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Old 12-15-2015, 06:55 PM   #61
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...Was he gambling, while I was investing...
Yes. You were broadly diversified and he was not... you were investing and he was gambling.
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Old 12-15-2015, 07:02 PM   #62
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Originally Posted by eta2020 View Post
Can you tell me please how can I be completely wiped out with for example 3 Million dollar portfolio split between VXUS and VTI? I mean short of US-Russia Nuclear War

BTW I don't give my money to any guy because that 0.5% or 1% fee is huge money that I want to keep in my pocket.
No need. You answered your own question. My point isn't to say that your portfolio has any particular level of risk. It's to say that by investing in the stock market, we are handing our money to someone else and agreeing to accept a return based on a set of rules. No guarantees.

In a casino, both the customers and the house are gambling. We say the gaming company is making an investment because it has a better business model, not because it isn't gambling.
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Old 12-15-2015, 07:07 PM   #63
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No need. You answered your own question. My point isn't to say that your portfolio has any particular level of risk. It's to say that by investing in the stock market, we are handing our money to someone else and agreeing to accept a return based on a set of rules. No guarantees.

In a casino, both the customers and the house are gambling. We say the gaming company is making an investment because it has a better business model, not because it isn't gambling.
Yea...but with Index funds we are handing it to Mr. Market versus some individual money manager.

I have trust in Mr. Market.
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Old 12-15-2015, 07:09 PM   #64
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If you worked until you had enough money to not need the stock market, then most likely you have lost, not won.

Last time I checked, extra years of life were more than even Buffett can afford.
I wasn't trying to talk in riddles but rather be concise. Instead of being cryptic, here is what I was trying to say:

If you think winning the game is working at your job until you are at the point where you have so much money that you do not need to take any real risk (stock market or even bond market) to insure that you never come close to running out, then in most cases you have probably spent too much of your life preparing yourself for your final years. You can never gain back the younger years of your life where you were not able to do some of the things you wanted to do because of your job. Obviously there are some who love their job and find the most happiness there (maybe Buffett is one) and there are those who get lucky and manage to pick a hot career or hot company and make a fortune while they are young (many Microsoft multi-millionaires by age 30 back in the late 1990s).

For most of us, there is a point where we can retire earlier than "normal" and still have a few decades of active lifestyle but in order to achieve this we must fight inflation by having a portion of our money at risk.

(I think my earlier post was far better)
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Old 12-15-2015, 08:03 PM   #65
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When I got to that point I actually felt even more that staying 100% in equities is a way to go and had even less reasons to get out .
You don't need to get out once dividend yield covers your living expenses.
Totally agree. With a nice pension backstop, I figure I can easily handle more risk.
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Old 12-15-2015, 08:37 PM   #66
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If you think winning the game is working at your job until you are at the point where you have so much money that you do not need to take any real risk (stock market or even bond market) to insure that you never come close to running out, then in most cases you have probably spent too much of your life preparing yourself for your final years.
I get your point and there is no right answer for each household. Your focus is being able to retire early (I think in your forties?). Some people would give a higher priority to never possibly running out of money or being able to leave money to charity, especially if they have jobs they enjoy and can continue to work on part-time.

Bernstein uses Pascal's wager as an example of why he recommends a conservative approach for those clients who have "won the game":

"If you have already achieved sufficient wealth to support a quality lifestyle, you face a similar wager. You can focus on the preservation of capital by having a low allocation to risky assets, or you can try to accumulate even more wealth by having a large allocation to risky assets. While it is likely that a high allocation will result in greater wealth, you can be wrong. And the consequences of going from rich to poor are intolerable for most people.

The bottom line is that the consequences of decisions must always dominate the probabilities of outcomes. That is why the prudent strategy for investors that have reached the point where their marginal utility of incremental potential wealth is low is to have their portfolios be dominated by high-quality fixed income assets. There are some risks that are just not worth taking."

Are the Rewards Worth the Risks? - CBS News
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Old 12-15-2015, 08:55 PM   #67
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Bernstein uses Pascal's wager as an example of why he recommends a conservative approach for those clients who have "won the game":
I'm going on the theory that God will appreciate an honest atheist over a sycophantic believer.
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Old 12-15-2015, 09:06 PM   #68
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I'm going on the theory that God will appreciate an honest atheist over a sycophantic believer.
I think his focus is on the concepts of the analogy since it is a famous one, and not trying to make a religious statement.

If you prefer a more secular analogy, Berstein also uses one by Warren Buffett, concerning the Long Term Capital geniuses:

"To make money they didn’t have and didn’t need, they risked what they did have and did need, and that’s foolish."

http://blog.alphaarchitect.com/2015/...cessary-risks/
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Old 12-15-2015, 09:12 PM   #69
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Yea...but with Index funds we are handing it to Mr. Market versus some individual money manager.

I have trust in Mr. Market.


heh heh heh - all praise to 'Bogle's Folly!' My best pal since 1977.

Lead Sled Dog. The horse I rode in on. Big Dog on the porch. And any other positive cliches you can think of.

Forget that brief affair with pssst Wellesley I am back with my true love - broad index funds.
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Old 12-15-2015, 09:44 PM   #70
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Originally Posted by daylatedollarshort View Post
I think his focus is on the concepts of the analogy since it is a famous one, and not trying to make a religious statement.

If you prefer a more secular analogy, Berstein also uses one by Warren Buffett, concerning the Long Term Capital geniuses:

"To make money they didn’t have and didn’t need, they risked what they did have and did need, and that’s foolish."

Warren Buffett On LTCM, Blind Spots, Leverage, and Unnecessary Risk - Alpha Architect
I'm not fond of Pascal's wager because it is intellectually dishonest. However, I am a believer in a liability matching portfolio and only risking money in the market that you can afford to lose.
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Old 12-15-2015, 09:55 PM   #71
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My question for daylatedollarshort is how are you going to get all these quotes from different sources out of your head?😎
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Old 12-15-2015, 10:24 PM   #72
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My question for daylatedollarshort is how are you going to get all these quotes from different sources out of your head?��
It took a long time to fit them all in there. Why would I want to go and take them out?
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Old 12-15-2015, 10:42 PM   #73
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I don't know. Sometimes some of these experts and studies can cloud our own thought process. I think it is ok to learn certain things from experts but ultimately use our own brain and creativity.
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Old 12-15-2015, 11:36 PM   #74
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heh heh heh - all praise to 'Bogle's Folly!' My best pal since 1977.

Lead Sled Dog. The horse I rode in on. Big Dog on the porch. And any other positive cliches you can think of.

Forget that brief affair with pssst Wellesley I am back with my true love - broad index funds.
It's interesting though that when one compares pssst Wellesley with similar conservative allocation index funds such as Vanguard LifeStrategy Consrv Grwth which has a very similar split of stocks/bonds, Wellesley beats it soundly for 1,3,5 and 10 year periods, with a higher SEC yield to boot. The Welllesley conundrum.
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Old 12-16-2015, 07:19 AM   #75
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I give my money to a guy, and give him instructions about what I want done with it. He and I agree that the amount he gives me back later will be related to some results that happen between now and then. I have studied the process that my return will be related to...I understand the mechanism of how it works, and I understand the statistics of people who have done similar things with their money in the past. I know that I can take the high-risk, high-reward option or a low-risk, low-reward option when I give the instructions to this guy, and am comfortable with the level of risk I am taking now. This understanding notwithstanding, I have absolutely no control over the outcome and how much I will get back, only a historical record of what has happened previously in similar situations.

So did I give my money to my Vanguard rep and ask him to invest it all in Wellesley with dividends reinvested? Or did I give my money to the croupier and tell him to put it on red, and let it ride two times if I win? Could you look at investing as informed and well considered gambling? The process is pretty similar.

I watched my brother's portfolio get completely wiped out during the dotcom bust, while mine took a 20% hit. I realized then that while I had taken a more conservative (lower risk, lower reward) approach to investing, I had absolutely no more control over the results than my brother did. The mechanism of what he did and what I did were identical. We both could have been completely wiped out. We were playing the same game...I just took less risk than he did. Was he gambling, while I was investing, just because the results turned out the way they did?
Having some similarities doesn't make gambling and investing the same thing.
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Old 12-16-2015, 08:45 AM   #76
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Having some similarities doesn't make gambling and investing the same thing.
You're right, of course. But having similarities goes a lot further toward making them the same than making them different.

This is a semantic issue to a great extent, depending on how we define the two words, invest and gamble. What I find important to remember (you may not) when I put money in index funds is that I really don't understand the forces that make the indices go up and down on a year-to-year basis very well, and I have zero influence on them. I'm just betting that they will continue to perform more-or-less as they have performed in the past. I read books and try to diversify holdings across sectors and markets, but this is just using historical results to try to hedge bets a little bit. Does this make my investing different from gambling? It doesn't feel too different to me, only like the odds are stacked more in my favor...kind of like being the house at a casino rather than the customer. Both are gambling.

What would feel different to me would be if I were involved with the capital I'm investing...where I had expertise in the actual use of the capital, and where I could evaluate and manage the risks of the use of the capital (not just which stocks to buy). Then the investment wouldn't just be betting on how some stocks perform. In fact that's what I do at w*rk. I help evaluate and manage the risk of the direct investments my megacorp makes. We invest in hundred million dollar projects that may only have a 20% chance of success. An 80% chance of losing one's full investment may seem like gambling to some, but we are expert at identifying the cost of the investment, the chance of its success, and at evaluating the value of successful projects. With a portfolio of projects like this, the numbers can pencil out. The company is over 100 years old and valued at over $100 billion, so routinely investing in projects with an 80% failure rate can be quite an effective investment strategy. To me the difference between investing and gambling isn't so much the level of risk being taken, but the level of control one exerts on the use of the capital.

I now realize that others may have a different view on this.
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Old 12-16-2015, 09:15 AM   #77
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I am staying in equities to maximize both our spending capacity and the legacy to daughter. I view it almost as an option on a very nice future for daughter. Our future is pretty well assured, I think.
Yes that is the crux of the question. Both my heirs have a high tolerance for volatility so they are on board with taking equity risk in their eventual portfolio.

The other heir, charities, gets their bundle without capital gains tax so they will love the benefits being higher and not taxed.

Even without heirs, we would still have charities. We self-insure for LTC so they understand that downside.
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Old 12-16-2015, 09:18 AM   #78
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Yes, fine, semantics and lots of similarities. But gambling has negative connotations compared to investing in common usage. And it seems pretty obvious to me that Car-Guy is purposely using gambling accentuate what he sees as the risks in investing, as he hinted that it's risky to retire and still be dependent on stock market returns (post#45 in this thread). As someone else said, if he views being in the market as gambling, he's doing it wrong.

Many people would view gambling as entertainment, or taking high, perhaps unnecessary risks to make money, often out of desperation. Most of us would not view being in the stock market that way. If he does, fine, he can and should do whatever he feels right with his money, but trying to pass that judgement onto others, (again, as he did in post #45) doesn't sit well with me and I said so.

I'm not interested in a pedantic discussion of the definitions of the two, and how you could tilt your head and call them the same thing. I'm talking about the way the two terms are commonly used, and used here.
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Old 12-16-2015, 11:05 AM   #79
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So scrinch, if, instead of doing the investing internally, you contracted it out to someone you trust, would that become gambling? Presuming you still had a healthy level of visibility and control, I doubt that would fall into gambling. But some control was relinquished. But you have some rules in the contract and laws of the land that protect your interests.

As a stockholder you become a silent partner, so does that make it gambling? Because you don't have direct control? But your interests are still looked after by the law of the land, and also many times major stockholders that are running the company have a bigger stake than you.

Wondering what level of control would have the investment become gambling.
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Old 12-16-2015, 12:07 PM   #80
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Investing is not gambling. Move on already!


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