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View Poll Results: How much of the Return available from the stock market is realized by the average investor?
95% 3 6.52%
80% 10 21.74%
50% 11 23.91%
30% 8 17.39%
10% 14 30.43%
Voters: 46. You may not vote on this poll

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Re: Average Investor Returns
Old 08-31-2006, 04:06 AM   #21
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Re: Average Investor Returns

im running at about 12-13% annually on average since 87 up to last year....i have to admit though i have been following the same newsletter since then and following their lead.....but non the less life is about not knowing everything but knowing where to go to get the info you need.....* left to my own devices i think my returns would be lower as i tend to take profits to quickly when im in the drivers seat leaving to much on the table
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Re: Average Investor Returns
Old 08-31-2006, 04:11 AM   #22
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Re: Average Investor Returns

as of last year i toned my portfolio down as all those years i was following the growth mix only in my newsletter...as i prepare for ER i started to use an income mix , a growth and income mix and my growth mix as i started investing for different time frames in the different models ...my returns will be less than the 12-13 % and should come in the 7-8 % overall area ....this is my first year so im not sure what my reduced risk mix will give me....
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Re: Average Investor Returns
Old 08-31-2006, 05:49 AM   #23
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Re: Average Investor Returns

I'm confused about the poll.* Do 30% of the respondents to date really think that the "average investor" gains only 10% of the total return of the stock market?

I.e., if in 2005 the market returned 12%, then the "average investor" got 1.2%*

What does "return available" actually mean? The bestest stock picker ever picking just the handful of stocks that go up 200% or 300%?? Those kind of returns are 'available' but just damned unlikely!*

Open to any corrections if my comprehension is lacking here.
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Re: Average Investor Returns
Old 08-31-2006, 07:25 AM   #24
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Re: Average Investor Returns

ladelfina - Good question!*

I voted 50% in the poll after reading about typical investment approaches with typical mutual fund houses.* The John Bogle article* "The Relentless Rules of Humble Arithmetic" http://www.vanguard.com/bogle_site/sp20060101.htm elegantly steps through the process of starting with the values of the underlying stocks in the market and subtracting expenses, overheads, and unfortunate buy/sell decisions that lead to reduced "Average Investor Gains".

- The best you can have is the basic stocks and their dividends for an actual market return value.

- If you have these stock within a mutual fund at a vendor (such as Vanguard or Fidelity) your return would be reduced by the ER and some other associated trading costs and overhead, and also by advisor fees.* As a result you, as the mutual fund owner, would receive typically 93-98% of the actual market returns of the underlying stocks.*

- If you then chose to attempt to market-time and move in-and-out of the market at inappropriate times, then your transaction costs, etc could reduce your actual market returns even more.* Bogle says that the typical MF owner realizes 60-65% of the actual market returns.

What I found most significant in the "...Humble..." article above, was the systematic expenses associated with having your funds with different vendors; Bogle indicates that merely buying your funds from different vendors can change your returns within a range from 98% to 36% of actual market returns of the underlying stocks.*

I've learned many things here - if you have a stable asset allocation in mind, buy etfs instead of mutual funds, stay the course, chose a low cost vendor and keep away from advisors.

Great poll Hellbender!

JohnP
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Re: Average Investor Returns
Old 08-31-2006, 08:07 AM   #25
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Re: Average Investor Returns

Quote:
Originally Posted by mb
Donheff, Dodge & Cox is a no-load fund family.
Sorry, Dodge and Cox is in DW's firms's plan, but the question remains the same. With Dodge and Cox, or a load fund, do the total return figures from Morningstar give you an accurate picture (in hind-sight) of performance versus an index fund. That is what I have always understood. The question's relevance has to do with what I do with existing load funds (load paid off) that are doing well - move em, or leave em?

Quote:
Originally Posted by LOL
I think you need to use software like Quicken or MSMoney or the XIRR function of excel to get your ROI. You must enter every transaction accurately though (date, $, number of shares). There is no real shortcut if you want a valid ROI.
I recognize that the calculation can be done but I don't have the historical data so I am stuck with where I am now and going forward. JohnP's suggestion to use ETFs to set-up your stable allocation and then just leave it alone sounds pretty good to me if, and when, I decide to move these funds.
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Re: Average Investor Returns
Old 08-31-2006, 08:13 AM   #26
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Re: Average Investor Returns

Knowing what I do about what even many educated (but not about investing) people do with their 401ks--let alone IRAs and taxable investments--I said 50% and think that's generous. An awful lot of people lose money even in an up-market. Personally speaking, with my heavy weighting in interntional, small cap, value, and cash, I won't do so well in a large-cap-growth led market. (If we ever have one again )
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Re: Average Investor Returns
Old 08-31-2006, 08:22 AM   #27
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Re: Average Investor Returns

I'm not sure what the point of the poll is. People smoke tobacco, trade in cars every three years and buy crappy load funds. Yep, they're stupid. What does that have to do with the rest of us?
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Re: Average Investor Returns
Old 08-31-2006, 08:44 AM   #28
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Re: Average Investor Returns

The point of the poll is the same as the point of many of our threads: "Look at how much smarter we are than the rest of the people in this world."

Sounds bad when I say it like that, but it's true that we say that a lot, and it's true.* We're just a bunch of self-righteous nerds!
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Re: Average Investor Returns
Old 08-31-2006, 09:33 AM   #29
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Re: Average Investor Returns

Quote:
Originally Posted by JohnP

As a result you, as the mutual fund owner, would receive typically 93-98% of the actual market returns of the underlying stocks.*
...
Bogle says that the typical MF owner realizes 60-65% of the actual market returns.
...
merely buying your funds from different vendors can change your returns within a range from 98% to 36% of actual market returns of the underlying stocks.*
Wowee!* ** I had no idea it was that bad.. I voted 80%.. the other numbers seemed impossible but I guess they're not. Any of the 10% respondents wanna explain their reasoning, though?

TromboneAl .. YEAH! GO EARLY-RETIREMENT.ORG! We RUUUUULE!

First I thought the poll was dopey (pace, brewer), but it's really valuable to see how much difference there is between "investing" and investing. Anything that gets people to take a closer look at their fund performances, expenses and so on, and rub the sleep from their eyes...!
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Re: Average Investor Returns
Old 08-31-2006, 09:45 AM   #30
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Re: Average Investor Returns

Quote:
Sounds bad when I say it like that, but it's true that we say that a lot, and it's true.* We're just a bunch of self-righteous nerds!
I'll confess... I am a nerd...* but not sure about the self-righteous part;* I believe I'm here to understand and learn and share ...* Personally, I'd like to know what do I do and where do I go for the best opportunity to safely FIRE.

Quote:
Sorry, Dodge and Cox is in DW's firms's plan, but the question remains the same. * With Dodge and Cox, or a load fund, do the total return figures from Morningstar give you an accurate picture (in hind-sight) of performance versus an index fund. *That is what I have always understood. * The question's relevance has to do with what I do with existing load funds (load paid off) that are doing well - move em, or leave em?
donheff - in my mind, the M* figures do give an accurate picture versus an index fund... I am pleased with the M* numbers. *We also have load funds bought in active tax-deferred accounts that I'm comfortable holding there until DWs full retirement. *After DWs retirement we're likely to move the t-d acct to a VG TIRA and hold ETFs there.* Only one more school year for DW.* *

JohnP
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Re: Average Investor Returns
Old 08-31-2006, 09:54 AM   #31
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Re: Average Investor Returns

Quote:
Originally Posted by TromboneAl
We're just a bunch of self-righteous nerds!
He was actually registered here for a while, but only posted a couple of times...

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Re: Average Investor Returns
Old 08-31-2006, 10:04 AM   #32
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Re: Average Investor Returns

Quote:
Originally Posted by donheff
Sorry, Dodge and Cox is in DW's firms's plan, but the question remains the same.* *With Dodge and Cox, or a load fund, do the total return figures from Morningstar give you an accurate picture (in hind-sight) of performance versus an index fund.* That is what I have always understood.* *The question's relevance has to do with what I do with existing load funds (load paid off) that are doing well - move em, or leave em?
Historical performance is historical performance. The problem is that it doesn't tell you if those same funds will beat the indexes in the next 5 years. You are basically gambling that they will do so. Mostly, I am not real eager to make the same wager.
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Re: Average Investor Returns
Old 08-31-2006, 10:24 AM   #33
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Re: Average Investor Returns

Quote:
Originally Posted by TromboneAl
The point of the poll is the same as the point of many of our threads: "Look at how much smarter we are than the rest of the people in this world."

Sounds bad when I say it like that, but it's true that we say that a lot, and it's true.* We're just a bunch of self-righteous nerds!
TA, you're an insightful fella........
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Re: Average Investor Returns
Old 08-31-2006, 11:33 AM   #34
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Re: Average Investor Returns

Quote:
Wowee!* * *I had no idea it was that bad.. I voted 80%.. the other numbers seemed impossible but I guess they're not. Any of the 10% respondents wanna explain their reasoning, though?
Sure, I'll explain again.* I include everyone in the denominator of "average investor", including all those folks that don't invest in stocks, ETFs, and no-load, low-expense ratio mutuals, but in real estate, small businesses that go nowhere, pyramid schemes, timeshares, 0.25% passbook accounts, social security, annuities, front-end load funds, back-end load funds, hedge funds, lottery tickets, LasVegas, etc.

You can see that the numerator is gonna be much less than stock market returns.* *Furthermore, if everyone achieved stock market returns on average, this message board probably would not exist because we would all be average.

And why have a message board to toot our own horns if we are all just average?
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Re: Average Investor Returns
Old 08-31-2006, 11:56 AM   #35
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Re: Average Investor Returns

Quote:
You can see that the numerator is gonna be much less than stock market returns.* *Furthermore, if everyone achieved stock market returns on average, this message board probably would not exist because we would all be average.

And why have a message board to toot our own horns if we are all just average?
I think the server is about to collapse on itself and form a black hole with those statements.....
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Re: Average Investor Returns
Old 08-31-2006, 01:06 PM   #36
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Re: Average Investor Returns

Quote:
Originally Posted by brewer12345
Historical performance is historical performance. The problem is that it doesn't tell you if those same funds will beat the indexes in the next 5 years. You are basically gambling that they will do so. Mostly, I am not real eager to make the same wager.
Thanks Brewer (and JohnP for your similar answer). When I ER'd I had most taxed money and a substantial portion of non-taxed money in load funds recommended by a long term advisor. We were typical overworkers who paid little attention to finances other than the general principal to LBYM and save a boatload. The advisor (luckily) kept us diversified and did not churn. When I was close to ER I started to study and realized the mistake we had made with load funds. Shortly after ER I discovered this group and learned a lot more. When I analyze our funds past performance, however, it looks like we have done fine. Every time I read Bogle's stuff or people quoting it I worry that maybe I am missing something and we are really doing worse than I think. Thus the question about M* -- I think the reality is part luck and part an advisor with a reasonable level of integrity (which was also part luck).

I plan to watch the M* forecasts and, when everything frees up, I will probably move substantial chunks to well regarded ETFs and leave them be. When I am ready to go I will follow up here and pull some nuggets out of your heads.

Thanks again.

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Re: Average Investor Returns
Old 08-31-2006, 01:11 PM   #37
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Re: Average Investor Returns

donheff, FWIW< I wouldn't be in a rush to dump Dodge & Cox. I think they do a pretty good job, although I naturally wouldn't bet the farm on it. Not sure about Calamos.
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Re: Average Investor Returns
Old 08-31-2006, 02:22 PM   #38
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Re: Average Investor Returns

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Originally Posted by brewer12345
donheff, FWIW< I wouldn't be in a rush to dump Dodge & Cox. I think they do a pretty good job, although I naturally wouldn't bet the farm on it. Not sure about Calamos.
I am not ready to do anything with the funds just now. I do have some cash accounts that I don't need to tap soon that may be in search of a good Federal Credit Union CD per other threads around here.
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Re: Average Investor Returns
Old 08-31-2006, 04:07 PM   #39
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Re: Average Investor Returns

Quote:
Originally Posted by brewer12345
I'm not sure what the point of the poll is.* People smoke tobacco, trade in cars every three years and buy crappy load funds.* Yep, they're stupid.* What does that have to do with the rest of us?
Fortunately, several others found value in the poll and the ensuing discussion.* Perhaps they don't expect and demand that every post be about them.* Bogle and many others have found value in asking how real world investors actually do with their investments.* I would think that anyone (particularly young people) considering entering the equities markets and not already as enlightened as you, would be very interested in knowing how the average investor fares.

I personally found the poll interesting for a number of reasons.* First, despite the existence of numerous studies addressing the issue, it shows that there is still a very wide divergence of opinion by [self-proclaimed] above-average investors regarding the average returns achieved by individual investors in the equities markets.* Second, the opinion of these investors seems by and large to reflect knowledge of the huge discrepancy that exists between historical and real world returns.* *Nearly 3/4 of those responding to the poll felt that the average investor only realizes about 50% or less of what the market delivers.* *I personally think that is a realistic (and perhaps optimistic) assessment.* As more and more employees are made responsible for their own investments and retirements, I think knowledge of such things is very important.

Is smoking stupid?* Yes.* Does the fact that many thousands of people smoke have anything to do with me, a nonsmoker?* You bet it does.*

Is driving drunk stupid? Yes.* Does the fact that many thousands of people engage in this activity have anything to do with me?* You bet it does.

Does the likely proliferation of millions of investors that are too stupid to invest intelligently for their own retirements and ending up too old, sick or disabled to work and without two nickels to rub together, affect anyone?* I think so.*

I would much rather the truth about real investor returns be told, and I think there is good reason to do so.
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Re: Average Investor Returns
Old 08-31-2006, 04:14 PM   #40
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Re: Average Investor Returns

OK, smart guy: What percentage of the return available in the RE market does the average investor capture?

I agree that the US is desparately in need of even basic financial literacy education for the general populace, but money is such a taboo in this country that I seriously doubt you will ever see widespread education on the subject. Plus I rather doubt it would stop most people from doing painfully short-sighted things with their money. Its really hard to get the money brain evolution has left us with to act with cold rationality.
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