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you don't have to buy it. as i said earlier statistics mean nothing . all that matters is that the advice given to an individual is either correct or it isn't.
all i am saying is giving advice to someone we know nothing about on a one to one basis is just not a smart idea.
there is nothing wrong with telling about what you do and why or throwing ideas out there for discussion but that is different from telling someone go buy some funds.
This claim is utterly absurd. If statistics mean nothing, your day-to-day decisions are crippled. Everything you do from getting out of bed to making dinner to posting on C-D requires you to make some assumptions about what is plausible, probable, likely to happen or not.
You cannot be 100% certain that you won't die in a car crash, so why do you risk it and even get out of the house? Clearly you assess the probability based on statistics and decide accordingly, the risk is low enough.
Yes, something either happens or not but in the face of uncertainty you must apply some sort of statistics. To insist otherwise is to bankrupt your epistemology and dissociate your life from all rationality.
A lot of these talking heads hem and haw a lot. They are like the daily horoscope so vague that it can never be right or wrong. It does seem that Yardeni has been claiming that the stock market is in the final stages before a major correction. It seems that he has been making that claim at least since last July. That is long enough for me to mistrust any of his opinions. At best you might want to give him another half year or so.
This claim is utterly absurd. If statistics mean nothing, your day-to-day decisions are crippled. Everything you do from getting out of bed to making dinner to posting on C-D requires you to make some assumptions about what is plausible, probable, likely to happen or not.
You cannot be 100% certain that you won't die in a car crash, so why do you risk it and even get out of the house? Clearly you assess the probability based on statistics and decide accordingly, the risk is low enough.
Yes, something either happens or not but in the face of uncertainty you must apply some sort of statistics. To insist otherwise is to bankrupt your epistemology and dissociate your life from all rationality.
my view is through out your day you have only an outcome not a statistic. you have no idea what side of the statistic you are on. someone has to be on that opposing side and it can be you just as easily.
that is why we plan to 90 or 95 in retirement. statistically most of us will not be around but not knowing who will live and who will die makes the planning the same for everyone unless ill.
insurers can tell us how many of us will die each year. but they can't tell us who so statistics mean crap.
as i said earlier statistics mean very little to humans. for us things either work out the way we planned or they don't.
no matter what discipline is the key . you may do better or worse just buying and holding but overall you should do fine as long as the next 15 years are better than the last 15 years.
Indeed. If you cannot stick to your plan or are tossed by the waves to and fro you will never get anywhere. It requires some education and basic understanding to come up and follow a reasonable investing approach.
It seems that this discussion has digressed a long way from the original post. To my way of thinking passive investing is related to the concept of an efficient market. That means we avoid speculation in handling our investments. That also means we are skeptical about others - a Madoff or a Hathaway - who in theory act as our agents in this approach. Passive investing at least to me means we avoid speculative trades, we look for low cost investments such as index funds. It also means we avoid the notion that we can time the market at least on a short term basis.
The passive investing approach still means we have a lot of choices. At the minimum we need to think about our risk tolerance and allocation mix. We need to consider diversification. That can adversely affect gains but the risks are lessened. We need to recognize that with time allocations will drift and we need a mechanism for rebalancing. That can be done on a fixed time basis or we can rebalance when we have drifted a fixed percentage amount from our ideal allocation.
I think there are also reasons we might want to adjust allocations over time. Mathjak for example is very risk adverse as he heads into retirement. Some investors are always born pessimists and want low risk at all times. They are happy with small returns as long as they avoid big losses. Others like myself have seen strong returns and for now believe the risk of a major setback is minimal. Eventually I will want to pull back on equities. That to me is the crux of the investment issue. We need to pay attention to the long term trends and adjust our investment strategy accordingly. I see no magic way of doing that. I think there are some inputs in this sort of decision making that we should recognize and avoid. First are emotional responses. Too many have panicked and sold low. Too many have piled into a hot market and bought high. Next, I try to avoid following the crowd. I basically consider the talking heads to be idiots. Big time investors who buy and sell on a daily basis are fickle idiots using a strategy that has been proven to be wrong. On every transaction, half win and half lose. None of them seem to be consistently on the winning side and eventually the costs of analysis and trading catch up.
It would be great if there were some long term indicators that we could watch and use to change our investment allocations. I don't see any that work. Some believe the Shiller CAPE is a powerful indicator. Anyone with even basic accounting knowledge, knows that the accounting conventions have changed and we can no longer look back over decades. Others look at historical trends and patterns. Trying to extrapolate from the 60s or from post WWII or from the Great Depression makes absolutely no sense. The global, regulatory and financials are totally different.
Excellent post, thank you! It sums up my experience as well. Let me add one observation - the megaphone chart pattern that prevails during secular stock bear markets. Once it gets breached to the upside like in the 80s or earlier this year we can be fairly confident that the bear market is over. However waiting for confirmation from 2009 to today would have cost you dearly. Not recommended for practical use therefore.
I also feel that nobody should just "set it and forget it". different sectors & asset classes may not do so well over time. with that being said, you shouldn't also continues change investments either. make it a semi-passive approach. follow advice from brokerage newsletters and make adjustments for possible long-term trends.
for example, I think I have too much invested in foreign equities right now(35%). Europe & asia recession, instability, etc. ive also found out from numerous sources that my s&p 500 already has adequate foreign exposure anyway. I was thinking of dialing the foreign stocks down to between 15-20% and replacing what I sell with a small cap fund. for some reason, I enjoy the volatility of small caps. as for bonds, I plan on keeping it at 10% or less. I like the 90-10 approach and will stick with it.
I have mixed feelings about keeping with a set investment allocation and the option of making adjustments. First I only buy funds with diversified holdings. I am not at all concerned about picking individual stocks, bonds or even sectors. I mistrust any idea of making short term predictions. In that regard I am passive and believe in the idea of an efficient market.
I cannot give up the idea that I can understand long term trends and make wise adjustments in my allocations. That worked in the past but maybe I was just lucky. In 2010, I started an experiment. My investment house (TIAA-CREF) advisor pushed for a managed portfolio. The managed portfolio is basically a fund of funds with some individual holdings but very minimal trading. The allocation was 60% stock based on a questionnaire designed to assess my risk tolerance. If the allocation changes more than +/- 3% it is automatically adjusted. In addition to this managed portfolio, I maintain another portfolio of about equal size that I manage on my own. In the past several years I have made very minimal adjustments in my self-directed portfolio. Both portfolios have done about equally well. I still have the idea that as the stock market continues to inflate, I will reach a point of pulling back and avoid the next major drop. I am not sure if my idea of making long term adjustments is a wise self confident move or just self delusion.
I have mixed feelings about keeping with a set investment allocation and the option of making adjustments. First I only buy funds with diversified holdings. I am not at all concerned about picking individual stocks, bonds or even sectors. I mistrust any idea of making short term predictions. In that regard I am passive and believe in the idea of an efficient market.
I cannot give up the idea that I can understand long term trends and make wise adjustments in my allocations. That worked in the past but maybe I was just lucky. In 2010, I started an experiment. My investment house (TIAA-CREF) advisor pushed for a managed portfolio. The managed portfolio is basically a fund of funds with some individual holdings but very minimal trading. The allocation was 60% stock based on a questionnaire designed to assess my risk tolerance. If the allocation changes more than +/- 3% it is automatically adjusted. In addition to this managed portfolio, I maintain another portfolio of about equal size that I manage on my own. In the past several years I have made very minimal adjustments in my self-directed portfolio. Both portfolios have done about equally well. I still have the idea that as the stock market continues to inflate, I will reach a point of pulling back and avoid the next major drop. I am not sure if my idea of making long term adjustments is a wise self confident move or just self delusion.
How old are you?
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