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Old 10-11-2012, 10:45 AM   #21
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Thanks all for the great advice. It's great getting some different perspectives on how people apply this issue in the real world.

I like the approach of using index funds for most of my portfolio, but still leaving 10% of so to "play with". Odds are I won't beat the market with that 10%, but it still allows me take some chances and follow the market a bit closer than I otherwise would.
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Old 10-11-2012, 10:55 AM   #22
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Testosterone is hard to overcome. I wish my testosterone was a lot smarter though.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 10-11-2012, 12:30 PM   #23
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Testosterone is hard to overcome. I wish my testosterone was a lot smarter though.
Yeah, I've been married too...

Twice...
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Old 10-11-2012, 01:57 PM   #24
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I like the approach of using index funds for most of my portfolio, but still leaving 10% of so to "play with". Odds are I won't beat the market with that 10%, but it still allows me take some chances and follow the market a bit closer than I otherwise would.
My equity portfolio is dominated by a low cost TSM index fund but, like you, I enjoy managing 10% or so in individual stocks. (Currently less than 10%.) I've done well, handily beating the S and P 500 index the past few years, based primarily on short term trading. I'm not a day trader but seldom own a stock more than a few weeks. There have been some exceptions of course. I also own some dividend stocks but don't include those in my "trading" allocation.

As mentioned above:

1. Taxes are important. I've owned my TSM fund for many years and it has very significant capital gains. I'm locked in for now since the capital gains hit would be very painful if I wanted to sell and switch to something else.

2. Avoid lapsing into a buy and hold mentality on individual stocks. There is no truly fool proof way to protect yourself during periods when you're not paying attention. (It's hard enough to protect yourself when you are paying attention!)
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Old 10-11-2012, 03:33 PM   #25
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2. Avoid lapsing into a buy and hold mentality on individual stocks. There is no truly fool proof way to protect yourself during periods when you're not paying attention. (It's hard enough to protect yourself when you are paying attention!)
+1
As a painful owner of TONE and EGLE I decided to keep these two in my brokerage account, specifically to remind me not to buy individual stocks
It was only my testosterone money, but it still hurts a little
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Old 10-11-2012, 05:01 PM   #26
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After 25 years of goofing around with individual stocks
One thing that doesn't always come through on these forums is how long, and how intently, we indexers spent "investing" in individual stocks before we were converted.

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Be careful of this. Investing isn't a hobby.
Yes. IMO the more exhilarating it is, the worse you'll do.
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Old 10-11-2012, 05:56 PM   #27
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Yeah, I've been married too...

Twice...
I usually don't make the same mistake twice. Definitely not in this case...
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Old 10-11-2012, 08:38 PM   #28
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Let's see. After 25 years of goofing around with individual stocks, active managed funds, and indexes, I've decided to focus on index funds from here on out. Most of my stock picks have been terrible, although a few good picks got me near even. I'm done with stocks.

I still have a few sector type funds that I'll be drawing down to convert to more broad indexes, using the value averaging approach.

As a matter of fact, I learned about the value averaging here on this board from my first posts (I see it mentioned above twice), and it sounds like a really good approach. I'm going to try it, with plans to invest every 2 months for the next two years (12 purchases) to a broad equity index. It will be interesting to see how this works out.
Sorry, but you are going to have to accept another member into the "terrible stock picker club". Outside of the idiot proof investments of oil companies and utilities, I had to accept the fact that I was a chronic market under performer. Needless to say, when I read on Bogleheads over a 15 year period 85% of all active managed funds underperformed the index, and the 15% that did wasn't the same funds, I knew I had to surrender.
My viewpoint of stocks however, are probably different than most. Since I live on my pension comfortably, I stash most of my savings from the left over amount of my pension and part time earnings in I Bonds and CDs. My stock purchase allotment goes to my yearly Roth contribution and a small monthly purchase into my vanguard total stock index. My stock portfolio is just a dead money bucket that I will never access and just let it grow. If my daughter is lucky, I will live a long life out of the nursing home and perish during a nice bull market run.
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Old 10-11-2012, 10:04 PM   #29
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I did fine with my stock picking. But when I decided I wanted to diversify internationally, there was no way I was going to be able to handle the workload. I transitioned into mutual funds and gave up most of the stocks except for a couple of fun ones. Absolutely, buy and hold is for funds, not individual stocks. None of my funds were going to go to $0 in 2009.
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Old 10-12-2012, 02:51 AM   #30
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Yeah, I've been married too...

Twice...
you do know until death do us part isnt a marriage vow, ITS A GOAL. ha ha ha ha
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Old 10-12-2012, 05:03 AM   #31
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I use both index and managed funds. The index funds consist of about 2/3 of my portfolio - TSM TISM, TBM in addition to Inst Index and EXT Mkt Index. All are low cost VG funds either in institutional or admiral share classes. However, my DW and I also hold Wellington and Wellesley with a dose of Hi Yield Bonds in our Roth's. I confess that I also hold a good sized chunk of Pimco total return Inst class in my 401k.
My overall plan is to hold low cost index funds with an allocation of 45 equity/ 40 bond / 15 cash. I'll hang on to the actively managed funds as long as they perform well, however that probably won't be forever.
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Old 10-12-2012, 07:35 AM   #32
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Just read the latest Rick Ferri post about another analysis showing index funds beat actively managed ones by a wide margin. I am mainly an indexer and relate to the many posts here about the evolution to get to that point. I was just wondering though if anyone has ever seen a performance comparison between index funds and say only the top quartile of low expense funds?
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Old 10-12-2012, 09:14 AM   #33
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Just read the latest Rick Ferri post about another analysis showing index funds beat actively managed ones by a wide margin. I am mainly an indexer and relate to the many posts here about the evolution to get to that point. I was just wondering though if anyone has ever seen a performance comparison between index funds and say only the top quartile of low expense funds?
Can't say that I have, but the argument is that the "top" funds usually don't stay there for long.
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Old 10-12-2012, 09:30 AM   #34
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FWIW I also find myself in the dual group with 80% or more in index funds and 20% to play with in mostly dividend stocks. Started out as an active fund guy and then "saw the light" all it took was a few years of not beating the indexes to convert me. Enjoy the picking aspect but limit my exposure. Also stick with my AA for good measure.

T-bird
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Old 10-12-2012, 11:05 AM   #35
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Just read the latest Rick Ferri post about another analysis showing index funds beat actively managed ones by a wide margin. I am mainly an indexer and relate to the many posts here about the evolution to get to that point. I was just wondering though if anyone has ever seen a performance comparison between index funds and say only the top quartile of low expense funds?
NoLoad Fundx has some

How Many Funds Outperform the Market?

http://blog.fundx.com/wp-content/upl...ePaper2012.pdf
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Old 10-12-2012, 12:43 PM   #36
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I usually don't make the same mistake twice. Definitely not in this case...
I once saw a homemade bumper sticker that said: "Marriage is a legal way for a woman to kill a man without facing the death penalty" It was on a beatup old car so I am assuming he didn't fare to well with the splitting up of assets........
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Old 10-12-2012, 04:40 PM   #37
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Just read the latest Rick Ferri post about another analysis showing index funds beat actively managed ones by a wide margin. I am mainly an indexer and relate to the many posts here about the evolution to get to that point. I was just wondering though if anyone has ever seen a performance comparison between index funds and say only the top quartile of low expense funds?
Morningstar had an article that was almost complementary to actively managed funds.
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Old 10-13-2012, 10:29 AM   #38
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I once saw a homemade bumper sticker that said: "Marriage is a legal way for a woman to kill a man without facing the death penalty" It was on a beatup old car so I am assuming he didn't fare to well with the splitting up of assets........
Mine sure tried. Doesn't that go with "Why do husbands usually die before their wives? Because we want to!"?

Off topic (what the?) but the beat up old car reminds me. Have a friend of a friend, got married, got divorced, wife got the house. Got married again to a woman with a house, she talked him into upsizing at the peak of the market, house lost half its value and is deeply underwater, she divorced him and left him with the underwater house. He had to take a second contracting job to try and make ends meet, just fell off a house yesterday and broke everything from the waist down. No insurance. Will probably never walk again.

He probably should have used index funds.
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Old 10-13-2012, 02:14 PM   #39
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I believe this has been attributed to Rod Stewert: "The next time I want to get married, I 'll find a woman I don't like, and buy her a house..."

Or as an old friend says when he sees a sweet young thing walk by: "she could be my next ex-wife..."

One more: On the Eagles Farewell I dvd, Glenn Frey dedicates one song to his first wife, "Plaintiff"...
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Old 10-13-2012, 04:49 PM   #40
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He probably should have used index funds.
Or more to the point, prostitutes.

Ha
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