The Cofeehouse Investor

[roadkill]

Hello all.....I am new to this forum and usually keep quiet, but I ran accross this web site and thought it may provoke some thoughts and discussion on their philosophy.............

www.coffeehouseinvestor.com

[trumpeting_angel]

I've read this site. I find the philosophy quite compatible with what I read here, and I especially like the emphasis on setting up investments to take care of themselves and then spending one's time on something more worthwhile.

I confess to enjoying financial news (sometimes) and keeping a $700 +/- Sharebuilder account to indulge my stockpicking urge. But overall, I believe I should spend less time on scrutinizing the Dow and second-guessing Greenspan, and more time on volunteer work, gardening, and taking care of my kid. Oh, and ice hockey. My spiritual pursuits!

Anne

[charlie]

I like the simplicity of their 10% allocation to each of
6 different stock index funds and 40% to bonds. I
think I can teach Lyn to divide by 10 if that becomes
necessary (just kidding if you read this Sweety).

Recently I adopted their approach on my IRA funds,
using Large Cap Index, Value Index, Mid-cap Index,
Small Cap Value Index, REIT Index and Total International Index for the stock allocation and Short Term Corporate for the bonds.

I decided to use Mid-Cap Index instead of Small Cap Index for the lower left corner of the matrix, but still might switch to Small Cap or Extended Market.

I don't know why Bernstein et al ignore the mid-cap area It seems to have a little less volatility and performed much better than Small Cap or Extended Market in 2000 - 2002.

The 5 year compound return for Mid-Cap through 2003 was 9.19% while the returns for Small Cap and Extended Market were 7.55% and 4.20% respectively. The mean return for Small Cap for the last 16 years was 13.54% with a std. deviation of 18.78%, while Extended Market had a 13.77% mean return with a 19.91% std. deviation.

Using Extended Market or Small Cap for the lower left corner appeals to my sense of symmetry but the extra
volatility may not be worth it. I think that's why the
gurus avoid Small Cap Growth.

If anyone has an opinion on this please speak up.

Cheers,

Charlie (aka Chuck-Lyn)

Chuck,

Berstein also avoids Small Cap Growth. He Likes Small Cap Value. He discusses Mid Caps in another book. The asset classes themselves are not key. The idea is to have several of them and then Stick to your choices. Hopping around is what will screw you. Sticking to your plan is what will pay off.

He also recommends avoiding paying attention to recency (performance less than 25 years).

This approach appeals to me, as I have proved to myself that I am not smarter than the market and no one I have seen or met is either. This gives me plenty of time for fishing and pursuing the important matters of life, without having to worry about what Greenspan said today or will say tomorrow.

[wabmester]

Quote:

I have proved to myself that I am not smarter than the market and no one I have seen or met is either.

C-T, that strikes me as a curious thing for somebody to say on a board like this one. A board whose membership includes several who retired based on their ownership of INTC and MSFT, for example, both of which absolutely trounced the market for over a decade.

Yes, I know, those examples don't pass your 25-year test. So, sell your 10-year-old MSFT/INTC portfolio and put all the money in TSM if you like, but to say you don't know anybody who beat the market seems a little delusional and defeatist to me....

Quote:

C-T, that strikes me as a curious thing for somebody to say on a board like this one. * A board whose membership includes several who retired based on their ownership of INTC and MSFT, for example, both of which absolutely trounced the market for over a decade.

Yes, it is possible to go to Las Vegas and put 10K on red for one spin on the roulette wheel. If you win, that does not mean the house does not have the best odds.

I too find it amazing that we have people on this forum that are smarter than Bernstein.

[wabmester]

IMHO, the only ones on this board smarter than Bernstein are those selling books and taking 1% investment advisor fees as a hobby while doing brain surgery the rest of the time

[cute fuzzy bunny]

I would count my one-stock meteoric launch into ER as sheer luck with no intelligence whatsoever. At least someone putting it all on a roulette spin has to pick a color or a number.

Having sold that one-stock annually within a few months of the options being granted for the duration of my career, reinvesting the proceeds in broader instruments, and getting the hell out altogether in January of 2000 on the other hand...

Its funny, but when I was annually diversifying, and most of my contemporaries were hanging on to every share and watching it double or triple every year, I was considered a goofball. Then all of a sudden I became a genius. And I didnt do anything different.

To think that in 1998 and 1999, I was starting to feel like a dickhead for investing in bonds and foreign stocks, and still not "getting" why I would want to invest in a .com...

I guess it IS all about timing.

And some luck.

And being in the right place at the right time.

And being a cheap bastard.

Being a "cheap bastard" and lucky will take you a long way.

John Galt

[unclemick]

1. I usually prefer the more PC: 'aggressively frugal' to 'cheap bastard' or tight fisted #!@&$ SOB'.
2. The postscript of Ben Graham's Intelligent Investor (4th ed.) points out that it only takes one stock. This happens enough times every generation to make a horse race, raging debate, and the lucky ones as 'living proof'. Las Vegas is still in business AND I have my hobby stocks which have 'not yet' overwhelmed my balanced index.

3. Dollar cost average, diversify, LYBM, low expenses, and take as much tax deferred as you can while letting time do it's thing. Whether it's the old fashioned pie chart, coffee house, Bernstein, Bogle, or even John J. Raskob in 1929, those fundamentals worked enough to put me in ER.

4. However - me and Monty Python are still hunting that 'one great stock'. When my 10-20% hobby strikes gold and my'80%' balanced index gets beat - I won't hesitate to brag about 'skill' and eschew 'luck'.

Hi unclemick........

Re. "eschew"; God bless you!

John Galt

[cute fuzzy bunny]

Quote:

1. I usually prefer the more PC: 'aggressively frugal' to 'cheap bastard' or tight fisted #!@&$ SOB'.

What the #$^%#$ do you mean by "PC"?!?

[unclemick]

Why TH!

Pontificatingly Curmudgeonly of course - PC for short. Unfortunately they usually call me the other stuff and don't want to listen to the finer points of dryer sheet recycling so I'm stuck with cheap, lucky, SOB mixed with a lot of #^&@#. Aggressively frugal would be nice - no luck so far.

[cute fuzzy bunny]

I like "beneficially economical".