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assume most saw this (passive vs active, yet again)
This surely won't sit well with MJG. First, Charlie Munger on academic theory:
"Academics love EMH because they can claim that they have mathematics-based formulas which can predict the future even though the underlying assumptions (borrowed from physics) are provably false." "Life is infinitely more interesting for an academic if they can create beautiful mathematics in their papers." "I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.”
And now this!!
"Specifically, there were no time periods in which the S&P 500 outperformed 90% of mutual funds. The index was a middle-of-the-road performer in most of the 24 separate time period/peer group combinations we studied ."
Good piece, backing up the clear tendency of market-cap indexes to be great on the way up and very un-great on the way down. It's amazing how something as simple as the clearly documented record of those indexes in up- and down-markets escapes the cognition of the 'indexes are all you need, now and forever' commenters.
I'd been thinking the reason there's been so much of that sentiment flying around the finance sphere is that many of those making said comments must be thinking only in terms of the standard return periods, and any of those from 1-5 years show market-cap indexes as brilliant choices because the last 5y neatly coincides with the latest bull market - clearly the sweet spot of a market cap index.
One of the best analyses of an optimal stake in stock indexes in a long-term portfolio came from, believe it or not, Gus Sauter, former bigwig at Vanguard (sorry, no link, haven't been able to find it recently), which took into account many years of data and concluded that something like 30%, but no more, of a stock portfolio in index funds made an optimal contribution to long-term returns.
Saw it, thanks; did not post it, surprisingly weak and vague, nothing like this one. Seemed like false balance or something. Also, most everyone here knows the pro-index args.
I’m immediately just a little leery when an author tosses out an extremely high, unrealistic percentage claim without justification. Additionally, he highlights that number in the title of the article. What about you guys? Does it strike a skeptical chord with you? It does with me.
I’m apprehensive that anyone ever claimed that Index portfolios outdistanced active fund managed equivalents 90% of the time for any fund category for any extended timeframe. I doubt it ever happened.
I suspect that the author constructed a straw-man target that could easily be burned. I addressed this fraudulent method in an earlier post. Here’s the internal Link to that post:
I am very familiar with active versus passive fund studies with results that are timeframe and category dependent. Just about all these studies show an advantage to the passive game plan. However, results are never 90% one-sided. In the investment universe, a 70% outcome advantage is outstanding.
The brief study that the writer referenced also seemed a bit sloppy in its construction. Various asset classes were tested against an S&P 500 Index benchmark. The active fund results should have been more carefully measured against a fair representative benchmark.
The Gus Sauter study that was mentioned can be found as follows:
Except for the highly skilled, both very talented and extremely lucky investor, the Sauter study basically reinforces the case for passive investing. I would anticipate nothing less from a Vanguard son.
I encourage you to read the study very carefully. It examines both the US and the European mutual fund marketplace. In the US world, only 14% of the actively managed funds outperformed an Index in both excess returns and in reduced risk. Another 21% also generated excess returns above Index returns, but at a higher risk level. So 65% of the active portfolios delivered less than their Indices.
Sauter also concluded that the relative outcomes would more heavily favor the Index strategy as the number of active funds increased from the three level that was explored in the study.
I’m immediately just a little leery when an author tosses out an extremely high, unrealistic percentage claim without justification. Additionally, he highlights that number in the title of the article. What about you guys? Does it strike a skeptical chord with you? It does with me.
I’m apprehensive that anyone ever claimed that Index portfolios outdistanced active fund managed equivalents 90% of the time for any fund category for any extended timeframe. I doubt it ever happened.
The active route is more challenging with a likelihood of Index out-performance that is in the 10 % to 30 % range depending on time horizon and number of active funds within the portfolio.
On some level I'm just pulling your leg. But it is an honest question whether there is any evidence that would convince you of the utility of an active strategy.
@Ted I agree, a mix of active and passive funds is best. But, my problem is that the active funds that I choose almost invariably underperform their related indices.
@AndyJ Are there better indices (superior to market-cap) to use "on the way down"? I'm looking at RAFI
On many past postings I documented that my current portfolio is divided about equally between passive and active funds. Recently, I decided to shift more towards a passive mix without abandoning active management completely. Active funds do have a place.
I plan a core Index dominated portfolio with a satellite active component. I expect a final mix of perhaps 80/20 or 70/30 passive to active components.
Many studies demonstrate that active funds outdistance passive products about 20% to 50% of the time, never predictable ahead of time, and never persistently.
The database includes stuff like the S&P. SPIVA scorecard and Persistency semi-annual studies and the Gus Sauter Vanguard work referenced earlier. Many others exist.
I don't mind a little leg pulling since it permits me to cite additional data sources. I have never submitted a post without quoting statistics that I culled from what I evaluated at least as semi~reliable from an honest source. This derives directly from my engineering background when preparing work proposals. Trust, but verify.
I do believe I will determine what is best regarding this area of investing; some time before I leave this third rock from the sun. But, I have yet to place this decision process onto my bucket list.
from Blitzer: ...But, my problem is that the active funds that I choose almost invariably underperform their related indices.
And this, I think, is the crux of every debate for active/passive. I kind of have a different view. A fund like FPACX for example which has lots of asset options, or even YAFFX which often loads up on cash, should I care if they beat the S&P500? All I care about is that my chosen manager gives good consistent returns with downside protection. MACSX? Do I expect this fund to have leading returns year in and year out? Nope. I own it because it is a relatively conservative way to participate in the growing Asia market. How do I compare it to a benchmark since it is so unique.
I guess to me, I'm less interested in what fund will give me the best return all the time or if it beats an index. I'm more interested in having a collection of fund managers that keep the journey on track with my goals - as smooth as possible.
Given that, the benchmark that I do find very important is overall portfolio results - is my collection of funds doing as good or better than a portfolio benchmark, say a comparative target date fund.
You make some good points. Although I compare the performance of my portfolio to a benchmark ... its true test comes in does it meet my needs. After all, if it does not meet my needs it does not matter what a benchmark might be doing. On the subject, I do have two index funds VADAX and IACLX which resprents 25 percent of their Large/Mid Cap Sleeve.
@AndyJ Are there better indices (superior to market-cap) to use "on the way down"? I'm looking at RAFI
Bitzer, I don't know the research on the downside aspect of RA's fundamental index approach, but it would be worth looking into ... seems fairly intuitive that at least mildly value-driven parameters would help in an extended market decline.
I've had enough luck with actively managed funds that limit the downside through significant ownership of defensive sectors, price consciousness, letting cash build up, and/or currency hedging that I'm okay with a small-ish percentage of market-cap index exposure. My family has ~ 20% of our total stock exposure in a 401k that offers only m.c. indexes.
". In the US world, only 14% of the actively managed funds outperformed an Index in both excess returns and in reduced risk. Another 21% also generated excess returns above Index returns, but at a higher risk level. So 65% of the active portfolios delivered less than their Indices."
To me this doesn't sound too bad. I've got a strong stomach and was able to add to my high beta funds during 2008 and 2011. I'm willing to take higher risk if I get long-term outperformance, and this quote seems to indicate that about 35% of funds do that. Then again I expect not to retire for at least another 20 years. If I were retired already or planning to retire in the next fews, it would be a different story.
@ MikeM I agree that YAFFX would be a good candidate to provide consistent returns with downside protection. However,
YAFFX has underperformed (using my arbitrary S&P 500 benchmark) over the past few years. Assuming newer shareholders haven't bailed yet, will YAFFX make up "lost ground" during the next downturn? YAFFX did well during the last downturn...will that happen again next time? (ie will the Yacktmans call it correctly?)
Personally, I bailed on YAFFX and purchased VTI...only time will tell if I made the correct move.
@ MJG I enjoy your commentary, Would you consider posting your portfolio in detail? Obviously, not dollar amounts, but I am interested to see how your commentary translates into actual holdings. I understand that each person's needs are different, past performance does not guarantee future results and that nobody should "copy" your actions.
>> agree that YAFFX would be a good candidate to provide consistent returns with downside protection.
But this not quite, or not exactly, what MM was saying, I think.
When I look (just now, rechecking) at the performance of Yackt vs indexes and see how it jumps down significantly from the incredible dip protection shown in 7y and 6y to the parallel and then worsening performance at 5y and on in, I see why you did what you did. Who wouldn't? Well, someone fretting bull market behaviors, like me, not only dip protection. (They all go hand in hand, natch.) The thing is, if I am going to pay this family based on their serious dip protection 07-08, I must be prepared for them to underperform in the last 5-4-3-2-1y incredible and some say likely frothy bull markets. That is the entire name of the active protection game.
Hi Blitzer. I guess my point is I don't care about an obligatory index comparison.
So, you go out and search for a fund that has beaten an index for the last 3 years. You find the perfect fund. Will that index beating performance continue? Maybe, but probably not. More likely that great fund you just bought will under perform, revert back to the mean. That's the way it works. The Yacktman funds are a good example of that.
What I've noticed is that most fund mangers either excel in hot bull markets and that manager gets noticed as that fund you need to be in, or lose less during pull backs and now that is the fund people want. There may be a slim few that can do both. If you find one you are very lucky. My own personal preference is that guy who focuses on principle protection. I don't care if he beats the S&P500. I don't want to be invested in the S&P500.
I'm comfortable with a fund manager who explains his or her process and sticks with it. If you understand and are comfortable with that manager, stick with him. Maybe the perfect example of that guy, for me, is Romick and FPACX. Is it the best performing balanced/allocation fund out there? No, but I like and understand the process and his conservatism.
Damn the manager who's sole purpose is to beat and index. Give me the mix of funds that will get me to my goals with the least amount of turbulence.
(sorry I got to rambling, and I know my opinion doesn't fit all.)
Sure, you've spoken about moving some but not all monies from active to passive holdings in the past, and I think listed DODGX and DODBX, along with others as continued long term holdings.
But you also strongly advocate indexing for pretty much everyone in all situations. I certainly appreciate your passion and care, but as has been pointed out through this thread - and elsewhere - not everyone is invested in beating a given benchmark or in not protecting the downside. Indices probably work best for accumulators (ignoring some research on international, particularly int SC) who are able to take a very long view. Psychology might intervene for everyone else.
If I were to give just one criticism it's this: different strokes for different folks. As long as they are saving, informed, and are maintaining a sensical process, they're hopefully going to get where they want to go.
I guess my point is I don't care about an obligatory index comparison. My own personal preference is that guy who focuses on principle protection. I don't care if he beats the S&P500. I don't want to be invested in the S&P500.
I'm comfortable with a fund manager who explains his or her process and sticks with it. If you understand and are comfortable with that manager, stick with him. Maybe the perfect example of that guy, for me, is Romick and FPACX. Is it the best performing balanced/allocation fund out there? No, but I like and understand the process and his conservatism.
Damn the manager who's sole purpose is to beat and index. Give me the mix of funds that will get me to my goals with the least amount of turbulence. (sorry I got to rambling, and I know my opinion doesn't fit all.)
That's good MikeM. That's why my favorite fund manager was always Jean Marie Eveillard, of First Eagle Global Fund. Principal protection. Getting to the goal "with the least amount of turbulence." I still like SGENX, but nowhere near as much as when Eveillard was the manager. He was one of those rare managers that you could actually fully trust with your money. It even went beyond his skill as an investor, to his personal qualities that engendered trust.
@MikeM After some years of purchasing mutual funds during periods that a manager is outperforming his benchmarks then being indecisive during the often inevitable underperfomance, I've decided that, rather than worry about whether my fund will deliver downside protection just because it did last time, I'll just settle for the mean (more and more ETFs).
In another thread, I saw a lot of familiar places; I'm off route 250
Whenever I add to the MFO Discussion Board, I do so with some definite goal in mind. I typically do not contribute innocuous atta-boys. Since I almost always have a target purpose, I complete a little verification research and include references and a few statistics to backstop my positions. This annoys several MFO members, but I feel compelled to provide this necessary documentation to capture credibility.
You are not alone in thinking that my current positions are those that I steadfastly recommend for all MFO participants. That thinking is wrong!
That thinking grossly overstates my compassion and dedication on any matter. My main goal is to inform MFO members on the likely odds and expected payoffs for various investment scenarios. I truly believe that statistical inputs and probability-based interpretations of those statistics are essential to support superior financial decision making.
I never say that my way is the only way. It is not. If you feel so then you are overreacting to my presentation. Also, since I am a true believer in an incremental approach to financial matters since it is nowhere near a well understood science, I never believe that my viewpoints are irrefutable, and they are always subject to change as the marketplace dynamics change.
Just like placing all your eggs in one basket is a hazardous investment policy, placing total reliance on a single market wizard is also hazardous duty.
I also truly believe that each investor is the only and singular master to his own goals and preferences. There are many diverse roads to investment success, and I respect each and everyone of them although each one has its own set of traps and potholes. Whatever his goals, I believe an investor benefits by comparing his performance against a carefully designed benchmark that reflects those goals. How else would he measure his achievements in reaching those goals?
I surely do not possess the magic roadmap. To each his own investment pathway. That’s why I do not recommend specific investments and I resist disclosing my own portfolio holdings. These are both temporal things and could promote harm to an unseasoned, rookie investor.
I suspect some of you guys interpret my writing style as being far too authoritative. I certainly am guilty of trying to organize my research and interpretations in an authoritative framework. In defense of that style, I doubt that many MFOers would even read my posts if they were wishy-washy.
I spent an engineering career writing and evaluating work proposals. If those proposals were less than honest and less than positive, they would quickly be discarded as unacceptable. I still compose with that firmness of purpose.
As a sidebar, I have a question for you. Is your Mrdarcy moniker a reference to the Mr. Darcy character in Jane Austen’s “Pride and Prejudice” book? If so, do you see yourself in the dual roles that characterized Mr. Darcy’s overarching behavior, initially a charming cad and later a romantic hero, on this panel? Yours is a puzzling name choice for these MFO discussions. Please respond.
As a sidebar, I have a question for you. Is your Mrdarcy moniker a reference to the Mr. Darcy character in Jane Austen’s “Pride and Prejudice” book? If so, do you see yourself in the dual roles that characterized Mr. Darcy’s overarching behavior, initially a charming cad and later a romantic hero, on this panel? Yours is a puzzling name choice for these MFO discussions. Please respond.
I'm a little unclear if this is an honest question or backhanded. I'll assume the former.
There is nothing particularly insidious or deep, it just happens to be my own name (hence the different spelling). Any romanticism or feigned arrogance is entirely a joke (well, sometimes), as is the ridiculous picture. I really don't even like Austin, though Thug Notes has a pretty funny take:
Thanks for your rapid reply. Indeed my question was both honest and sincere. Exchanges on MFO are serious stuff, well almost always so.
Also, indeed your reference to Thug Notes is seriously fun stuff. I was totally unaware of its existence. I do not frequently navigate in those waters. Also I am not especially familiar with Jane Austen’s works. Like you, she is not high on my personal authors rankings list.
But my wife owns many of her books, so I asked her to view your referenced video with me. She completely enjoyed it, and reported that it is an accurate summary of “Pride and Prejudice”. It captured the essential themes and lessons in that classic book.
My wife also commented on how much our mores and morals have morphed since Austen’s prolific period. She reflected that Austen’s world mostly doesn’t exist today, so her interest in Austen’s writings has greatly diminished. Change happens.
In a sense, I am pleased that you used a form of your real name. Occam’s Razor wins another victory. The simplest reason or explanation is the most likely the actual case. The fewer the assumptions, the better.
I thoroughly benefited from our exchange, from both a fun and a learning perspective. I’ll be ending my part of the exchange with this post. Thank you once again.
"Occam's razor (also written as Ockham's razor and in Latin lex parsimoniae) is a principle of parsimony, economy, or succinctness used in problem-solving devised by William of Ockham (c. 1287–1347). It states that among competing hypotheses, the one with the fewest assumptions should be selected. Other, more complicated solutions may ultimately prove correct, but—in the absence of certainty—the fewer assumptions that are made, the better." ___________________ Or, the simplest explanation is often the best one
Completely OT, but if you liked Thug Notes (and who doesn't...) 8-bit Philosophy is done by the same people and is fantastic. It uses late 80s/early 90s video games to simply narrate philosophy.
Comments
I'd been thinking the reason there's been so much of that sentiment flying around the finance sphere is that many of those making said comments must be thinking only in terms of the standard return periods, and any of those from 1-5 years show market-cap indexes as brilliant choices because the last 5y neatly coincides with the latest bull market - clearly the sweet spot of a market cap index.
One of the best analyses of an optimal stake in stock indexes in a long-term portfolio came from, believe it or not, Gus Sauter, former bigwig at Vanguard (sorry, no link, haven't been able to find it recently), which took into account many years of data and concluded that something like 30%, but no more, of a stock portfolio in index funds made an optimal contribution to long-term returns.
Regards,
Ted
http://www.marketwatch.com/story/index-funds-superior-to-high-priced-active-management-2014-08-01/print?guid=A88A6EFF-2BDE-404A-82CF-4654914144D5
Regards,
Ted
I’m immediately just a little leery when an author tosses out an extremely high, unrealistic percentage claim without justification. Additionally, he highlights that number in the title of the article. What about you guys? Does it strike a skeptical chord with you? It does with me.
I’m apprehensive that anyone ever claimed that Index portfolios outdistanced active fund managed equivalents 90% of the time for any fund category for any extended timeframe. I doubt it ever happened.
I suspect that the author constructed a straw-man target that could easily be burned. I addressed this fraudulent method in an earlier post. Here’s the internal Link to that post:
http://www.mutualfundobserver.com:80/discuss/discussion/14757/charlie-munger-interview-comments
I am very familiar with active versus passive fund studies with results that are timeframe and category dependent. Just about all these studies show an advantage to the passive game plan. However, results are never 90% one-sided. In the investment universe, a 70% outcome advantage is outstanding.
The brief study that the writer referenced also seemed a bit sloppy in its construction. Various asset classes were tested against an S&P 500 Index benchmark. The active fund results should have been more carefully measured against a fair representative benchmark.
The Gus Sauter study that was mentioned can be found as follows:
https://global.vanguard.com/international/web/pdfs/INTAPR.pdf
Except for the highly skilled, both very talented and extremely lucky investor, the Sauter study basically reinforces the case for passive investing. I would anticipate nothing less from a Vanguard son.
I encourage you to read the study very carefully. It examines both the US and the European mutual fund marketplace. In the US world, only 14% of the actively managed funds outperformed an Index in both excess returns and in reduced risk. Another 21% also generated excess returns above Index returns, but at a higher risk level. So 65% of the active portfolios delivered less than their Indices.
Sauter also concluded that the relative outcomes would more heavily favor the Index strategy as the number of active funds increased from the three level that was explored in the study.
I hope this clears away some of the fog.
Best Wishes.
From January 9th: On some level I'm just pulling your leg. But it is an honest question whether there is any evidence that would convince you of the utility of an active strategy.
@AndyJ Are there better indices (superior to market-cap) to use "on the way down"? I'm looking at RAFI
No convincing is necessary.
On many past postings I documented that my current portfolio is divided about equally between passive and active funds. Recently, I decided to shift more towards a passive mix without abandoning active management completely. Active funds do have a place.
I plan a core Index dominated portfolio with a satellite active component. I expect a final mix of perhaps 80/20 or 70/30 passive to active components.
Many studies demonstrate that active funds outdistance passive products about 20% to 50% of the time, never predictable ahead of time, and never persistently.
The database includes stuff like the S&P. SPIVA scorecard and Persistency semi-annual studies and the Gus Sauter Vanguard work referenced earlier. Many others exist.
I don't mind a little leg pulling since it permits me to cite additional data sources. I have never submitted a post without quoting statistics that I culled from what I evaluated at least as semi~reliable from an honest source. This derives directly from my engineering background when preparing work proposals. Trust, but verify.
Thanks for the opportunity.
Best Wishes.
But, I have yet to place this decision process onto my bucket list.
And this, I think, is the crux of every debate for active/passive. I kind of have a different view. A fund like FPACX for example which has lots of asset options, or even YAFFX which often loads up on cash, should I care if they beat the S&P500? All I care about is that my chosen manager gives good consistent returns with downside protection. MACSX? Do I expect this fund to have leading returns year in and year out? Nope. I own it because it is a relatively conservative way to participate in the growing Asia market. How do I compare it to a benchmark since it is so unique.
I guess to me, I'm less interested in what fund will give me the best return all the time or if it beats an index. I'm more interested in having a collection of fund managers that keep the journey on track with my goals - as smooth as possible.
Given that, the benchmark that I do find very important is overall portfolio results - is my collection of funds doing as good or better than a portfolio benchmark, say a comparative target date fund.
You make some good points. Although I compare the performance of my portfolio to a benchmark ... its true test comes in does it meet my needs. After all, if it does not meet my needs it does not matter what a benchmark might be doing. On the subject, I do have two index funds VADAX and IACLX which resprents 25 percent of their Large/Mid Cap Sleeve.
Old_Skeet
I've had enough luck with actively managed funds that limit the downside through significant ownership of defensive sectors, price consciousness, letting cash build up, and/or currency hedging that I'm okay with a small-ish percentage of market-cap index exposure. My family has ~ 20% of our total stock exposure in a 401k that offers only m.c. indexes.
Good luck,
AJ
To me this doesn't sound too bad. I've got a strong stomach and was able to add to my high beta funds during 2008 and 2011. I'm willing to take higher risk if I get long-term outperformance, and this quote seems to indicate that about 35% of funds do that. Then again I expect not to retire for at least another 20 years. If I were retired already or planning to retire in the next fews, it would be a different story.
YAFFX has underperformed (using my arbitrary S&P 500 benchmark) over the past few years. Assuming newer shareholders haven't bailed yet, will YAFFX make up "lost ground" during the next downturn? YAFFX did well during the last downturn...will that happen again next time? (ie will the Yacktmans call it correctly?)
Personally, I bailed on YAFFX and purchased VTI...only time will tell if I made the correct move.
@ MJG I enjoy your commentary, Would you consider posting your portfolio in detail? Obviously, not dollar amounts, but I am interested to see how your commentary translates into actual holdings. I understand that each person's needs are different, past performance does not guarantee future results and that nobody should "copy" your actions.
But this not quite, or not exactly, what MM was saying, I think.
When I look (just now, rechecking) at the performance of Yackt vs indexes and see how it jumps down significantly from the incredible dip protection shown in 7y and 6y to the parallel and then worsening performance at 5y and on in, I see why you did what you did. Who wouldn't? Well, someone fretting bull market behaviors, like me, not only dip protection. (They all go hand in hand, natch.) The thing is, if I am going to pay this family based on their serious dip protection 07-08, I must be prepared for them to underperform in the last 5-4-3-2-1y incredible and some say likely frothy bull markets. That is the entire name of the active protection game.
So, you go out and search for a fund that has beaten an index for the last 3 years. You find the perfect fund. Will that index beating performance continue? Maybe, but probably not. More likely that great fund you just bought will under perform, revert back to the mean. That's the way it works. The Yacktman funds are a good example of that.
What I've noticed is that most fund mangers either excel in hot bull markets and that manager gets noticed as that fund you need to be in, or lose less during pull backs and now that is the fund people want. There may be a slim few that can do both. If you find one you are very lucky. My own personal preference is that guy who focuses on principle protection. I don't care if he beats the S&P500. I don't want to be invested in the S&P500.
I'm comfortable with a fund manager who explains his or her process and sticks with it. If you understand and are comfortable with that manager, stick with him. Maybe the perfect example of that guy, for me, is Romick and FPACX. Is it the best performing balanced/allocation fund out there? No, but I like and understand the process and his conservatism.
Damn the manager who's sole purpose is to beat and index. Give me the mix of funds that will get me to my goals with the least amount of turbulence.
(sorry I got to rambling, and I know my opinion doesn't fit all.)
Sure, you've spoken about moving some but not all monies from active to passive holdings in the past, and I think listed DODGX and DODBX, along with others as continued long term holdings.
But you also strongly advocate indexing for pretty much everyone in all situations. I certainly appreciate your passion and care, but as has been pointed out through this thread - and elsewhere - not everyone is invested in beating a given benchmark or in not protecting the downside. Indices probably work best for accumulators (ignoring some research on international, particularly int SC) who are able to take a very long view. Psychology might intervene for everyone else.
If I were to give just one criticism it's this: different strokes for different folks. As long as they are saving, informed, and are maintaining a sensical process, they're hopefully going to get where they want to go.
In another thread, I saw a lot of familiar places; I'm off route 250
Thank you for your thoughtful and generous reply.
Whenever I add to the MFO Discussion Board, I do so with some definite goal in mind. I typically do not contribute innocuous atta-boys. Since I almost always have a target purpose, I complete a little verification research and include references and a few statistics to backstop my positions. This annoys several MFO members, but I feel compelled to provide this necessary documentation to capture credibility.
You are not alone in thinking that my current positions are those that I steadfastly recommend for all MFO participants. That thinking is wrong!
That thinking grossly overstates my compassion and dedication on any matter. My main goal is to inform MFO members on the likely odds and expected payoffs for various investment scenarios. I truly believe that statistical inputs and probability-based interpretations of those statistics are essential to support superior financial decision making.
I never say that my way is the only way. It is not. If you feel so then you are overreacting to my presentation. Also, since I am a true believer in an incremental approach to financial matters since it is nowhere near a well understood science, I never believe that my viewpoints are irrefutable, and they are always subject to change as the marketplace dynamics change.
Just like placing all your eggs in one basket is a hazardous investment policy, placing total reliance on a single market wizard is also hazardous duty.
I also truly believe that each investor is the only and singular master to his own goals and preferences. There are many diverse roads to investment success, and I respect each and everyone of them although each one has its own set of traps and potholes. Whatever his goals, I believe an investor benefits by comparing his performance against a carefully designed benchmark that reflects those goals. How else would he measure his achievements in reaching those goals?
I surely do not possess the magic roadmap. To each his own investment pathway. That’s why I do not recommend specific investments and I resist disclosing my own portfolio holdings. These are both temporal things and could promote harm to an unseasoned, rookie investor.
I suspect some of you guys interpret my writing style as being far too authoritative. I certainly am guilty of trying to organize my research and interpretations in an authoritative framework. In defense of that style, I doubt that many MFOers would even read my posts if they were wishy-washy.
I spent an engineering career writing and evaluating work proposals. If those proposals were less than honest and less than positive, they would quickly be discarded as unacceptable. I still compose with that firmness of purpose.
As a sidebar, I have a question for you. Is your Mrdarcy moniker a reference to the Mr. Darcy character in Jane Austen’s “Pride and Prejudice” book? If so, do you see yourself in the dual roles that characterized Mr. Darcy’s overarching behavior, initially a charming cad and later a romantic hero, on this panel? Yours is a puzzling name choice for these MFO discussions. Please respond.
Once again, thanks for your comments.
Best Wishes.
I enjoy your comments. Don't change a thing.
There is nothing particularly insidious or deep, it just happens to be my own name (hence the different spelling). Any romanticism or feigned arrogance is entirely a joke (well, sometimes), as is the ridiculous picture. I really don't even like Austin, though Thug Notes has a pretty funny take:
Thanks for your rapid reply. Indeed my question was both honest and sincere. Exchanges on MFO are serious stuff, well almost always so.
Also, indeed your reference to Thug Notes is seriously fun stuff. I was totally unaware of its existence. I do not frequently navigate in those waters. Also I am not especially familiar with Jane Austen’s works. Like you, she is not high on my personal authors rankings list.
But my wife owns many of her books, so I asked her to view your referenced video with me. She completely enjoyed it, and reported that it is an accurate summary of “Pride and Prejudice”. It captured the essential themes and lessons in that classic book.
My wife also commented on how much our mores and morals have morphed since Austen’s prolific period. She reflected that Austen’s world mostly doesn’t exist today, so her interest in Austen’s writings has greatly diminished. Change happens.
In a sense, I am pleased that you used a form of your real name. Occam’s Razor wins another victory. The simplest reason or explanation is the most likely the actual case. The fewer the assumptions, the better.
I thoroughly benefited from our exchange, from both a fun and a learning perspective. I’ll be ending my part of the exchange with this post. Thank you once again.
Best Wishes.
"Occam's razor (also written as Ockham's razor and in Latin lex parsimoniae) is a principle of parsimony, economy, or succinctness used in problem-solving devised by William of Ockham (c. 1287–1347). It states that among competing hypotheses, the one with the fewest assumptions should be selected. Other, more complicated solutions may ultimately prove correct, but—in the absence of certainty—the fewer assumptions that are made, the better."
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Or, the simplest explanation is often the best one