Investment Thread

We would be remiss in not offering a tip of the DBR cap to John Bogle who died yesterday...head of Vanguard, he was the guy who (as many know) popularized the theory that in the long term, most investment managers don't outperform the market, so he was essentially the major proponent of index funds.

I know we could discuss/argue about this stuff all day, but I can't tell you how many people I have informally advised who are being hellaciously ripped off by ludicrously high management fees, by guys who don't match market gains (and whose prime motivation seems to be putting clients in mutual funds with high fees that pay the manager gobs of commission money for pushing their products. Ack.)
It's a national disgrace...(which is not to say that index funds are for everyone, not that there are not some good investment managers out there)...

Anyway, a tip of my warm fur hat to John...

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Originally Posted by budwom

We would be remiss in not offering a tip of the DBR cap to John Bogle who died yesterday...head of Vanguard, he was the guy who (as many know) popularized the theory that in the long term, most investment managers don't outperform the market, so he was essentially the major proponent of index funds.

I know we could discuss/argue about this stuff all day, but I can't tell you how many people I have informally advised who are being hellaciously ripped off by ludicrously high management fees, by guys who don't match market gains (and whose prime motivation seems to be putting clients in mutual funds with high fees that pay the manager gobs of commission money for pushing their products. Ack.)
It's a national disgrace...(which is not to say that index funds are for everyone, not that there are not some good investment managers out there)...

Anyway, a tip of my warm fur hat to John...

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I'm avoiding financial threads, but I must strongly second this post. John Bogle did more for retail investors than anyone in modern investment history. John Bogle is one of the main reasons a much higher percentage of Americans invest in equity compared to 40 years ago. Our lives are better because of John. Thanks, John!

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Originally Posted by Jeffrey

I'm avoiding financial threads, but I must strongly second this post. John Bogle did more for retail investors than anyone in modern investment history. John Bogle is one of the main reasons a much higher percentage of Americans invest in equity compared to 40 years ago. Our lives are better because of John. Thanks, John!

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I just wanted to say that the bolded section above is unfortunate because your input is a good read IMHO.

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Originally Posted by elvis14

I just wanted to say that the bolded section above is unfortunate because your input is a good read IMHO.

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Agreed. But I understand the personal decision to do so.

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Originally Posted by Jeffrey

I'm avoiding financial threads, but I must strongly second this post. John Bogle did more for retail investors than anyone in modern investment history. John Bogle is one of the main reasons a much higher percentage of Americans invest in equity compared to 40 years ago. Our lives are better because of John. Thanks, John!

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Well said

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Originally Posted by elvis14

I just wanted to say that the bolded section above is unfortunate because your input is a good read IMHO.

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Here, here! (Hear, hear?)
I'll add that in addition to being a good read Jeffrey's posts are also very informative and one of the reasons I always click the Investment thread when it is updated.

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Originally Posted by Jeffrey

I'm avoiding financial threads, but I must strongly second this post. John Bogle did more for retail investors than anyone in modern investment history. John Bogle is one of the main reasons a much higher percentage of Americans invest in equity compared to 40 years ago. Our lives are better because of John. Thanks, John!

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Just saw these comments on Mr. Bogle. I worked at the SEC, in the division that regulates mutual funds, when Bogle was head of Vanguard and dealt with him several times. He was always gracious and to the point. Had a very good sense of humor, too.

Years after I left the SEC, I ran into Jack at an industry conference. He said, "Matt, you're in my book!" I asked him what he meant, and he said "you told me to shut up!" The truth was a little more complicated. I was working on a matter where Vanguard and another fund group were having a dispute and I had almost convinced the other fund group that it wasn't worth pursuing the matter, because the law wasn't on their side, when Jack said something fairly inflammatory in the WSJ about the other group's effort. I called Bogle and told him he wasn't helping by speaking publicly about the matter. He agreed to be more circumspect. A week or two later, the other fund group withdrew their request.

And, yes, investors all over America owe him greatly.

Have been planning for full retirement for several years now. Have built various models to represent our current holdings/savings and project savings needs/implications over the remaining income earning years.


Q1: Models include projected Social Security benefits as a part of our annual income. How should we value these numbers? At a 100% of estimated benefit? Something less based on concerns for program solvency? I reach age 62 in 2025. Wife in 2027.


Q2: What's a useful/sensible compounded annual growth rate to use in my models for $$ parked in the market for a 20-year run?

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Originally Posted by BlueTeuf

Have been planning for full retirement for several years now. Have built various models to represent our current holdings/savings and project savings needs/implications over the remaining income earning years.


Q1: Models include projected Social Security benefits as a part of our annual income. How should we value these numbers? At a 100% of estimated benefit? Something less based on concerns for program solvency? I reach age 62 in 2025. Wife in 2027.


Q2: What's a useful/sensible compounded annual growth rate to use in my models for $$ parked in the market for a 20-year run?

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As for the first question, my own personal opinion (FWIW) is that you won't see your Social Security diminish in value...with precious few people being covered by defined benefit pension plans these days, messing with SS would move a lot of people into poverty.
Despite all the political posturing, its problems are very very fixable (people are living longer now, so raising the SS tax seems reasonable, just for example). Not worth getting into politics though...(e.g. raising the taxable amount of SS).

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Originally Posted by BlueTeuf

Have been planning for full retirement for several years now. Have built various models to represent our current holdings/savings and project savings needs/implications over the remaining income earning years.


Q1: Models include projected Social Security benefits as a part of our annual income. How should we value these numbers? At a 100% of estimated benefit? Something less based on concerns for program solvency? I reach age 62 in 2025. Wife in 2027.


Q2: What's a useful/sensible compounded annual growth rate to use in my models for $$ parked in the market for a 20-year run?

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Re: Q2: Which market?

For Q2 - I guess I could/should say market(s). I'm specifically referencing a mutual fund portfolio with an asset allocation geared toward long-term growth - currently includes ~15% international funds and 0% cash equivalents.

Think of it as a Roth account that, presuming things stay on track, I won't plan to touch in the next 20 years. And if things go really well - will simply flow to the kids.

The historical view of S&P 500 shows 10% annualized gain*. I recall reading recently that some of the major brokerages recently lowered their expectations for futute gains for the S&P 500 to either 6 or 7% but I'm not seeing those articles at the moment. They may be right, they may be wrong. Assuming you are using an ETF, make sure that you reinvest the dividends as 40% of the returns* have generally come from there. If using mutual funds, the advice is still the same.

Other things to think about:

If this account is just part of your overall asset allocation, how are you going to rebalance? How frequently? Will your risk tolerance change over those 20 years? If so, how will you handle that shift over time? You mentioned if things stay on track. Barring calamity, do you have enough cash to handle things such that your retirement assets can remain untouched?

FWIW, there are no simple questions when it comes to finances. I would push back on the idea that you can set it and forget it.

I'm also a do it yourselfer so these are the issues I've had to think about.

*Investopedia

Thete is one here: https://www.morningstar.com/articles...returns-2.html

Though this isn't the article I had in mindl

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Originally Posted by YmoBeThere

There is one here: https://www.morningstar.com/articles...returns-2.html

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Thanks - great article; addresses my question head-on. I'll admit forecasts were gloomier than I had expected. Here's a summary of the author's summary:

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BlackRock Investment Institute – next 10 yrs.
7% nominal return for U.S. large caps; 9% for non-U.S. large caps; 3.3% for U.S. Bonds

John C. Bogle – next 10 years
4%-5% returns for stocks (nominal); 4% for bonds

GMO – next 7 years
negative 4.1% real (inflation-adjusted) for U.S. large caps; negative 0.2% for U.S. bonds; 4.4% real returns for emerging-markets equities;

J.P. Morgan Asset Management – over 10-15 year
5.25% return (nominal) for U.S. equities; 4.5% return for U.S. investment-grade corporate bonds

Morningstar Investment Management – over 10 years
1.8% nominal returns for U.S. stocks; 3.3% for U.S. bonds

Research Affiliates – over next 10 years
0.7% (inflation adjusted) returns for U.S. large caps; 0.5% real returns for U.S. Bonds

Vanguard – 10 years
Nominal U.S. equity-market returns at 3% to 5%; 6% to 8% returns for non-U.S. equities; 2.5% to 4.5% for global fixed-income markets.
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Questions all this raises - will a longer run (i.e. 20 years vs. 7-10 years allow me to use a higher return estimate? Need to think/learn more about emerging markets - can I presume there is an index and funds that track it?

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Originally Posted by YmoBeThere

Other things to think about:

If this account is just part of your overall asset allocation, how are you going to rebalance? How frequently? Will your risk tolerance change over those 20 years? If so, how will you handle that shift over time? You mentioned if things stay on track. Barring calamity, do you have enough cash to handle things such that your retirement assets can remain untouched?

FWIW, there are no simple questions when it comes to finances. I would push back on the idea that you can set it and forget it.

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Good questions; helpful. For our overall plan, this account is a carve-out to go after growth in equity markets. The premise is we can afford to do that - and the overall portfolio asset allocation reflect that premise. In some scenarios, we may never need the assets at all - and can just leave them to our kids, tax free.

Wanted to share a few links I've found helpful. I'm currently working on my own strategy to yield high returns with low fees while still being on the efficient frontier.

The first link is about "coach potato investing" which is an extremely simple yet quite effective way to invest in the long term.
https://scottburns.com/on-the-import...dull-investor/

The link below shares a few easy ways to set up a diversified investment for retirement
https://scottburns.com/how-to-unders...ato-investing/

The third link is a look at value investing.
https://tweedy.com/resources/library...ndOct14Web.pdf

The Presidential Election 2020 thread veered slightly into an economic projection discussion so thought I'd pull some of that out and put it here. Curious what our resident investment gurus thought of Chairman Powell's recent remarks before Congress.

Never should have raised rates in December. Now he can appease the administration by taking that one back.

Market seems to think 3 cuts are in the offing, I’m more inclined to think 2.

Considering taking a small position in Danaher Corp.

Anyone have opinions?

Re: Danaher


Up 40% YTD, that's a pretty strong move. I wouldn't go all in at once, but would buy a small position and see if I could get it at more favorable prices.