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  1. #41
    Quote Originally Posted by RPS View Post
    I have no issue with going public. I simply wanted to avoid being seen as self-promoting. My favorites follow, in no particular order (except that I'm first). I have no business relationships with anyone else on this list, but they are all friends of mine, so bear that in mind.

    Above the Market (me)
    Jason Zweig
    The Reformed Broker (Josh Brown)
    Cliff Asness
    A Wealth of Common Sense (Ben Carlson)
    Corey Hoffstein
    Jeremy Schwartz
    Dan Egan
    Brian Portnoy
    Meb Faber
    The Retirement Researcher (Wade Pfau)
    The Big Picture (Barry Ritholtz)
    Blair duQuesnay
    Ben Johnson
    Peter Lazaroff
    Bps and pieces (Phil Huber)
    The Research Puzzle (Tom Brakke)
    The Irrelevant Investor (Michael Batnick)
    Michael Kitces
    Larry Hamtil
    GreenbackD (Tobias Carlisle)
    Of Dollars and Data (Nick Magiulli)
    Peter Huminski (a Wahoo though)

    If you don't want to wade through or follow this many, you might read Tadas Viskanta's Abnormal Returns, a daily aggregation of the best finance writing.
    James Dickey also wrote a poem about what went through the mind of a 29-year old stewardess as she fell to her death from the sky:

    https://www.poetryfoundation.org/poe...-56d22155e5c45

  2. #42
    Quote Originally Posted by RPS
    The research data says otherwise. The biggest issues in personal finance are not the investment choices per se. They are dealing with the bad markets that inevitably come, issues of risk need and risk capacity, asset location, spending priorities in retirement and the like. You may be different (the research data also is clear that almost everyone thinks s/he is in the "different" category), but most people would benefit a lot with good, professional advice.
    How much would you advise someone pay for this advice?

    Quote Originally Posted by RPS
    Diversification among indexes is as important as diversification among individual securities.
    The Vanguard Total Stock Market Index provides much more diversification than an individual security (your choice). Many of the domestic companies, in the Vanguard Total Stock Market Index, have substantial international exposure.

  3. #43
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by Jeffrey View Post
    How much would you advise someone pay for this advice?
    Vanguard says it's worth about three percent per year. You won't (and shouldn't) pay that, of course. There is no "one size fits all" answer. Not surprisingly, it will depend on a wide variety of factors such as your age and the complexity of your situation. Most advisors will want to charge a percentage of AUM. I'd look for one who will charge you hourly with an annual retainer to deal with issues throughout the year. If you're young, there may not be a great need for a retainer (although everyone needs help sticking with a plan when things get tough). Fees are generally (and very roughly) similar to those of other professionals such as attorneys and accountants.

    Quote Originally Posted by Jeffrey View Post
    The Vanguard Total Stock Market Index provides much more diversification than an individual security (your choice). Many of the domestic companies, in the Vanguard Total Stock Market Index, have substantial international exposure.
    Of course a basket of securities provides more diversification than any individual holding. I was talking about the benefits of exposure to multiple sectors, markets, and countries. VTSMX is limited to U.S. exposure. That's Jack Bogle's view (no foreign exposure) and it has served him well to this point. I think it's classic home country bias.

  4. #44
    Quote Originally Posted by RPS
    Vanguard says it's worth about three percent per year. You won't (and shouldn't) pay that, of course. There is no "one size fits all" answer. Not surprisingly, it will depend on a wide variety of factors such as your age and the complexity of your situation. Most advisors will want to charge a percentage of AUM. I'd look for one who will charge you hourly with an annual retainer to deal with issues throughout the year. If you're young, there may not be a great need for a retainer (although everyone needs help sticking with a plan when things get tough). Fees are generally (and very roughly) similar to those of other professionals such as attorneys and accountants.
    Would paying 3% per year in fees basically reduce my retirement funds by almost 50%?

    Keeping it simple, let's assume someone earns $100k per year, works for 35 years, and invests 15% annually in their retirement funds. Let's assume they invest 100% in the Vanguard Total Stock Market Index Fund and earn a CAGR of 10% during their 35 year career.

    Without paying advisory fees they would have approximately $4,065,000.

    With paying 3% in annual advisory fees they would have approximately $2,074,000.

    Why should anyone pay almost $2,000,000 in advisory fees during their career?

    Quote Originally Posted by RPS
    Of course a basket of securities provides more diversification than any individual holding. I was talking about the benefits of exposure to multiple sectors, markets, and countries. VTSMX is limited to U.S. exposure. That's Jack Bogle's view (no foreign exposure) and it has served him well to this point. I think it's classic home country bias.
    How is the Vanguard Total Stock Market Index fund limited to U.S. exposure when many of the companies, in that index, earn a substantial amount of their revenue and income internationally?

  5. #45
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by Jeffrey View Post
    Would paying 3% per year in fees basically reduce my retirement funds by almost 50%?
    Note my next sentence after the sentence you emboldened: "You won't (and shouldn't) pay that, of course." If you pay all the value in fees, you've lost the value. I also noted that I would pay a retainer fee rather than a fee based upon a percentage AUM. So your question doesn't make any sense to me. Have I misunderstood?

    Quote Originally Posted by Jeffrey View Post
    How is the Vanguard Total Stock Market Index fund limited to U.S. exposure when many of the companies, in that index, earn a substantial amount of their revenue and income internationally?
    Very roughly, the U.S. produces about a quarter of global GDP. The fact that some U.S. companies (part of the 25 percent) help to produce a portion of the 75 percent is hardly diversification. Indirect exposure is hardly exposure. You may of course decide you don't want or need (direct) foreign exposure. Those sorts of choices are the essence of so-called "active management" after all. That wouldn't be my call, but your mileage may vary. Over Jack Bogle's investment history, his active choice to stay domestic has served him well -- his choice helped him to outperform a more globally diversified portfolio. The question is whether that trend is likely to continue.

  6. #46
    Quote Originally Posted by RPS View Post
    Very roughly, the U.S. produces about a quarter of global GDP. The fact that some U.S. companies (part of the 25 percent) help to produce a portion of the 75 percent is hardly diversification. Indirect exposure is hardly exposure. You may of course decide you don't want or need (direct) foreign exposure. Those sorts of choices are the essence of so-called "active management" after all. That wouldn't be my call, but your mileage may vary. Over Jack Bogle's investment history, his active choice to stay domestic has served him well -- his choice helped him to outperform a more globally diversified portfolio. The question is whether that trend is likely to continue.
    I'm not sure about tying exchanges with GDP, but here is a major reason why Bogle would suggest US investments are sufficient for most:

    http://www.visualcapitalist.com/all-...anges-by-size/

    There are, of course, methods to compare expected returns from multiple stocks and/or exchanges, and how closely or widely they differ. 'Diversification' with no real difference in expected returns subjects you (without benefits) to the vagaries of taxation across borders, geopolitical issues, and most likely differences in institutional financial management practices.

    The real question is managing returns against risk, not 'diversification', as you stated earlier.

  7. #47
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by fidel View Post
    There are, of course, methods to compare expected returns from multiple stocks and/or exchanges, and how closely or widely they differ. 'Diversification' with no real difference in expected returns subjects you (without benefits) to the vagaries of taxation across borders, geopolitical issues, and most likely differences in institutional financial management practices.
    By any and every measure I'm aware of, expected returns from developed foreign stocks are higher than domestic stocks today and expected returns from emerging markets stocks are higher still. A representative example is shown below.

    LTCMA.jpg

    Quote Originally Posted by fidel View Post
    The real question is managing returns against risk, not 'diversification', as you stated earlier.
    Vanguard makes the case for global investing here (a more academic discussion is here). The key is portfolio diversification: "a U.S. investor should realize a diversification benefit from investing globally because the equity markets of other developed economies are less-than-perfectly correlated with the U.S. equity market." The goal of diversification is smoother returns -- lower volatility -- and thus better risk-adjusted returns. There is a reason Mr. Bogle concedes that "everyone" tells him he's wrong. Foregoing foreign stocks means foregoing over half of the world's opportunities (as determined by market capitalization).

  8. #48
    Join Date
    Feb 2007
    Location
    Raleigh
    Y'all wasting your time here. After last night's prediction of a Duke triumph when we were down 13 with under 8:00 to play, moonpie is now 2-2 on the season forecasting comeback wins so I'm calling him today about some $$$$.

    [redacted] them and the horses they rode in on.

  9. #49
    Quote Originally Posted by devildeac View Post
    Y'all wasting your time here. After last night's prediction of a Duke triumph when we were down 13 with under 8:00 to play, moonpie is now 2-2 on the season forecasting comeback wins so I'm calling him today about some $$$$.

    I took the moneyline on us last night because I'm suspicous of their ability to BTS. I shouldn't have doubted their ability to cover the 4 points, I won't do it again. (Mainly, because I won't be in Nevada..)

    I'm probably being petty in another thread.

  10. #50
    Quote Originally Posted by devildeac View Post
    Y'all wasting your time here. After last night's prediction of a Duke triumph when we were down 13 with under 8:00 to play, moonpie is now 2-2 on the season forecasting comeback wins so I'm calling him today about some $$$$.

    If you read the in-game thread, I am pretty sure there were Black Tuesday expectations that would have you hiding under your bed today.

  11. #51
    Join Date
    May 2007
    Location
    Tennessee
    Quote Originally Posted by RPS View Post
    By any and every measure I'm aware of, expected returns from developed foreign stocks are higher than domestic stocks today and expected returns from emerging markets stocks are higher still. A representative example is shown below.

    LTCMA.jpg

    Vanguard makes the case for global investing here (a more academic discussion is here). The key is portfolio diversification: "a U.S. investor should realize a diversification benefit from investing globally because the equity markets of other developed economies are less-than-perfectly correlated with the U.S. equity market." The goal of diversification is smoother returns -- lower volatility -- and thus better risk-adjusted returns. There is a reason Mr. Bogle concedes that "everyone" tells him he's wrong. Foregoing foreign stocks means foregoing over half of the world's opportunities (as determined by market capitalization).
    Let me play a little devil's advocate here.

    First, yes, expected returns from foreign equities are higher and emerging markets higher still. Pretty straightforward investment theory there; plus you can observe from various valuation measures. But the funny thing is, those expected returns are seldom realized by investors (or so it has seemed to me). It's like the old joke, "[Country X] is the market of the future ... and always will be."

    Second, while it's obvious that there's less than perfect correlation between domestic and foreign markets, let's not pretend that domestic multinationals give you zero global diversification, even if it's indirect. To a US investor, you still get exposed to currency risk and market risk, even if indirectly, whether you're invested in Coca-Cola or Nestle.

    Finally, domestic and international markets are positively correlated, and the correlations have generally been increasing for years (generally attributed to globalization).

    Fair disclosure, I do hold international (specifically, foreign) funds. But not nearly in proportion to market capitalization - I'm one of many contributing to the phenomenon of home country bias. But I don't think I'm as underexposed to foreign investments as might be inferred by a simple market cap weighting of my investments. Maybe not at all, but I'm really not sure.

  12. #52
    Quote Originally Posted by RPS View Post
    Note my next sentence after the sentence you emboldened: "You won't (and shouldn't) pay that, of course." If you pay all the value in fees, you've lost the value. I also noted that I would pay a retainer fee rather than a fee based upon a percentage AUM. So your question doesn't make any sense to me. Have I misunderstood?
    No, we are in full agreement, Vanguard's 3% valuation estimation is a gross overstatement! Would you also agree with me that a 2% valuation estimation is an overstatement?

    Same example, let's assume someone earns $100k per year, works for 35 years, and invests 15% annually in their retirement funds. Let's assume they invest 100% in the Vanguard Total Stock Market Index Fund and earn a CAGR of 10% during their 35 year career.

    Without paying advisory fees they would have approximately $4,065,000.

    With paying 2% in annual advisory fees they would have approximately $2,585,000.

    Why should anyone pay $1,480,000 in advisory fees during their career?

  13. #53
    Join Date
    Feb 2007
    Location
    Princeton, NJ
    Quote Originally Posted by Jeffrey View Post
    We are in full agreement, Vanguard's 3% valuation estimation is a gross overstatement. Would you also agree with me that a 2% valuation estimation is an overstatement?

    Same example, let's assume someone earns $100k per year, works for 35 years, and invests 15% annually in their retirement funds. Let's assume they invest 100% in the Vanguard Total Stock Market Index Fund and earn a CAGR of 10% during their 35 year career.

    Without paying advisory fees they would have approximately $4,065,000.

    With paying 2% in annual advisory fees they would have approximately $2,585,000.

    Why should anyone pay $1,480,000 in advisory fees during their career?
    You are assuming the rate of return is the same with and without advice. Obviously if that's true, you shouldn't pay anything. Kind of an obvious and not insightful conclusion though.

  14. #54
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by cspan37421 View Post
    Let me play a little devil's advocate here.
    We should all have our ideas and assumptions challenged.

    Quote Originally Posted by cspan37421 View Post
    First, yes, expected returns from foreign equities are higher and emerging markets higher still. Pretty straightforward investment theory there; plus you can observe from various valuation measures. But the funny thing is, those expected returns are seldom realized by investors (or so it has seemed to me). It's like the old joke, "[Country X] is the market of the future ... and always will be."
    Almost any way you measure it, domestic stocks have outperformed during our investment lifetimes.

    MSCI v. S&P.jpg

    But I believe in mean reversion and valuation. Like Grayson, I think foreign stocks are due (and always valuable for diversification purposes).

    Quote Originally Posted by cspan37421 View Post
    Second, while it's obvious that there's less than perfect correlation between domestic and foreign markets, let's not pretend that domestic multinationals give you zero global diversification, even if it's indirect. To a US investor, you still get exposed to currency risk and market risk, even if indirectly, whether you're invested in Coca-Cola or Nestle.
    Agreed.

    Quote Originally Posted by cspan37421 View Post
    Finally, domestic and international markets are positively correlated, and the correlations have generally been increasing for years (generally attributed to globalization).
    Agreed.

    Quote Originally Posted by cspan37421 View Post
    Fair disclosure, I do hold international (specifically, foreign) funds. But not nearly in proportion to market capitalization - I'm one of many contributing to the phenomenon of home country bias. But I don't think I'm as underexposed to foreign investments as might be inferred by a simple market cap weighting of my investments. Maybe not at all, but I'm really not sure.
    Me too.

  15. #55
    Quote Originally Posted by freshmanjs View Post
    You are assuming the rate of return is the same with and without advice. Obviously if that's true, you shouldn't pay anything. Kind of an obvious and not insightful conclusion though.
    If the advice is to purchase actively managed funds, then what are the odds, over a 35 year career, an actively managed fund will return more than the index it tracks?

    If the advice is to purchase index funds, then we are back to where this part of the discussion began...

    http://forums.dukebasketballreport.c...41#post1029941

    As an aside, I'm showing the math because I've found many investors do not truly appreciate how expensive it is to pay for financial advice.

  16. #56
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by Jeffrey View Post
    Why should anyone pay $1,480,000 in advisory fees during their career?
    I reject the premise of the question. For starters, I suggested looking at a retainer arrangement rather than a fee based upon AUM. But it goes well beyond that.

    dalbar.jpg

    Nearly everybody thinks that they're immune to performance-chasing and will stick to their plans no matter what happens in their lives and in the markets. But the evidence suggests (screams) otherwise (see above).

    To move beyond investments, smart people willing to do the work could figure out how to do their own financial planning reasonably well most of the time (if, when and how to do a Roth conversion; appropriate asset location; tax-loss harvesting; the most efficient retirement distribution plan; etc.). However, as with smart people acting as their own attorney (or accountant, or, or, or), they are more prone to mistake than they think and simply don't know what they don't know. Perhaps most importantly, as with anything else, you have to want to put in the time to become an expert. Not very many people are (and shouldn't be -- they have better things to do).

  17. #57
    Join Date
    Feb 2007
    Location
    San Diego, California
    Quote Originally Posted by devildeac View Post
    Y'all wasting your time here. After last night's prediction of a Duke triumph when we were down 13 with under 8:00 to play, moonpie is now 2-2 on the season forecasting comeback wins so I'm calling him today about some $$$$.

    Have you read Tetlock's epic, Expert Political Judgment? Brilliant. One of the most influential books of my life.

  18. #58
    Join Date
    Feb 2007
    Location
    Raleigh
    Quote Originally Posted by RPS View Post
    Have you read Tetlock's epic, Expert Political Judgment? Brilliant. One of the most influential books of my life.
    I have not but will investigate that soon. Thanks for the suggestion!
    [redacted] them and the horses they rode in on.

  19. #59
    Quote Originally Posted by RPS
    Nearly everybody thinks that they're immune to performance-chasing and will stick to their plans no matter what happens in their lives and in the markets. But the evidence suggests (screams) otherwise (see above).
    Agreed, they need to do what Mr. Thomas said...

    Quote Originally Posted by rthomas
    Pick your index (mine has been the S&P 500), put money in regularly (I've been adding a little bit each month since 1995), don't look until 20 years later, and you will have an account full of fun coupons.
    Quote Originally Posted by RPS
    To move beyond investments, smart people willing to do the work could figure out how to do their own financial planning reasonably well most of the time (if, when and how to do a Roth conversion; appropriate asset location; tax-loss harvesting; the most efficient retirement distribution plan; etc.). However, as with smart people acting as their own attorney (or accountant, or, or, or), they are more prone to mistake than they think and simply don't know what they don't know. Perhaps most importantly, as with anything else, you have to want to put in the time to become an expert. Not very many people are (and shouldn't be -- they have better things to do).
    "shouldn't be -- they have better things to do" is where we disagree. In my example, the person's gross earned income was $100,000 per year for a 35 year career. Having an additional $1,480,000 is almost 15 years (almost half their career) worth of earned income. I think it's time well spent!

    I'm not saying or implying you are advising anyone to pay close to 2% per year to a financial advisor. I am saying you and I both know many people do. Most of the financial advisors I know gross about 1.5% per year.

  20. #60
    http://www.berkshirehathaway.com/letters/2013ltr.pdf

    Mr. Buffett wrote...

    "Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.

    I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.

    That’s the “what” of investing for the non-professional. The “when” is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better longterm results than the knowledgeable professional who is blind to even a single weakness.

    If “investors” frenetically bought and sold farmland to each other, neither the yields nor prices of their crops would be increased. The only consequence of such behavior would be decreases in the overall earnings realized by the farm-owning population because of the substantial costs it would incur as it sought advice and switched properties.

    Nevertheless, both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.

    My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers."

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