Swedroe Article - 4 Horseman of your Portfolio ... Questions

[IQuit]

I found this article to be helpful but I'm curious about Swedroe's conclusions and wondered what this group makes of them:

Swedroe: 4 Horsemen Of Your Portfolio | ETF.com

Nothing too controversial I think about the sources of risk going forward but I'd like to better understand his proposed approach cited in his postscript where he is recommending some alternatives to a standard 60/40 portfolio that include alternative lending and reinsurance vehicles among others. He does disclose that his firm is promoting that approach.

Thoughts?

 

[Mr._Graybeard]

You know the old rule of thumb: If you can't understand it, don't go there. Viewing the results of the funds Swedroe mentions, none of them appear to have any secret sauce that justifies their high expense ratios. None of them have been around too long, either. If the management firm isn't a household name I'm wary about taking a flyer on a fund that's been around for less than five years.

The fund that's been around the longest, SRRIX, posted a 12% loss over the past year! Losing that much in this investment environment took a certain knack, I guess.

 

[flintnational]

I am (was) a Larry fan. But, apparently he has gone over to the dark side. The funds he recommends at the end of article have management fees ranging from 1.4% to 2.0%. Yikes!

 

[Maenad]

I notice he recommends LTC insurance, but I keep hearing about how the policies cost a lot and don't cover enough to make them worth it. Has anyone here done any significant research into them?

(Now that I'm posting this, I predict there's a comprehensive thread out there that I've been too lazy to look for.)

 

[REWahoo]

(Now that I'm posting this, I predict there's a comprehensive thread out there that I've been too lazy to look for.)

Several of them. That's probably why no one is responding.

 

[OldShooter]

I rarely read the stuff from the chattering monkeys but for some reason I did click the link here. My conclusion is that ignoring them continues to be a sound strategy.

In the first place he opines: " ... when designing a financial plan, investors should be sure to use current estimates of returns." Really? Every monkey has his own "current estimate." The only certain thing is that one of the monkeys will be right and will be lauded as the genius monkey until his next forecast is a bust. Then another genius monkey will be anointed. IMO the only estimate that makes any sense at all is the long term historical average for an asset and even this involves all the problems with inductive reasoning. Taleb's turkey parable applies.

"We believe an equal-weighted portfolio of these four funds has forward-looking return expectations similar to those of a global equity portfolio, but with only about one-quarter of the volatility of equities (5% versus 20%)." Wow! He sees the future and the future is three nut-ball funds with high fees. I'd be interested in seeing a multi-year history of his prophesies versus actual results before buying into this particular bit of nonsense.

Finally, he attempts to validate his opinions as follows: "I’d note that none of these four strategies is new. They have been available to institutional investors for, in some cases, decades." The implication, of course, is that institutions' buying nut-ball products is some kind of validation. Possibly he hasn't noticed the thundering crowd of institutions that are bailing out of their failed nut-ball investments and going mostly passive.

OK, I've had my dose of monkey-talk for a while. Probably for the year.

 

[flintnational]

.............

"We believe an equal-weighted portfolio of these four funds has forward-looking return expectations similar to those of a global equity portfolio, but with only about one-quarter of the volatility of equities (5% versus 20%)." Wow! He sees the future and the future is three nut-ball funds with high fees. I'd be interested in seeing a multi-year history of his prophesies versus actual results before buying into this particular bit of nonsense.........

You nailed it. You gotta love Larry's insight above, less volatility more return. There is no such animal. If it did exist, markets would drive the price up to find equilibrium between volatility and return. Larry has to know this.

 

[OldShooter]

... Larry has to know this.

He's a monkey. To the monkeys facts are largely irrelevant. What is relevant is page views and increases in AUM. Everything else is implementation details.

 

[Walt34]

I notice he recommends LTC insurance, but I keep hearing about how the policies cost a lot and don't cover enough to make them worth it. Has anyone here done any significant research into them?

(Now that I'm posting this, I predict there's a comprehensive thread out there that I've been too lazy to look for.)

There have been several threads on LTC insurance. I didn't reread the entire thread but I think this is the one where member Nords wrote about the trials and tribulations of getting John Hancock to honor his father's LTC contract. If not, search on "LTC", "Nords", and "John Hancock".

http://www.early-retirement.org/for...l-management-and-asset-allocations-55688.html

 

[IQuit]

OP here ... Thanks all for the perspective on this. My portfolio is simple and boring because that's the limit of my understanding (as Mr._Graybeard advises). Not hearing any ringing endorsements of Mr. Swedroe's alternative approach I thought it might be interesting to capture the prices of his recommended products and the S&P for posterity on the day of the article in case anyone wants to see how the portfolio performs over time ... Rooting for you Larry!

February 7, 2018
S&P 500 - 2681.66

Equal weighting of:
QSPRX - 10.59
LENDX - 10.24
SRRIX - 8.98
AVRPX - 9.76

 

[samclem]

I am (was) a Larry fan. But, apparently he has gone over to the dark side. The funds he recommends at the end of article have management fees ranging from 1.4% to 2.0%. Yikes!

Yikes indeed! Were's the old Larry?

 

[NW-Bound]

I learned the name of many financial gurus from this forum, including Larry Swedroe. Y'all follow all this stuff much more than I do.

Excuse me, but I thought the simplest way is to index. Yes, I am stubborn and still spend the time to research stock, but people spend as much or more time reading and following gurus. What gives?

PS. For the few times I went to Boglehead, whose site I also learned from this forum although I previously knew of Bogle himself, I also saw numerous gurus mentioned. No comprende.

 

[samclem]

I learned the name of many financial gurus from this forum, including Larry Swedroe. Y'all follow all this stuff much more than I do.

Excuse me, but I thought the simplest way is to index. Yes, I am stubborn and still spend the time to research stock, but people spend as much or more time reading and following gurus. What gives?

PS. For the few times I went to Boglehead, whose site I also learned from this forum although I previously knew of Bogle himself, I also saw numerous gurus mentioned. No comprende.

Telling a person to "index" is necessary but not sufficient. Folks like Bogle, (apparently formerly) Larry Swedrow , Burton Malkiel, William Bernstein (before he lost heart) etc have written a lot on asset allocation (which an investor needs to know in order to apply indexing), tax efficiency, the problems of active management, the importance of reducing investment costs, etc. All that stuff is important, and it helps to have someone with experience to write about it. Those writing investment pornography or trying to sell the masses on the need for active (high commission) funds and portfolio management spend millions every year to lure the sheep in. There are a few "gurus" trying to help those sheep avoid getting shorn.

 

[OldShooter]

... My portfolio is simple and boring ...

Good for you. Most real experts, like the ones cited by @samclem, would tell you that if your investing isn't simple and boring, you are doing it wrong.

I thought it might be interesting to capture the prices of his recommended products and the S&P for posterity on the day of the article in case anyone wants to see how the portfolio performs over time ...

To be statistically significant, "over time" really needs to be five years plus. Ten is better. A year or two is close to meaningless.

Re "index" I agree that the term is vague and often misused. I like to use "passive" instead. For example, an investment in an S&P 500 fund is not a passive investment; it is a sector bet. An investment in a Russell 3000 fund, or -- better -- an ACWI fund is a passive investment.

 

[Maenad]

Several of them. That's probably why no one is responding.

There have been several threads on LTC insurance. I didn't reread the entire thread but I think this is the one where member Nords wrote about the trials and tribulations of getting John Hancock to honor his father's LTC contract.

Thanks for humoring me. I'll return to my responsible search-first-ask-second methodology now.

 

[Nords]

Has anyone here done any significant research into them?

Here you go:
https://the-military-guide.com/wont-buy-long-term-care-insurance/

 

[Onward]

Here you go:
https://the-military-guide.com/wont-buy-long-term-care-insurance/

Good article that I hadn't read before. Sorry you had to go through that. I'm sure many, many others go through the same.