PP Performance for 2016

[mathjak107]

wellesley is an interesting case , likely because wellesley is a favorite of investors who are usually pretty sharp more than i think just the masses . .

it is a boglehead favorite as well as the early retirement forum .

5 year shows fund got 7.29 / investor 6.70

10 year fund 6.66 investor 6.08

15 year fund 6.87 investor 6.26

[dualstow]

You don't put non-retirement funds in there, though, do you Desert?

I've always found Wellesley attractive*, but my Roth is still very small.

*Not claiming to be sharp here, haha, but perhaps well-read.

[mathjak107]

wellesley has been a long term favorite for as long as i can remember on financial forum and retirement forum sites .

it is always like there is wellesley and then there is everything else when you talk conservative investing on these forums .

we tend to get blindsided to what the masses do financially when we are communicating with those who share our interests .

from the numbers it appears that wellesly attracts a higher quality group of investors . they certainly do look better investor return wise . there could be retiree's who were told to just buy it and forget it so they pay no attention to markets or it could be because it is heavily promoted to more sophisticated investors on retirement and financial forums . but whatever the reason for such a small spread wellesley seems to be the exception . although it still exhibits enough bad investor behavior too to effect the numbers

[Kbg]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

[dualstow]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

The former also make ideal neighbors. Very quiet.

[sophie]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

That is outstanding. If you can find that study let us know!

[Kbg]

http://www.morningstar.com/advisor/t/10 ... estors.htm

[mathjak107]

i haven't researched it but i wonder if you compared index funds from vanguard vs other fund family's if you would see a higher success rate in general from vanguard investors . for the same reason wellesley seems to do better investor return wise vanguard is hot among the investing sophisticated and hobbyists too .

[mathjak107]

interesting enough i took the vanguard s&p 500 vfinx which is used by most higher level investors and compared it to an s&p 500 fund from dryfus which is likely used by those who don't manage their own money or really don't care much about it i think after the investment is made,

it seems our sophisticated investors did a lot worse with vanguard in the 10 year which included the volatile 2008-2009 years .

vanguard had a spread of 3.34% between investor returns and what the fund got . dryfus investors had only a 1.82% spread. could vanguard bogleheads be attempting a whole lot more market timing then we are led to believe ?
i know with me i used the fidelity insight newsletter for 30 years because i am not happy being average at anything , so i was always thinking about how to beat the markets by either 2nd guessing my last move or planning the next .

once i took the shot calling out of my hands i did very well , so i can see vanguards index funds maybe showing poorer investor returns since these are the folks more in to diy investing and who make investing a hobby and focus ..

[Kbg]

There is another study at Longboard which shows investors kill their bond returns (and alts) even more than their stock returns as a percentage of total return.

We humans really aren't very well wired for this stuff as a general rule.

[mathjak107]

that is because as modern brain imaging equipment taught us humans hate losing money more than making it . when we look at things hypothetically as opposed to with real money on the line the same parts of the brain are not used .

we are prewired for failure as once the stress of having money potentially at a loss hits us our brain hands us very different flawed information .

it is all in jason zweigs book your money your brain .

in fact the same parts of the brain came in to play when there was the fear of losing money that reacted to watching vomiting or smelling dog poop while being scanned .

the funny thing was the rational part of the brain came back in to play once the actual loss was in place . but the fear of that loss was what caused the poor behavior .

that is why there is really little correlation between poor investor behavior being any less from more conservative models . a loss is a loss to the brain ,big or small . once it goes in to that flawed mode the allocation means little .


some of us are just better at dealing with it .

[ochotona]

There is another study at Longboard which shows investors kill their bond returns (and alts) even more than their stock returns as a percentage of total return.

Sure, because there is an expectation that bonds are "safe". Not really! They are not CDs.

[dualstow]

“All of humanity's problems stem from man's inability to sit quietly in a room alone.”
― Blaise Pascal, Pensées

Similar to my current sig, which I chose with passive investing in mind.

[dualstow]

Awesome.

[barrett]

Similar to my current sig, which I chose with passive investing in mind.

Ha! I thought it was a Chauncey Gardiner quote from the movie Being There!

[l82start]

Similar to my current sig, which I chose with passive investing in mind.

Ha! I thought it was a Chauncey Gardiner quote from the movie Being There!

so did i....

[dualstow]

You guys are cracking me up!
Well, Chauncey had some mastery of zen, even if he was probably unaware of the word.

[dualstow]

pressure ---> touchscreen

[dragoncar]

That's a great quote. The entire book is worth reading, for anyone interested in science, philosophy or religion.

By the way, I'm guessing Pascal wouldn't have been thrilled with the advent of smart phones!

I dunno... Looks to me like ol' Blaise is staring into his iPad in the avatar of yours.

Yeah, you're right! And here I thought his biggest contribution to technology was inventing pressure.

No, it was inventing triangles.

[EdwardjK]

I believe the current method to measure the PP performance is not realistic.

A commonly used method is to go to the ETFReplay website and enter the four ETFs (VTI, TLT, GLD & SHY) with equal weights. This assumes that the 25% equal weighting is carried through every day of the year. Since daily rebalancing is not required nor desired by PP adherents, this approach is meaningless. No rational investor rebalances their portfolio daily.

I think the better approach is to assume an equal 25% investment on day one of every year and then track daily performance throughout the year. Here you would only rebalance when any asset falls outside the 15%-35% rebalancing bands, as stated by Harry Browne. The yearend balance is then measured against the starting balance to determine overall return.

I think this is a more meaningful and realistic approach to reporting the annual PP performance.

[Xan]

So he cloned himself 99,999 times and invented... wait for it...

The Bar.

boooooo

[EdwardjK]

FWIW, I think ETF Replay does the calculations as you describe in the second paragraph (i.e. the portfolio composition is set on Day 1, and there is no rebalancing), and *not* as you describe in your first paragraph.

One way to verify is to simply check that the portfolio return is a weighted average of the individual fund returns.

You are correct. Here is a reply to my question to ETFReplay:

"You enter the STARTING weight and then yes, the weights will drift as performance differs between the securities vs the starting amount.

There is a rebalancing option as well for subscribers in a drop-menu on the right."

I stand corrected.

[geaux saints]

A commonly used method is to go to the ETFReplay website and enter the four ETFs (VTI, TLT, GLD & SHY) with equal weights. This assumes that the 25% equal weighting is carried through every day of the year. Since daily rebalancing is not required nor desired by PP adherents, this approach is meaningless. No rational investor rebalances their portfolio daily.

I think the better approach is to assume an equal 25% investment on day one of every year and then track daily performance throughout the year. Here you would only rebalance when any asset falls outside the 15%-35% rebalancing bands, as stated by Harry Browne. The yearend balance is then measured against the starting balance to determine overall return.

FWIW, I think ETF Replay does the calculations as you describe in the second paragraph (i.e. the portfolio composition is set on Day 1, and there is no rebalancing), and *not* as you describe in your first paragraph.

One way to verify is to simply check that the portfolio return is a weighted average of the individual fund returns.

Interesting, thanks for the info.

[LC475]

The PP is not a good grow your assets over the long term portfolio.

Seems pretty good to me!

Very good!

Stupendously good!!

It's been a smashing success during its entire existence, since it was invented. I don't know what else you could ask from a portfolio. Seriously.

Now if you're going to be comparing actually-existing portfolios to imaginary-backtested portfolios.... indeed: ALAS! You shall always be pining for the gains what might have been.

[Libertarian666]

I would say if you are in your 20-30's that is young,even 40's today could go 100% equity and have enough growth and recovery time. The real determining factor is your own pucker factor. I ran 100% until about 55 . Retired at 62 and even ran in to 2008 on the way

Only 100% equity? Why limit yourself so?