Your Opinion: Who wins - The Tortoise or the Hare

[chinaco]

In the past I have employed some risky strategies for investments. Done a few things that I reflect on as kinda dumb in retrospect.

From reading on this board and others, I see a variety of strategies and approaches taken.

Based on your experience, which approach is more likely to win:

• Hare - An approach that employs a largely equity portfolio of stocks picked Maybe some EFTs and Mutual funds with a smattering of market timing based on marker greed/fear. Sometime employing some options, leverage, shorting to try to goose the gains.

OR

• Tortoise - A life long balanced portfolio index mutual fund strategy across Equity classes and Bonds that rebalances periodically and move to a bit more of a conservative as they reach old age.

I am referring to the average investor (i.e., not a professional equity manager).


It is my opinion (and experience) that the Tortoise winds up better off a majority of the time.

 

[brewer12345]

Probably the tortoise, especially when you look at stuff like the oft-quoted Dalbar study showing how badly retail schmoes underperform the market in aggregate by virtue of their trading activity at exactly the wrong time.

Having said that, don't discount the possibility that any given person might be a successful hare.

And then there is the Haha style of investing. I envision it as the "Morlock" investing style: spend most of the time lurking in your cave on a pile of t bills and puts only to emerge when there is a panic so that you can slurp up some of the blood running in the streets. Very effective, or so it appears, and I may eventually try it when I have built a large enough base of capital.

 

[Olav23]

And then there is the Haha style of investing. I envision it as the "Morlock" investing style: spend most of the time lurking in your cave on a pile of t bills and puts only to emerge when there is a panic so that you can slurp up some of the blood running in the streets. Very effective, or so it appears, and I may eventually try it when I have built a large enough base of capital.

This is an interesting concept, and I have been hearing more about it as of late. I think it is related to the Taleb Black Swan approach. As i understand it, he basically holds very safe vehicles, like short term govt bonds, and then takes 5-10% and bets it on long shots. This can be some options strategies, like you say with the puts, or loading up on penny stocks or biotech. It is an interesting concept for the risk averse, with still a lot of upside potential.

Anyone considering a go of this?

 

[cute fuzzy bunny]

I'll vote for the bunny.

 

[haha]

And then there is the Haha style of investing. I envision it as the "Morlock" investing style:

Morlocks are humanoid creatures. They don't seem to wear clothing, and are instead covered with fur. The Time Traveller describes them as "almost spiderlike" in their demeanor, in that they silently slink around in the dead of night and snag their prey. .... As a result of living underground, the Morlocks are extremely sensitive to light, and apparently have little or no melanin in their skin.

You think this is why I haven't had any lately?

Ha

 

[Nords]

Hare - An approach that employs a largely equity portfolio of stocks picked Maybe some EFTs and Mutual funds with a smattering of market timing based on marker greed/fear. Sometime employing some options, leverage, shorting to try to goose the gains.

Generally this approach suffers from three problems:
- Frequent trading (spreads, commissions, lack of market liquidity)
- Taxes (especially short-term cap gains)
- Excessive volatility

If you can solve those three issues with an asset allocation that isn't very correlated and doesn't require a lot of trading then you'll be eating turtle soup on the half-shell...

I think Buffett favors the Morlock approach as well.

 

[eridanus]

This is an interesting concept, and I have been hearing more about it as of late. I think it is related to the Taleb Black Swan approach. As i understand it, he basically holds very safe vehicles, like short term govt bonds, and then takes 5-10% and bets it on long shots. This can be some options strategies, like you say with the puts, or loading up on penny stocks or biotech. It is an interesting concept for the risk averse, with still a lot of upside potential.

Anyone considering a go of this?

Taleb generally used options in the currency markets. If you take a look, they become very cheap fairly close to ATM.

His funds also slowly bleed out. [SIZE=-1]Empirica Capital is now closed, right?


[/SIZE]

 

[Ed_The_Gypsy]

Based on your experience, which approach is more likely to win:

• Hare - An approach that employs a largely equity portfolio of stocks picked Maybe some EFTs and Mutual funds with a smattering of market timing based on marker greed/fear. Sometime employing some options, leverage, shorting to try to goose the gains.

OR

• Tortoise - A life long balanced portfolio index mutual fund strategy across Equity classes and Bonds that rebalances periodically and move to a bit more of a conservative as they reach old age.

Yes.

 

[samclem]

I've put my money on the turtle. Still, an occasional small hare-like fling helps us remember that we're alive.

 

[chinaco]

Good comments. I agree with most. There are a few hares out there that wind up better off.

For most of of mere mortals though, the tortoise model is seems to be the better approach.

For me personally, when using the Hare approach, the only thing I have experienced was a few short-term successes followed by some losses by trying to get to fancy or time or being a pig. Then the only hare I experienced was the "Hair of the Dog" (a dumb move) during the poor performance "Hangover" to try to correct things...

 

[Moemg]

I'd go with an aggressive tortoise .Someone with a portfolio more heavily in stocks than bonds who never goes too conservative .

 

[wildcat]

I agree with Moemg but it depends on what you define as "win". Are we talking risk-adjusted returns or pure portfolio size?

The Hare would win. Imagine some schmuck who stashed away his entire savings in a small value for the last 40 years. HUGE portfolio. Of course the problem is, most can't stomach the dips and crashes and this person probably would have sold out long before reaching the finish line. Also, past performance does guarantee anything so the for the next 40, it could be different but I would still bet on the Hare.

 

[novaman]

I'd go with the rabbit. You need to have a portion of your portfolio (maybe 10%) in a more aggressive position.... call this approach defensive aggressive (I didn't coin the phrase)
This is the approach I've been taking and it has worked out well for me so far.

 

[unclemick]

'God looks after Drunkards, Fools, and The United States of America.'

Dollar cost average as early as possible into something like 500Index or Total Stock Market Index with as low expenses as possible. As you get old - do something like 110 minus your age with Total Bond Index or something like that. Don't read a lot of investment books or watch the market - do your day job/career and live your life(Bon Temps Rolliere). When your belly button says retire - then retire.

Stone simple - do NOT overcomplicate the blindlingly obvious. To even further simplify the above - just buy Vanguard Target Retirement based on your age.

If you must 'win' or are male, have a hormone imbalance - take up golf, race kayaks, lie about the fish you caught, etc.

heh heh heh - there is NO total cure if you are addicted - I have a few 'good' stocks and I only buy/look on weekends - I have it under control - Right? Like the dog at the race track - even though I'm retired and it has no bearing on the results - I still chase the rabbit/buy a few individual stocks - for the dividends you know(he rationalizes).

 

[brewer12345]

You think this is why I haven't had any lately?

Ha

Heh, wasn't trying to make personal comments, ha. But ya know, maybe some more melanin would help. I hear they have this process in Thailand where they do a series of injections...

 

[MasterBlaster]

Are we talking risk-adjusted returns or pure portfolio size?

Size matters, just so you know....

However those without a big one claim that doing it fast can (somewhat) make up for a large one.

It should be noted also that those with large ones seem unconcerned about this topic. It's only those with smaller assets that opine incessantly about this issue. Therefore I conclude that the OP and others who concur have a deficit here and are somehow trying to rationalize their shortcomings.

 

[unclemick]

Size matters, just so you know....

However those without a big one claim that doing it fast can (somewhat) make up for a large one.

It should be noted also that those with large ones seem unconcerned about this topic. It's only those with smaller assets that opine incessantly about this issue. Therefore I conclude that the OP and others who concur have a deficit here and are somehow trying to rationalize their shortcomings.

I keep telling folks it's those stinking hormones - it's incurable(unless you're below ground) - golf, kayaks, chasing wild women, a few good stocks - however you rationalize it.

I think the first step is - ya gotta admit you have a problem or something like that.

heh heh heh - I thought those injections in Thailand were because you got something other than the 'intrinsic' value you believed you were obtaining.

 

[cute fuzzy bunny]

I like the process where you get to do the injecting.

 

[Goonie]

I'll go with the tortoise. The old saying, "Slow and steady wins the race" works fine for me, especially now that I'm comfortably retired. I really don't want anymore risk than is really reasonable....at least reasonable from my vantage point. I do have 2 target funds that are 77% and 87% equities, so risk is in the eye of the beholder, since I view those as reasonable, and not too risky. (for me)

Dollar cost average as early as possible into something like 500Index or Total Stock Market Index with as low expenses as possible. As you get old - do something like 110 minus your age with Total Bond Index or something like that. Don't read a lot of investment books or watch the market - do your day job/career and live your life(Bon Temps Rolliere). When your belly button says retire - then retire.

Stone simple - do NOT overcomplicate the blindlingly obvious. To even further simplify the above - just buy Vanguard Target Retirement based on your age.

Unclemick's post says pretty much what I believe. Over the past few years I've tried to simplify things as much as possible. I didn't really want my money scattered all over the place, that's not saying I didn't want a fairly diverse mix. I just decided it was easier (and less headaches) to do index and target funds, rather than the smattering of a mish-mash of odds and ends. And in the end, probably not quite as risky. Plus, it's a heck of a lot easier to keep track of things now!

I've been DCA'ing for several years, and I plan to continue that, along with tossing in any extra change I can scrape up besides.

La vie est bonne!!!

 

[yakers]

How about target retirement fund and occasional lotto ticket?

 

[Lusitan]

I am a tortoise, and if I had to bet (which, as a tortoise, I wouldn't) I'd put my money on the tortoises overall. No doubt a few hares will come in first place, but tortoises will fare better on average.

Oh, and as a tortoise, I sleep pretty well at night and spend very little time managing my finances.

 

[SecondCor521]

I guess I follow the "complicated" unclemick approach. I'm 100% S&P500 index funds across three accounts: traditional IRA, Roth IRA, and 401(k). The first two are Vanguard and the latter is SWPIX (Schwab's version).

My bellybutton thinks it can retire in about 8 years even though the spreadsheet says 15 (spreadsheet is too conservative in lots of ways).

I'd say that there are some Hares out there that have done well just because there are those 5% tails out to the right on a statistical distribution. If I had to bet money I'd always bet on the Tortoise. Of course, it depends on how you define "win" -- is it first to achieve FIRE, or is it first to achieve an arbitrarily large portfolio size? Your average Tortoise isn't going to end up with $100M. So if you think you need $100M, become a Hare. If you want to retire ASAP, I'd recommend the Tortoise route.

2Cor521
Tortoise

 

[cute fuzzy bunny]

Hmmm...I think you might want to consider a little hair dye Ha...

 

[laurence]

I like the process where you get to do the injecting.

Better double-bag it!

So in theory, one could win as the tortoise if you had a large amount to contribute early on in life (say, early 20's) and held it until your 60's. I agree with WC, either fear or different goals would prevent you from holding that. Nobody here ( I think ) has the goal of putting off retirement to 65, right? I mean, obviously everyone has a portfolio size goal, but with all small cap you could be 100k away from your 2 million goal and be 6 months or 6 years from reaching it.

 

[clifp]

Based on your experience, which approach is more likely to win:

• Hare - An approach that employs a largely equity portfolio of stocks picked Maybe some EFTs and Mutual funds with a smattering of market timing based on marker greed/fear. Sometime employing some options, leverage, shorting to try to goose the gains.

OR

• Tortoise - A life long balanced portfolio index mutual fund strategy across Equity classes and Bonds that rebalances periodically and move to a bit more of a conservative as they reach old age.

I am referring to the average investor (i.e., not a professional equity manager).


It is my opinion (and experience) that the Tortoise winds up better off a majority of the time.

Ok, I know I am taking this too literally but I just got my issue of the M* Stockinvestor newsletter. It has two portfolios called imaginatively the tortoise and the hare.

Here is the editors report on performance
"

From its inception on June 18, 2001, through July 31,
2007, the Tortoise Portfolio has returned 90.6%
compared with a total return of 33.2% for the S&P 500
Index and 37.3% for the average large-cap blend
mutual fund. Year to date, this portfolio has risen 1.4%
versus a 3.6% total return for the S&P 500. The
Tortoise has outperformed 97.9% of U.S. large-cap
blend funds since inception, but it has outperformed
only 10.5% of these funds over the past 12 months."

"
From its inception on June 18, 2001, through July 31,
2007, the Hare Portfolio has returned 62.7% compared
with a total return of 33.2% for the S&P 500 Index
and 19.7% for the average large-cap growth mutual
fund. Year to date, this portfolio has returned
5.2% versus a 3.6% total return for the S&P 500 Index.
The Hare has outperformed 97.3% of U.S. largecap
growth funds since inception and 98.8% of these
funds in the past 12 months."

So there you have it the tortoise wins. Unfortunately, I don't have many stocks in either porfolio and my performance isn't nearly as good as either portfolio. But I am better than the average large cap mutual fund manager. ​