Buy-and-Really-Hold Will Suck Your Portfolio Dry

[stevenst]

Honestly, I think your message will be better received over on Bogleheads Investing Advice and Info . Plenty of active managers over there.

Steve (sorry, couldn't resist )

[M Paquette]

Quote:

Originally Posted by HFWR By definition, an "index fund" tracks an index. But the S&P500 does not change very often, and it doesn't try to follow the latest hot stocks or trends...

Total Stock Market (VTI and friends) changes even less, removing companies when they die and adding them when they become public small caps or better. Of course, he'll argue that is also active (for small values of active).

These funds exhibit tax efficiency (handy for those of us who have filler our IRA with the least tax efficient assets, and need equity exposure), and have lower expenses than actively managed funds, including a reasonably diverse stock portfolio. They also are easier to manage than portfolios of individual equities. (I used to invest that way. About 1-2 hours per week per stock, or a full time job. No thanks. I'm retired now.)

I still don't see his customer's yachts...

[ERD50]

Quote:

Originally Posted by mmoody95 As I'm sure you know, an investment advisor is legally prohibited from making guarantees of any kind.

How convenient. So lets parse this. I'm sure you are correct - it would be illegal to 'guarantee' future performance.

But we can enter into a contract, right? It's done every time one buys a stock, index fund or actively managed fund. Foe example, when a bank offers a CD, it contracts to pay X% interest and return your principle for a specified period of time. It isn't a 'guarantee' as such, but it is a contractual obligation. And (as I understand it) bank regulators require certain amount of assets to back that contractual obligation.

So, how about an actively managed fund that makes a contractual obligation to outperform the market after fees, and keeps funds in reserve to meet that obligation? The contract could be for 5 years or so, so people can't cherry-pick one bad year and get out.

Based on your assurances, it seems this should be easily accomplished, and I think you would draw a steady supply of customers. After all, beating an index should be easy for anyone with a solid financial understanding, right?

BTW, I know something along these lines were offered in the past, with caps on the gains, and IIRC they kept the dividends and just compared NAVs, giving them a nice 2-3% of 'house money' to play with. Devil's in the details.

So, got a contract for me?

-ERD50

[Rich_by_the_Bay]

Greed kills. I'm happy with my fair share of the market, less a smidge for management fees (like .18%). No need to beat it, just go along for the ride.

If you truly "need" to beat the market for your retirement strategy to work, you may be in trouble.

I find the OP's claims and explanations to be disingenuous and implausible over the big picture.

[robls]

Quote:

Originally Posted by Nords Speaking of trolls, Mike, I'd check the IP address and background of that guy "Rob" who leaped on your blog to make the first comment. How appropriate that you two found each other so quickly-- I believe he's still 100% cash, and I'm sure he's looking for good advice on picking winning stocks!

Is this comment really necessary? A troll? And I'm still in 100% cash? How would you know that? You have no idea what my asset allocation is. Correct?
Post a link to an article that "some" may find of interest, and you are instantly labeled a troll. Thanks.
By the way, I have been a member of this board since 2003. Here's the linky to my profile:
http://www.early-retirement.org/foru...obls-4179.html
Rob

[robls]

Quote:

Originally Posted by robls FYI. Found this article very interesting: Buy-and-Really-Hold Will Suck Your Portfolio Dry

Maybe should have added this to my original post.
I'm going to investigate this concept, see if it checks out, and use a portion of my funds to see if I can outperform the index.
Of course, it is easier to just bash the article in the comments.

[Emeritus]

There is a difference between intelligent critique based on a long record of investigation and "bashing"
Good luck

[robls]

Quote:

Originally Posted by Emeritus There is a difference between intelligent critique based on a long record of investigation and "bashing" Good luck

So, you've ruled out a way to take a portion of your assets and possibly increase your returns on those assets, and stick with an index fund?
I know I have answered my own question.

[Westernskies]

This has certainly been an interesting thread, but I'm still confused...

Should I buy-and-really-hold or pay off the mortgage?

[HFWR]

Quote:

Originally Posted by Westernskies This has certainly been an interesting thread, but I'm still confused... Should I buy-and-really-hold or pay off the mortgage?

You should buy, and really, really hold...

[Emeritus]

Quote:

Originally Posted by robls So, you've ruled out a way to take a portion of your assets and possibly increase your returns on those assets, and stick with an index fund? I know I have answered my own question.

I could "Possibly" win the lottery but the odds make it unlikely. I always offer investment advisers the following deal. Ill invest with them. they absorb all the losses below the market and get half the gains as a fee. If they have a secret system that works, they will make money hand over fist.Guess what? They run away screaming that I am ignorant and don't understand the investment business.
I do understand it. That is their problem.
Heck Ill give you the same deal. Provide a suitable guarantee against loss. IE under perfroming the market. Ill invest $50,000 exactly as you say. We split the winnings and you pay the loss
If you have a magic system you will make money.

What do you say?
.

[robls]

Quote:

Originally Posted by Emeritus I could "Possibly" win the lottery but the odds make it unlikely. I always offer investment advisers the following deal. Ill invest with them. they absorb all the losses below the market and get half the gains as a fee. If they have a secret system that works, they will make money hand over fist.Guess what? They run away screaming that I am ignorant and don't understand the investment business. I do understand it. That is their problem. Heck Ill give you the same deal. Provide a suitable guarantee against loss. IE under perfroming the market. Ill invest $50,000 exactly as you say. We split the winnings and you pay the loss If you have a magic system you will make money. What do you say? .

I'm not asking you to invest your money that way. You have the choice to say, no thanks. And you have.
I'm asking myself, after researching this, would I be willing to put a portion (5%?) of my assets and try to outperform.
5% of 1.5 million = $75,000(not saying I have 1.5 million)
Index return after all fees = 10%(around historical return)
Relative strength return after all fees = 15%(I know this is a prediction)
That is around a $4,000 difference.
Am not saying putting all your assets this way. Understand AA, and diversification.
Rob

[Emeritus]

Quote:

Originally Posted by robls I'm not asking you to invest your money that way. You have the choice to say, no thanks. And you have. I'm asking myself, after researching this, would I be willing to put a portion (5%?) of my assets and try to outperform. 5% of 1.5 million = $75,000(not saying I have 1.5 million) Index return after all fees = 10%(around historical return) Relative strength return after all fees = 15%(I know this is a prediction) That is around a $4,000 difference. Am not saying putting all your assets this way. Understand AA, and diversification. Rob

Now you are just blowing smoke. If you have a system and it's not chance, it works. If not , you just want to play in the casino.

[robls]

Quote:

Originally Posted by Emeritus Now you are just blowing smoke. If you have a system and it's not chance, it works. If not , you just want to play in the casino.

Exactly. With 5% of my assets.

[unclemick]

Hormones. Resistance is futile.

In retirement - me? - balanced index on full auto.

However - a few good stocks to keep the hormones in balance - strictly for medicinal purposes don't you know.

heh heh heh - after all the Saints finally did win a Superbowl. And if one really really 'must' be active - pssst Wellesley! .

[robls]

Quote:

Originally Posted by unclemick Hormones. Resistance is futile. In retirement - me? - balanced index on full auto. However - a few good stocks to keep the hormones in balance - strictly for medicinal purposes don't you know. heh heh heh - after all the Saints finally did win a Superbowl. And if one really really 'must' be active - pssst Wellesley! .

Thanks, Unclemick.

[Emeritus]

Quote:

Originally Posted by unclemick Hormones. Resistance is futile. In retirement - me? - balanced index on full auto. However - a few good stocks to keep the hormones in balance - strictly for medicinal purposes don't you know. heh heh heh - after all the Saints finally did win a Superbowl. And if one really really 'must' be active - pssst Wellesley! .

When I want activity and excitement I go diving or take a stroll with a Rhino

[Texas Proud]

Quote:

Originally Posted by mmoody95 In answer to your question, I discovered this board from a trackback link at Wordpress for our blog. I didn't know it existed before. Wordpress shows you the links for anyone who posts your article links.

Interesting... so you track you blog... and then jump in to "sell" what you have to offer without even figuring out why it was posted... and if the board is even interested in what you are selling

And don't try to say you are not selling... the only reason I can see to come and post right away is to get people to your blog... and even if we do not buy anything... you get ad dollars... so it is a win for you either way...

If you look at the history of the DOW industrials.... there is no way to be a 'buy and hold'... some companies have gone out of business... so have been bought or merged with others... so it is kind of hard to have an index of 30 stocks when one gets bought and you do not replace it...

BUT... that is a LOT different than... let's throw BP out of our index because we do not like them now... they don't represent what we want right now... no, I would be that the index that contains BP still has them in there... so my thinking of indexes are that they are not the flavor of the month (or week in some cases).... I don't have to worry about excess trading... of the fund manager deciding that the peso is undervalued and can make a killing investing there (from experience with Fidelity Asset Allocation.. which you would have 'thunk' would have been more conservative)....

Also, my mom has made a lot of money on buy and hold with Exxon and Texaco.. she even kept Texeco through the Pennzoil lawsuit... could she have done better... of course... did she do bad... nope..

[ESRwannabe]

Quote:

Originally Posted by mmoody95 P.S. Indexing and relative strength management are not mutually exclusive, by the way. PDP, PIZ, and PIE are all index funds in an ETF format that use relative strength. They own 100 high relative strength stocks and are reconstituted and re-weighted each quarter. (Disclosure: my company provides the indexes for these products.) AQR Management also has several open-end index mutual funds like AMOMX. Clifford Asness at AQR wrote his thesis at the University of Chicago on momentum; his thesis advisor was Eugene Fama, the famous efficient markets theorist. When I wrote that none of my three propositions was controversial, I guess I should have said "within the community of finance professionals and academics." Clearly, the news hasn't gotten to everyone yet!

Based on the performance I see no benefit to owning one of these ETFs.

http://quicktake.morningstar.com/etf...DP&country=USA

http://quicktake.morningstar.com/etf...IZ&country=USA

http://quicktake.morningstar.com/etf...IE&country=USA

[haha]

This board should be renamed Boomerang. No matter where it is thrown, it always comes back to good old what we knew all along.

God's in Heaven, waiting for Mr. Bogle to take his reserved seat at the dais, and all is well in His kingdom.

Ha