Yale's top investor belongs on ER Forums

[FinanceDude]

Originally Posted by Running_Man

My point is that is what indexers were pointing out in 96-97 as a VERY GOOD investment. This is not my return over that period.

I assumed that......... I suppose there are some folks who have been in the S&P 500 stock fund for 10 years or more, and are happy with an average return of less than 6%, blaming the tech wreck and 9/11 for the low return.

[saluki9]

Originally Posted by Running_Man

This is where I disagree with individuals such as Mr. Swenson. Some such as Bernstein are going further, suggesting the government should ban Wall Street investing in retirement accounts and only allow indexing as it is an impossibility to beat the market as an individual.

The common refrain from the doubters is as Suluki9's who state "show me how you beat it after 20 years" Could someone please show me what Bernstein or Swenson were suggesting 20 years ago? Has anyone followed the same indexing strategy for 20 years? I know that back through 1995-1998 the prevalant suggestion from indexers was that a mixture of bonds and S&P500 would outperform any managed fund due to their international exposure and growth potential. Now 10 years later we are at an annual rate of about 5 percent return for the S&P500, different mixes are showing up.

The ability to be able to select stocks without having to justify it to an investor allows for returns to be earned by those with the patience and discipline to do so with very good dividends in my opinion. With the internet and the ability to look up SEC filings and listen to the management on conference calls live as they get the same answers to questions from the Wall Street "professionals" has made the modern era even more profitable to the individual investor.

1. Sinquefeld, Bogle, etc have been advocating indexing since the bear market of the early 1970s. What you have to realize is that at the time they were advocating people use the tools that were available at the time. It is only very recently that it was possible to index international, EM, etc.

2. If you believe that more people chasing the same opportunity set creates more opportunity I guess there isn't much else to say.

[Delawaredave5]

I think Swensen's allocations are quite different than his recommendations to us "common" folks.

Swensen has large portions in natural resources and private equity. His US stock portion is 20% or less. I'm suprised his recommendations aren't higher tilted towards international.

Here's intersting article on allocations for various ivy league endowment funds.

Learning From The Harvard & Yale Endowments - Seeking Alpha

[Running_Man]

Originally Posted by saluki9

1. Sinquefeld, Bogle, etc have been advocating indexing since the bear market of the early 1970s. What you have to realize is that at the time they were advocating people use the tools that were available at the time. It is only very recently that it was possible to index international, EM, etc.

2. If you believe that more people chasing the same opportunity set creates more opportunity I guess there isn't much else to say.

First let me state I think passive investing is very important for investors who do not like to think about financial matters, it is very much better than any alternative. I am opposed to the claims these index creators make that one cannot beat "market returns" which is an everchanging definition in it's own right, over the long run, when they themselves have no long run to provide a comparison of and continue to "fine-tune" their investment strategy.

Rex Sinquefield created the first S&P500 fund and has made himself very rich selling passive investment vehicles. The very success Bogle and Sinquefield had in creating the S&P500 index class resulted in my opinion in virtually eliminating the risk premium of the asset class, which was directly observable in the S&P500 dividend yield and the underperformance of that index for a decade. Yet Sinquefield argues that the S&P500 risk premium is a constant. I believe the success of index funds changes the risk premium and directly results in a lower return the greater the success in obtaining funds for a given index.

To become rich selling a product that by it's very description is the best return you possibly can earn and any losses are unavoidable or even better an opportunity for making even more money (send it in!) is a very admirable feat. I am sure he has been very happy with his investment in his investment company.

[FinanceDude]

Originally Posted by Running_Man

First let me state I think passive investing is very important for investors who do not like to think about financial matters, it is very much better than any alternative. I am opposed to the claims these index creators make that one cannot beat "market returns" which is an everchanging definition in it's own right, over the long run, when they themselves have no long run to provide a comparison of and continue to "fine-tune" their investment strategy.

The alternative is avoiding market risk entirely and having inflation eat you alive...........a huge financial mistake many make, more than even most can imagine..........

Rex Sinquefield created the first S&P500 fund and has made himself very rich selling passive investment vehicles. The very success Bogle and Sinquefield had in creating the S&P500 index class resulted in my opinion in virtually eliminating the risk premium of the asset class, which was directly observable in the S&P500 dividend yield and the underperformance of that index for a decade. Yet Sinquefield argues that the S&P500 risk premium is a constant. I believe the success of index funds changes the risk premium and directly results in a lower return the greater the success in obtaining funds for a given index.

Good point. I think a well diversified portfolio cane asily beat the S&P 500 over long periods of time, and has.

To become rich selling a product that by it's very description is the best return you possibly can earn and any losses are unavoidable or even better an opportunity for making even more money (send it in!) is a very admirable feat. I am sure he has been very happy with his investment in his investment company.

True. As for me, unless I am in an international fund, I avoid betas of 1.00.........something a market index fund can not do. Ever notice in good markets, how all the "gurus" are pushing index funds, but in bad markets they say little or nothing?

[saluki9]

Originally Posted by FinanceDude

Ever notice in good markets, how all the "gurus" are pushing index funds, but in bad markets they say little or nothing?

I push index funds in all markets

[saluki9]

Originally Posted by Running_Man

To become rich selling a product that by it's very description is the best return you possibly can earn and any losses are unavoidable or even better an opportunity for making even more money (send it in!) is a very admirable feat. I am sure he has been very happy with his investment in his investment company.

The total wealth created by the founders of Dimensional is probably less than one years bonus for the managers of (One) of the large active fund management companies. I suppose you have the same disdain for the recipients of the billions of dollars that investors pay every year in failed attempts to beat the indexes?

[FinanceDude]

Originally Posted by saluki9

I push index funds in all markets

Are you a "guru", or a DFA disciple??

[ats5g]

Originally Posted by saluki9

The total wealth created by the founders of Dimensional is probably less than one years bonus for the managers of (One) of the large active fund management companies. I suppose you have the same disdain for the recipients of the billions of dollars that investors pay every year in failed attempts to beat the indexes?

c'mon now. someone has got to pay for Ned + Abigail Johnson's planes.

[Running_Man]

Originally Posted by saluki9

The total wealth created by the founders of Dimensional is probably less than one years bonus for the managers of (One) of the large active fund management companies. I suppose you have the same disdain for the recipients of the billions of dollars that investors pay every year in failed attempts to beat the indexes?

Yes

[FinanceDude]

Originally Posted by ats5g

c'mon now. someone has got to pay for Ned + Abigail Johnson's planes.

I used to think Abigail was hot..

[saluki9]

Originally Posted by FinanceDude

I used to think Abigail was hot..

I'll be very frank with you. I think all women billionaires under 50 are hot

[FinanceDude]

Originally Posted by saluki9

I'll be very frank with you. I think all women billionaires under 50 are hot

Another billionaire driving a 7-8 year old car or older:


Luxury Car Reviews, Prices and Advice on ForbesAutos.com

Looks like MBYM to me............

[Want2retire]

Originally Posted by FinanceDude

Another billionaire driving a 7-8 year old car or older:


Luxury Car Reviews, Prices and Advice on ForbesAutos.com

Looks like MBYM to me............

Interesting! I clicked on the other Forbes 400 bigshots listed to see what cars they drive, as well. Much to my chagrin, NONE of them drive a Toyota Camry, much less a Camry Solara (my car).

A couple of them do drive Toyota Priuses, but most seem to like Mercedez-Benz and BMWs. Who knew? Must be due to keeping up appearances for business reasons. Most luxury cars like those (or like the Jaguar which has such nice body design) seem to spend a lot of time in the shop, and I'm not sure I would want that. I would have thought that they'd be driving Lexuses, Infinitis, Toyotas, or Hondas.

[Running_Man]

Originally Posted by saluki9

I suppose you have the same disdain for the recipients of the billions of dollars that investors pay every year in failed attempts to beat the indexes?

I was curious as to what the Top 10 funds in size 1998 and their 10 year return since then. Since this point the managed funds, at least I think the other 9 were managed I really don't follow, outperformed the S&P500 by over 1.3 percent per year. And the S&P500 ranked 8 out of 10 funds. The column that totals to a 6.16 is a dollar weighted average return of all 10 funds so most investors in these actually outperformed the index used at the time for the benchmark of these funds.

Table attached I couldn't get to work in normal view.

[Marquette]

Why compare managed funds to the s&p 500? Wouldn't it make more sense to at least compare them to a basket of similarly weighted index funds? I mean, if you're looking at Wellington, it's 60/40 and the 60 is lv weighted. I mean, I've read all over diehards and read Bogleheads Guide and even the prevailing single-index there seems to be a TSM-type rather than an s&p 500.. It's always interesting to see both sides..

[Running_Man]

Originally Posted by Marquette

Why compare managed funds to the s&p 500? Wouldn't it make more sense to at least compare them to a basket of similarly weighted index funds? I mean, if you're looking at Wellington, it's 60/40 and the 60 is lv weighted. I mean, I've read all over diehards and read Bogleheads Guide and even the prevailing single-index there seems to be a TSM-type rather than an s&p 500.. It's always interesting to see both sides..

I quoted versus the S&P500 because that was the index of choice back in 1997-1998 and really blazed the trail for other index funds and was where the money actually was. Total Stock market at Vanguard has had a 5.54 10 year return since then. I am trying to compare what people were doing with their investments based on advice at the time as opposed to a back testing of indexing.

Even now the Vanguard S&P500 has 114 billion in assets vs 48 billion for the toal Stock Market (per Morningstar) so more are actually still invested in the S&P500.

[Marquette]

Originally Posted by Running_Man

I quoted versus the S&P500 because that was the index of choice back in 1997-1998 and really blazed the trail for other index funds and was where the money actually was. Total Stock market at Vanguard has had a 5.54 10 year return since then. I am trying to compare what people were doing with their investments based on advice at the time as opposed to a back testing of indexing.

Even now the Vanguard S&P500 has 114 billion in assets vs 48 billion for the toal Stock Market (per Morningstar) so more are actually still invested in the S&P500.

I see. Fair enough.