The "price" of diversification

[ESRBob]

Quote:

Originally Posted by Have Funds, Will Retire Doesn't Bernstein refer to this as "tracking error"?

I think it is just diversification. Tracking error is when you really are trying to invest in something that will track the index (like an index fund) and then find it drifts off due to a mismatch about what they actually own and the fees/commissions they pay to own it, and what the market index actually does.

[Alan]

Checking several times a week is fun and is harmless as long as you don't act on what you see every week. Being in my 50's my portfolio is now only 35% in equities, 50% bonds and 15% cash, so a daily look doesn't really mean much as all the cash and bond funds pay out monthly or quarterly. (I'm still re-investing the dividends).

[HFWR]

Quote:

Originally Posted by ESRBob I think it is just diversification.* Tracking error is when you really are trying to invest in something that will track the index (like an index fund) and then find it drifts off due to a mismatch about what they actually own and the fees/commissions they pay to own it,* and what the market index actually does.

Yes, agree. However, tracking error is also defined (maybe not by Bernstein??) as deviation from your friends and neighbors; i.e with a diversified portfolio, it's assumed you'll outperform in the long run, with lower volatility, etc. But sometimes you'll be down when the stock/index du jour is up, and your neighbors are all gloating about their portfolios. IOW, can you stand to be down when your neighbor is up. It goes without saying that being up when others are down would not be a problem...

[ESRBob]

Yeah, Bernstein makes quite an issue out of this. I think the conversations at this cocktail parties must be a lot more explicit than it is at the ones I go to. We almost never talk about our portfolios or earnings -- or even investments really. Maybe the odd private equity deal, or an annual figure in January parties for those who manage money professionally. If you are down, then you just smile and keep your mouth shut. No one I know is going to make you tell how big 'your number' is.

[REWahoo]

Quote:

Originally Posted by ESRBob Yeah, Bernstein makes quite an issue out of this. I think the conversations at this cocktail parties must be a lot more explicit than it is at the ones I go to. We almost never talk about our portfolios or earnings -- or even investments really. Maybe the odd private equity deal, or an annual figure in January parties for those who manage money professionally. If you are down, then you just smile and keep your mouth shut. No one I know is going to make you tell how big 'your number' is.

You mean you don't hear "I'll show you mine if you show me yours."?

REW

[ESRBob]

Nah.. maybe because a lot of them are pros on wall street, so if you really want to know, you read about it in Barron's? I dunno. They talk about specific investments, but mostly it feels like talking about 'work' and we move on to lighter topics like how we want to make the kids more rugged and independent without actually giving up pampering them, or moan about the other parents who have become hopelessly neurotic micromanagers of their kids' sports careers, and wonder whether that will end up hurting the kid in the long run or whether the parents are in fact making a clever if tiresome and unpleasant maneuver that promises to make the kid happy and outflank all the rest of us at the very moment when we are finally trying to relax a bit. I talk about ER, sculpture and yoga.

[Ed_The_Gypsy]

So I ain't the only one who stopped reinvesting dividends and let them pile up in the MMF until I figure out where it should go. It took me a while. Hope you-all got there earlier.

Gyspy

[BUM]

Hi Ed,

No you're not the only one. Stashing the divvies is a common practice among ER's. Its what many live on. The monthly procedure is to have those funds (sometimes even including money market interest) electronically transferred to your local checking account.

[preben]

Ah yes - those divies should just come in and be used to live of. Unfortunately US broker(s) makes life hard on us non-resident aliens....

Can't open a US bank account without a US address (and some even want SS no...go figure..)
Can't wire from my broker to other account unless account name is MINE (meaning I can't even wire to other broker as they have a one-in-all account followed by "for benefit of" the sub account one has with broker)
Can't do ANY auto electronic wires or transfers to any foreign (or US) account only manually with fax.....
I managed to get a debit visa card through one US broker (with the risks that implies) and had to deposit $10k and sign a letter that they could grap any fraud from them!
And the list goes on..... I am a bit tired of being treated as a terrorist or a 2nd rate customer even if they do it for my "own best".

Rant over - cheers!

Quote:

Originally Posted by BUM Hi Ed, No you're not the only one. Stashing the divvies is a common practice among ER's. Its what many live on. The monthly procedure is to have those funds (sometimes even including money market interest) electronically transferred to your local checking account.