mix on a market timing basis. I do some value cost averaging and let my AA float based on market conditions. It works for me but YMMV.
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Old 12-27-2010, 11:54 AM   #22
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Overall the run long, I think it's very difficult to beat the index especially if you're dealing with your entire portfolio. Aside from books that say 70% of money managers can't beat the index and 90% of return is driven by asset allocation, I've tried it with my portfolio and I did come out ahead but it was purely by luck in hindsight. Got into financials near the bottom of the market in early 2009 and sold out during 2nd Q of 2010 but it's mainly due to being occupied with job. Started picking stocks and market timing starting in 2nd Q 2010 and, from then to now, did worse than the index. Spent a lot of time, resources, and stress to underform the index. It was fun and educational though.

I'm sure there are people out there who can beat the index for 5, 10, 15, or 20 years (ok, anything over 5 yrs is unlikely) but, in my opinion, I think it's highly unlikely especially if you're dealing with your entire portfolio. I can't imagine betting my family's entire savings into stocks/funds that I think will do well when I'm competing with much smarter people who does this for a living. Also, I need to be invested in the market for the next 50 yrs and there's absolutely no way I can beat the index for that time period.
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Old 12-27-2010, 12:18 PM   #23
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I'm an indexer and take a passive approach to investing rebalancing when my AA gets off by 10%. I might tweak that AA as I get older and become more conservative approaching ER and I have made the decision to pay down my mortgage with recent stock gains rather than letting it ride, but I'm not out there hunting alpha.

I have a friend who is an alpha hunter which makes for animated conversations over a few beers. He does research and jumps into things that folks like Bill Gross recommends. Recently he's big on high dividend paying closed end funds like Reaves Utility (UTG) and Pimco Corporate Opportunity (PTY). I argue that although they've given great total returns over the last 2 years, the alpha isn't necessarily higher than mine as he's taken on more risk.

He's still in the accumulation phase and I'm looking at ER in a couple of years so we have different philosophies. He worships alpha, I see it as a false idol. What do you think?
It's a false idol. There is no way to do this without taking on more risk. If he thinks otherwise he is deluding himself . TANSTAFL

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Old 12-27-2010, 03:25 PM   #24
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What ever floats people's boat, I don't care...
Of course we should never care. It's not our own money that is at stakes.
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Old 12-27-2010, 05:33 PM   #25
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I find closed end funds like PTY (div & yield 8.20%) difficult to compare with it's Vanguard equivalent (VWEHX) which has an SEC yield of 6.86% because of the different fees and the way the numbers are reported. I cant find a total return number for PTY anywhere.

My main question is not the nature of the investments, but whether using research and perceived knowledge to market time is ever more than hubris.
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Old 12-27-2010, 06:32 PM   #26
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My main question is not the nature of the investments, but whether using research and perceived knowledge to market time is ever more than hubris.
I am ok wearing whatever label given to me if I make money

I'd much prefer being a rich idiot than a poor expert
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Old 12-27-2010, 07:03 PM   #27
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Not hard getting near 25% this year with basic indexing. I'm up 20.7% YTD with 70% TSM index, and 30% small-value index. Pure small-value indexing would have hit 25%. Expense ratios are 0.07% and 0.28% respectively (SV is high because I don't qualify for admiral shares yet, not hard qualifying though) .

This January's Roth purchase will be Total Int ex US for sure.
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Old 12-27-2010, 07:17 PM   #28
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Not hard getting near 25% this year with basic indexing. I'm up 20.7% YTD with 70% TSM index, and 30% small-value index. Pure small-value indexing would have hit 25%. Expense ratios are 0.07% and 0.28% respectively (SV is high because I don't qualify for admiral shares yet, not hard qualifying though) .

This January's Roth purchase will be Total Int ex US for sure.
if you looked at TSM returns as of August 2009 --- it would be a whole different story

see this thread --- Bogleheads :: View topic - 10-year TSM index results vs. comparable (?) averages

kinda a depends on when you invest and when you retire (when you are born for that matter) ... there seems to be a little luck and fate involved with that
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Old 12-27-2010, 07:25 PM   #29
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That is interesting, but not really related. Mid 99-09 is cherry picking from the beginning and to the end of two recessions. You can be down 40-50% at a historical low and still end up just fine in the long run, this has occurred many times in the past, and should be expected.
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Old 12-27-2010, 09:07 PM   #30
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That is interesting, but not really related. Mid 99-09 is cherry picking from the beginning and to the end of two recessions. You can be down 40-50% at a historical low and still end up just fine in the long run, this has occurred many times in the past, and should be expected.
I don't know what is to be expected

actually it is not cherry picking for those (and there are more than a few) ... that invested and had to cash out during this time period

the bottom line is that there is no hard and fast investing theory that ends up working well for everyone ... if your fate puts your prime investing years and your cash out years in a worst case scenario ... then you could end up being screwed more than if you just had a savings account

people should not hold themselves to cookie-cutter investing theories .... AA can adjusted for more reasons than just age (one example would be to reduce exposure when investment goals have been met during a prolonged bull market) ... you won't get stabbed with a pitch fork if you do something unorthodox like going to the sidelines on occasion
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