Active vs Passive; links to facts, no opinions wanted.

[OldShooter]

... You also miss the main point in the buying after a correction. This does not mean stock picking. It means for someone who have a three fund portfolio of (1) total stock market index, (2) total international stock market index and (3) total bond market index, then that investor can simply exchange $100K in his/her total bond market index fund for $100K total stock market index fund shares in his IRA. After the market has recovered from the 10% correction, he/she transfer the $100K back to the bond fund. The end result: he/she made a profit based on the three fund portfolio he/she already have. As the article suggest, this has ALWAYS worked and this has ALWAYS worked for me. ...

Interesting. So if this strategy is so easy and so reliable why do you have such a small portion of your portfolio invested in it? Why have you not long since gone all in/100%, gotten insanely rich, and bought yourself a private tropical island somewhere?

FWIW, here are some more links for you to ignore. They pertain to market timing.

https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes
https://www.forbes.com/sites/sap/20...tion-make-the-invisible-visible/#391301ae8129
https://www.marketwatch.com/story/why-market-timing-doesnt-work-2013-10-23

The first is IMO an especially good read.

 

[2177V]

OK. I read some of the 14 articles but it still does not change my position one bit. Here is my rationale.

There are facts and statistics that more than 50& of marriages end up in divorce. Therefore people who have a fixation on facts and statistics should never get married.

NOTE: I invite readers to make jokes on the above comment because this thread should be entertaining and funny....and not attack people who has a different viewpoint.

BOTTOMLINE: There is no right answer to the debate between passive investing and active investing.

It all boils down to your personality and experience.

If your experience is limited then you should be a passive investor. If your experience is high like Warren Buffet, then you should be an active investor. It is useless to convince Warren Buffet to be a passive investor but he stated that after he passes away, then his estate assets should be invested in passive investments. This is because Warren Buffet recognizes that his knowledge and experience will be gone after he passes away.

Qs Laptop had a beautiful comment #12 in the Three Fund Portfolio thread when he stated:

"It's not for me" and "Then the 3 fund portfolio would be good for you". I suggest people read comment #12 in the Three Fund Portfolio thread.

This implies that Qs Laptop also recognizes that investing style depends on people's personality and experience.

 

[2177V]

Interesting. So if this strategy is so easy and so reliable why do you have such a small portion of your portfolio invested in it? Why have you not long since gone all in/100%, gotten insanely rich, and bought yourself a private tropical island somewhere?

I am close to 70 so I am now in a capital preservation phase. This means I am no longer taking big risks. When I was younger I was more aggressive.

I did become rich enough to buy multiple properties in California in cash and now I am shopping for a vacation home in Hawaii. I guess I was not aggressive enough to buy a private tropical island. My college daughter now own a San Francisco bay area house "free and clear" so she will never have to pay rent or a mortgage payment in her life. I expect her to retire early.

 

[OldShooter]

... investing style depends on people's personality and experience.

All true. People's investing style is certainly up to them to choose.

That does not, however, change the fact that 50 years of studies and statistics indicate that active strategies almost always lose to passive ones, nor does it change the overwhelming consensus among experts that market timing does not work as a strategy.

BTW, regarding "experience is limited" I began investing in 1972, running Fourier transforms on stock price series, looking for patterns. I spent the next 30 or more years making most of the mistakes investors make, including playing with stock picking. Over the next ten years I slowly began to understand that, while I had made significant money, a passive approach would have almost certainly have yielded more. In the literature, you can read Charles Ellis, Eugene Fama, Burton Malkiel, and many other "experienced" and passive investors. Even Buffet's ideal holding period for an investment is "forever." So, dear @vchan2177, it is not just you that can claim to have some experience. Some of us on the passive side have experience too.

... I am no longer taking big risks. ...

Gee, you previously said that

" ... this has ALWAYS worked and this has ALWAYS worked for me."

"ALWAYS" doesn't sound like a big risk to me.

That's it. I'm done bothering you with facts (that you asked for) and getting arm-waving in return.

 

[corn18]

I am close to 70 so I am now in a capital preservation phase. This means I am no longer taking big risks. When I was younger I was more aggressive.

I did become rich enough to buy multiple properties in California in cash and now I am shopping for a vacation home in Hawaii. I guess I was not aggressive enough to buy a private tropical island. My college daughter now own a San Francisco bay area house "free and clear" so she will never have to pay rent or a mortgage payment in her life. I expect her to retire early.

Humblebragging always wins people over.

 

[2177V]

Interesting. So if this strategy is so easy and so reliable why do you have such a small portion of your portfolio invested in it? Why have you not long since gone all in/100%, gotten insanely rich, and bought yourself a private tropical island somewhere?

The first is IMO an especially good read.

Recently I had recommended to 20's something friends of my daughter on buying during a market correction after they visited my house for a swim party. I have an in-ground swimming pool and spa. I suggested "starting out small" to go through a learning curve.

The Dow is currently 25,983. The 52 week high was 26,951. The 52 week low was 21,712. You cannot predict the high and lows. However, My trigger point is 10% off the 52 week high which is 24,255.

Once it went below 24255 last December, I reallocated 10% of my portfoiio from bonds to stocks. Since it is now at 25983 which means I gained about 7% of the 10% re-allocation portion in only 6 months. The other 90% passive portion of my portfolio gained 4% because my bonds did not do as well as stock during this same time period. 7% is better than 4%. Overall the portfolio gained about 4.75% vice 4% if I stayed passive.

Since the DOW is less than 10% of the 52 week high, I suggested they wait. One of my daughter friend admitted that he only had $30,000 in his IRA so I stated $3,000 is a good amount to risk if the Dow ever drops below 24,255 again. The biggest risk is that it may take longer than 6 months to gain 7%. I got burned before when it took 5 years to make 10% but since it is a IRA, you can't cash out until you are 59-1/2. so temporary paper losses was not a concern when I was young.

I can only suggest trying this out and $3,000 is really not much of a risk if your portfolio is $100K+. The only way to gain knowledge and experience is actually doing it. If you are a newbie at this, $3,000 is a low risk during the next correction.

Here is another story: Years ago I complained that Walgreens and CVS drug stores should take back expired drugs instead of making the local government do it. I found out the pharmaceutic industry provided campaign contributions to state representatives to make sure no laws were passed that affected their profits. I therefore invested in the health industry and made a profit. Unethical yes....but I understood what was going on. I may save market awareness for another thread.

 

[2177V]

This is Repeat comment for people who don't get it:


There are facts and statistics and publications that more than 50& of marriages end up in divorce. Therefore people who have a fixation on facts and statistics and publications should never get married.



This is exactly why facts and statistics and publications do not mean anything to me.



You are wasting your time on facts and statistics and publications on passive investing.

 

[flintnational]

vchan, below is your quote from the Three fund portfolio thread. At your request, Oldshooter started this thread and complied with your requests to provide data and professional articles. The underlining is my added emphasis.

"As another side issue: I like to see another thread based on "data and professional articles" only on the subject of passive investing versus active investing and NO PERSONAL OPINIONS. "

This is Repeat comment for people who don't get it:

There are facts and statistics and publications that more than 50& of marriages end up in divorce. Therefore people who have a fixation on facts and statistics and publications should never get married.

This is exactly why facts and statistics and publications do not mean anything to me.

You are wasting your time on facts and statistics and publications on passive investing.

 

[easysurfer]

This is Repeat comment for people who don't get it:


There are facts and statistics and publications that more than 50& of marriages end up in divorce. Therefore people who have a fixation on facts and statistics and publications should never get married.


This is exactly why facts and statistics and publications do not mean anything to me.


You are wasting your time on facts and statistics and publications on passive investing.

It's okay to believe or approach things the way you wish. We all do.

But for me, a claim without a demonstration or facts is just that, a claim.

For example, If I told you I'm clairvoyant. I'm a psychic. I give readings all the time to friends and family that end up very accurate.

Yet at the same time, there isn't really rational facts or statistics to back up what I say and I'm unwilling to demonstrate my abilities under a more controlled situation than just my words, then all I have is a claim. Not much different than the boy who cried wolf.

 

[LOL!]

I'll wade into this for a moment with math and history.

..., I reallocated 10% of my portfoiio from bonds to stocks. Since it is now at 25983 which means I gained about 7% of the 10% re-allocation portion in only 6 months. The other 90% passive portion of my portfolio gained 4% because my bonds did not do as well as stock during this same time period. 7% is better than 4%. Overall the portfolio gained about 4.75% vice 4% if I stayed passive.

A 7% gain on 10% of the portfolio is a 0.7% addition to the portfolio over doing nothing. EXCEPT bond funds are up about 4.5% in the same time frame, so the money would have made 4.5% anyways. The outperformance by shifting 10% from bonds to equities was just 0.25%. For many people, the 0.25% is a rounding error in performance and is not going to make them rich. Furthermore, there was added risk.

Nevertheless, I like market timing. Here is a 3-part post on the above that might interest you which I hesitate to link because you probably won't read it anyways:
http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-65.html#post1787189

 

[corn18]

I have an in-ground swimming pool and spa.

Interesting that this is mentioned but does not feature in your story. Could you share with us how many and what type cars you have? And the watches you wear? That would help establish your bonafides as a master investor.

 

[OldShooter]

Interesting that this is mentioned but does not feature in your story. Could you share with us how many and what type cars you have? And the watches you wear? That would help establish your bonafides as a master investor.

My favorite internet cartoon: https://en.wikipedia.org/wiki/On_th...ows_you're_a_dog#/media/File:Internet_dog.jpg

 

[Alan]

Thanks for the interesting discussion.