Author Topic: "Investing should be boring"  (Read 27887 times)

undercover

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"Investing should be boring"
« on: October 22, 2015, 02:40:27 AM »
How many of you agree with this? I've heard it before and it seems to be a pervasive statement that insinuates everyone should only be investing in index funds. Set it and forget it. Not to imply that the majority shouldn't, but you don't get to be a multi-millionaire quickly by "setting it and forgetting it". Making lots of money takes hard work and finding and creating value.

I'm not suggesting everyone should pick stocks either. Investing can take many different forms. Maybe it's lending money privately to real estate investors. Maybe it's buying equipment you need to start your own business. There are so many ways to get better returns than 7% that may or may not be inherently more risky.

I would say everyone should have a "boring" portfolio just for possible rainy days (enough to cover basic expenses) but should also be heavily thinking about alternative avenues of investments like real estate, private lending, startups, (don't shoot me) individual stocks, etc...

steveo

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Re: "Investing should be boring"
« Reply #1 on: October 22, 2015, 05:07:19 AM »
I think it should be boring and I don't think its so easy to get better returns than 7%. I think real returns of 7% are fantastic.

I personally don't find it boring anyway. I like the idea of figuring out my asset allocation and choosing the index funds that suit me.

mr_orange

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Re: "Investing should be boring"
« Reply #2 on: October 22, 2015, 05:22:47 AM »
I have started similar threads on this forum.  It is pretty easy for me to get much better than 7% returns.  Many claim it is with additional risk.  I disagree, but I do agree that it is not without additional effort exerted and thus is not passive. 

For your statement it is probably necessary to define what "investing" means.  If you impute any time component to it aside from doing a rote index fund contribution some will claim that is not investing.  Others prefer to define investing more broadly to include activities that require active involvement on the part of the investor. 

Some people take the time and put forth the effort to have a broader array of investment options that have better risk-adjusted yields than index investing.  I'm sure there will be a whole army of posts after this claiming that these activities are always coupled with higher risk by people that have never spent the time trying to invest in other manners.  There will then be a bunch of back and forth where neither side of the argument gives and inch and nothing will have come of the discussion.  Suffice it to say that I agree with the OP and many people wish to put forth the extra effort to design a better lifestyle long-term for their family.  That does not make this decision "sub-optimal;" it makes it different.

YoungInvestor

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Re: "Investing should be boring"
« Reply #3 on: October 22, 2015, 06:06:30 AM »
Index funds are great for people with low/average net worth, but once you get to a point where you have significant taxable accounts,  you need a more hands-on approach.

Joshua Kennon had a pretty good article about that incidentally discussed that lately.

Scandium

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Re: "Investing should be boring"
« Reply #4 on: October 22, 2015, 07:19:16 AM »
Index funds are great for people with low/average net worth, but once you get to a point where you have significant taxable accounts,  you need a more hands-on approach.

Joshua Kennon had a pretty good article about that incidentally discussed that lately.

Why? When you're rich you should pay more to get below-market return? I don't see why.

That guy also picks stocks because he thinks he know something everyone else doesn't.

Louisville

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Re: "Investing should be boring"
« Reply #5 on: October 22, 2015, 07:30:29 AM »
How many of you agree with this? I've heard it before and it seems to be a pervasive statement that insinuates everyone should only be investing in index funds. Set it and forget it. Not to imply that the majority shouldn't, but you don't get to be a multi-millionaire quickly by "setting it and forgetting it". Making lots of money takes hard work and finding and creating value.

I'm not suggesting everyone should pick stocks either. Investing can take many different forms. Maybe it's lending money privately to real estate investors. Maybe it's buying equipment you need to start your own business. There are so many ways to get better returns than 7% that may or may not be inherently more risky.

I would say everyone should have a "boring" portfolio just for possible rainy days (enough to cover basic expenses) but should also be heavily thinking about alternative avenues of investments like real estate, private lending, startups, (don't shoot me) individual stocks, etc...
Those things don't sound like "investing" to me. They sound like running a (maybe part time) finance business. So, like mr_orange said, it depends on how you define investing.

Tyler

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Re: "Investing should be boring"
« Reply #6 on: October 22, 2015, 07:42:31 AM »
I personally agree with the statement, but I also think believing it specifically promotes index investing misses the point.  No matter how you invest, if you're doing it for the excitement or the rush you're probably in the wrong mindset to make good decisions. The right decision is very often to do absolutely nothing for a long period of time.

Aphalite

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Re: "Investing should be boring"
« Reply #7 on: October 22, 2015, 07:59:57 AM »
Why? When you're rich you should pay more to get below-market return? I don't see why.

That guy also picks stocks because he thinks he know something everyone else doesn't.

No, the point is more so that once you get rich, you will avoid at all costs to go back to square one. Even if you get below market returns, if you are not exposed to a big ugly event, you're happy. If you've already won the game, why chase more returns? For example, someone that has ten million in assets might park 1/3 of it in cash, 1/3 in tax free muni bonds, and then the final 1/3 in very safe stocks. He will lose to the index in the long term, but he doesn't care, since life isn't about accumulating as much money as possible - you see?

Another thing the rich want to save on is taxes and protection against liability - if you have resources, people will be more likely to come after them with frivolous lawsuits and such

Aphalite

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Re: "Investing should be boring"
« Reply #8 on: October 22, 2015, 08:02:02 AM »
Regarding the OP, I agree. As Tyler mentioned, even if you are an individual stock selector, or if you run a real estate business, it can still be very boring. Take Warren Buffett - the guy always talks about how if you were to watch him work for a day, you would be very bored. A good stock selector will wait until prices are right, buy, and then never sell (ideally). Same for real estate businessmen, it takes years to build up a large portfolio if you are a rent collector. If you are a flipper, it's a little different, but then you're running a business, and it's not so much passive investing and it is an underlying economic engine

Scandium

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Re: "Investing should be boring"
« Reply #9 on: October 22, 2015, 08:12:29 AM »
Why? When you're rich you should pay more to get below-market return? I don't see why.

That guy also picks stocks because he thinks he know something everyone else doesn't.

No, the point is more so that once you get rich, you will avoid at all costs to go back to square one. Even if you get below market returns, if you are not exposed to a big ugly event, you're happy. If you've already won the game, why chase more returns? For example, someone that has ten million in assets might park 1/3 of it in cash, 1/3 in tax free muni bonds, and then the final 1/3 in very safe stocks. He will lose to the index in the long term, but he doesn't care, since life isn't about accumulating as much money as possible - you see?

Another thing the rich want to save on is taxes and protection against liability - if you have resources, people will be more likely to come after them with frivolous lawsuits and such

You're talking about changing asset allocation once you reach financial goals, and presumably changes in life circumstances (work to retired). Yeah, obviously. Change some from stock index fund to bond index funds etc. Or a tax-managed index fund. 

The person I quoted said "index funds are fine for low net worth.." and presumably meant that once you're rich you'd use something other than index funds. That's what I took issue with. I see no reason why rich people should pay more in fees for suboptimal returns. This is that myth that rich people have some secret, special methods to manage and grow their wealth. *cough hedge funds.. And that they have to be "hands on" and "do something". He/she didn't clarify what the alternative was though, except to mention mr. Kennon. From my reading of his blog I assume that means shares of coke and disney.. 

Aphalite

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Re: "Investing should be boring"
« Reply #10 on: October 22, 2015, 08:22:10 AM »
You're talking about changing asset allocation once you reach financial goals, and presumably changes in life circumstances (work to retired). Yeah, obviously. Change some from stock index fund to bond index funds etc. Or a tax-managed index fund. 

The person I quoted said "index funds are fine for low net worth.." and presumably meant that once you're rich you'd use something other than index funds. That's what I took issue with. I see no reason why rich people should pay more in fees for suboptimal returns. This is that myth that rich people have some secret, special methods to manage and grow their wealth. *cough hedge funds.. And that they have to be "hands on" and "do something". He/she didn't clarify what the alternative was though, except to mention mr. Kennon. From my reading of his blog I assume that means shares of coke and disney..

That's exactly what he means, if you are rich, you care more about safety than excess returns. Even if you are still in the accumulation phase, your goal is to not lose what you've already built up. What if another 1960s happened again? Why would you want to wait ten years for your indexes to come back to what they were? Why take that risk instead of holding cash or muni bonds, even if historically, you will lose purchasing power to inflation? Again, the goal in life isn't to have the most money possible when you're dead. They already have more than they will ever need, it's not the same mindset as here where we operate on a thin margin and have to worry about whether the 4% rule is viable. These people are living on a 1 or 2% withdrawl rate, but continue to work because they love their jobs or their projects, they're not the same as the community here. There's not a secret/special method to manage or grow wealth, it's more about structuring your assets in a way that you're protected in case there's a lawsuit or there's a crash. More than anything that means holding cash, or holding assets in a trust or limited liability umbrella so they're out of reach from frivolous suits.

I mean, even Vanguard has trust services that cover what I'm talking about above, they charge about 1.50% for it - 0.70% and $5,000, which is 1.70% for a $500k portfolio. They don't really provide stock picking advice, it's more about structure. And this is what YoungInvestor means when he says low networth, you really have no use for it until $5m+, since that's when estate taxes begin to start mattering to your planning

EDIT: Vanguard link - https://personal.vanguard.com/us/whatweoffer/advice/trustservices
« Last Edit: October 22, 2015, 08:29:40 AM by Aphalite »

undercover

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Re: "Investing should be boring"
« Reply #11 on: October 22, 2015, 08:39:10 AM »
For your statement it is probably necessary to define what "investing" means.  If you impute any time component to it aside from doing a rote index fund contribution some will claim that is not investing.  Others prefer to define investing more broadly to include activities that require active involvement on the part of the investor.

Judging by the knowledge of some of the members on this forum about stocks and index funds, I wouldn't go so far as to say that it's a passive endeavor for them. It takes lots of time and research for them to come to the conclusion that indexes are the best for them. I guess my point is that some people's narrow definition of what investing is, at least in practice, holds them back from much larger returns elsewhere. There's no truly passive investment out there. Everything requires at least a heavy amount of initial front-load research. Usually, this scales with the amount of reward involved, but not always.

I also believe, like you, that higher rewards do not always equate to higher risk. Generally? Yes. Always? No.

Interest Compound

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Re: "Investing should be boring"
« Reply #12 on: October 22, 2015, 08:40:37 AM »
Index funds are great for people with low/average net worth, but once you get to a point where you have significant taxable accounts,  you need a more hands-on approach.

Joshua Kennon had a pretty good article about that incidentally discussed that lately.

If by "hands on" you mean "making a one time change to my asset allocation to hold more bonds", then sure. When I hit $5 million in a few years I'll be sure to do that. Otherwise, I see no reason to pay a higher % of my portfolio in fees to underperform what I'm doing now, just because I have more money...

mr_orange

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Re: "Investing should be boring"
« Reply #13 on: October 22, 2015, 09:02:00 AM »
For your statement it is probably necessary to define what "investing" means.  If you impute any time component to it aside from doing a rote index fund contribution some will claim that is not investing.  Others prefer to define investing more broadly to include activities that require active involvement on the part of the investor.

Judging by the knowledge of some of the members on this forum about stocks and index funds, I wouldn't go so far as to say that it's a passive endeavor for them. It takes lots of time and research for them to come to the conclusion that indexes are the best for them. I guess my point is that some people's narrow definition of what investing is, at least in practice, holds them back from much larger returns elsewhere. There's no truly passive investment out there. Everything requires at least a heavy amount of initial front-load research. Usually, this scales with the amount of reward involved, but not always.

I also believe, like you, that higher rewards do not always equate to higher risk. Generally? Yes. Always? No.

Yes....everything can always be taken to an illogical extreme.  The truth is that there are no absolutes and things exist on a spectrum.  Some of the less-than-well-informed posters on here that have read Malkiel's books on random walks and such that claim to know everything about investing tend to do this without even considering the circumstances of those they're distributing bad advice to. 

From all of the studies I have read the most highly correlated activity that is associated with wealth is generation of money from a small business.  People that run small businesses generally think very differently than people who trade their labor for dollars at high rates working for other people.  The former folks treat money as a tool and choose to concentrate their wealth in activities they know a great deal about, which allows them to deliver a lot of wealth to their coffers.  Much of the wealth they're not investing in their business(es) they choose to keep fairly safe for reasons mentioned above.  Many of the latter folks are busy selling their labor to employers and don't have time to make their money work hard.  These people tend to justify passive index investing as the only way to deliver wealth because they don't have skillsets to make money work on their own.  They then cite academic studies with non-real-world assumptions that confine the study to publicly-traded securities and spike the football once they "won" (the unwinnable) argument. 

Everyone's situation is different.  People have different skills, abilities, goals, initial conditions, and attitudes toward how they'll invest their time daily.  One person's "selfish asshole" is another person's model citizen providing for their family before giving to charity.  One person's wage slave is another person's idiot who chooses to work for someone else.  One person's greedy business owner that trades off time with their kids is another person's model for the american dream.  Any of this discussion necessarily involves a projection of one's values and is not a math exercise like many on this forum lead you to believe. 

alexrcraig

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Re: "Investing should be boring"
« Reply #14 on: October 22, 2015, 09:15:50 AM »
I think for most people that is sound advice. Most people do not have a vigor for personal finance. They do not like to track their spending and they do not like to find different investments (Private loans, stocks, or even index funds).

The majority of us would rather be told what to sock our money in. For the bulk of people who just want to have a little bit of money and an investment egg, then this is probably the best advice you can give them that they would take action on.

Taking action is a big part. Of course we could share all of this information with everyone, but the bulk majority of us will not do anything with that information. They will say yeah... I really should do that and then do nothing with it.

When I started investing I was 18 years old and knew nothing about anything. So the thought of investing in stocks, private loans, businesses or whatever scared me because I knew I did not have enough information to know what was a good investment. This is how most people are.

They never invest because they think you have to be smart to invest in the stock market. So having boring investments is good advice for those types of people. Of course if you find someone who is willing to take action, then the best advice would be to invest in other things that will yield higher returns.

But the bulk of the people will not do anything with their money and are afraid to take action.

If knowledge was enough and sufficient then nobody would be broke. It is common sense to save money you need to spend less than you make and the reinvest that money into something that is high-yielding, yet too many young kids keep their money in banks out of fear.

It is a mind game.

Alex

Aphalite

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Re: "Investing should be boring"
« Reply #15 on: October 22, 2015, 09:28:29 AM »
Yes....everything can always be taken to an illogical extreme.  The truth is that there are no absolutes and things exist on a spectrum.  Some of the less-than-well-informed posters on here that have read Malkiel's books on random walks and such that claim to know everything about investing tend to do this without even considering the circumstances of those they're distributing bad advice to. 

From all of the studies I have read the most highly correlated activity that is associated with wealth is generation of money from a small business.  People that run small businesses generally think very differently than people who trade their labor for dollars at high rates working for other people.  The former folks treat money as a tool and choose to concentrate their wealth in activities they know a great deal about, which allows them to deliver a lot of wealth to their coffers.  Much of the wealth they're not investing in their business(es) they choose to keep fairly safe for reasons mentioned above.  Many of the latter folks are busy selling their labor to employers and don't have time to make their money work hard.  These people tend to justify passive index investing as the only way to deliver wealth because they don't have skillsets to make money work on their own.  They then cite academic studies with non-real-world assumptions that confine the study to publicly-traded securities and spike the football once they "won" (the unwinnable) argument. 

Everyone's situation is different.  People have different skills, abilities, goals, initial conditions, and attitudes toward how they'll invest their time daily.  One person's "selfish asshole" is another person's model citizen providing for their family before giving to charity.  One person's wage slave is another person's idiot who chooses to work for someone else.  One person's greedy business owner that trades off time with their kids is another person's model for the american dream.  Any of this discussion necessarily involves a projection of one's values and is not a math exercise like many on this forum lead you to believe.

+1 to all of this

YoungInvestor

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Re: "Investing should be boring"
« Reply #16 on: October 22, 2015, 12:11:02 PM »
Why? When you're rich you should pay more to get below-market return? I don't see why.

That guy also picks stocks because he thinks he know something everyone else doesn't.

No, the point is more so that once you get rich, you will avoid at all costs to go back to square one. Even if you get below market returns, if you are not exposed to a big ugly event, you're happy. If you've already won the game, why chase more returns? For example, someone that has ten million in assets might park 1/3 of it in cash, 1/3 in tax free muni bonds, and then the final 1/3 in very safe stocks. He will lose to the index in the long term, but he doesn't care, since life isn't about accumulating as much money as possible - you see?

Another thing the rich want to save on is taxes and protection against liability - if you have resources, people will be more likely to come after them with frivolous lawsuits and such

You're talking about changing asset allocation once you reach financial goals, and presumably changes in life circumstances (work to retired). Yeah, obviously. Change some from stock index fund to bond index funds etc. Or a tax-managed index fund. 

The person I quoted said "index funds are fine for low net worth.." and presumably meant that once you're rich you'd use something other than index funds. That's what I took issue with. I see no reason why rich people should pay more in fees for suboptimal returns. This is that myth that rich people have some secret, special methods to manage and grow their wealth. *cough hedge funds.. And that they have to be "hands on" and "do something". He/she didn't clarify what the alternative was though, except to mention mr. Kennon. From my reading of his blog I assume that means shares of coke and disney..

As someone else already clarified, I was mostly referring to the structure (trust services, etc.).

Were I to win the lottery tomorrow (which won't happen unless I find a ticket on the sidewalk), my first focus would be on building a robust structure to protect my wealth and optimize my tax situation.

Paying 1.5% or so for sound advice, a solid structure and a personalized portfolio makes lots of sense in these situations. Even if you do end up with 0.02% mer index funds, a selection of blue chip stocks, muni bonds and cash in there.

Of course this shouldn't affect most people here (including me).

Scandium

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Re: "Investing should be boring"
« Reply #17 on: October 22, 2015, 12:44:37 PM »
As someone else already clarified, I was mostly referring to the structure (trust services, etc.).

Were I to win the lottery tomorrow (which won't happen unless I find a ticket on the sidewalk), my first focus would be on building a robust structure to protect my wealth and optimize my tax situation.

Paying 1.5% or so for sound advice, a solid structure and a personalized portfolio makes lots of sense in these situations. Even if you do end up with 0.02% mer index funds, a selection of blue chip stocks, muni bonds and cash in there.

Of course this shouldn't affect most people here (including me).

Ok then. I'm still not sold on it, but maybe it makes sense. If you have Bill Gates money maybe some trust is necessary, but with "only" a few million I don't see why simply holding some boring, tax-efficient index funds (stocks or bonds) isn't good enough. "Don't do something, just stand there" as John Bogle would say.. It's unlikely a "personalized" portfolio will serve you any better than equivalent index funds. I'm not super-rich and I own a muni bond fund right now. Guess I don't see the appeal of complexity just because your NW has en extra digit or two.

Out of curiosity; if (when..) I have $2 mill and put everything in a 60/40 stocks/bonds (muni fund in taxable), what would I be missing out on that this 1.5% adviser could do? The lawsuit protection angle I know little about. But I understand retirement accounts are protected? And there is simple umbrella insurance.

OkieStache

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Re: "Investing should be boring"
« Reply #18 on: October 22, 2015, 12:56:41 PM »
There is a great video of Bogle where he discusses the boredom of indexing.  He basically says the investing should be boring, don't even open your statements, and then in 50 - 70 years (!) you should open your statement and have a heart attack because you have so much money.  From an efficiency standpoint, it's hard to argue with indexing as preached/practiced by (what seems to be) most mustachians.

Kaspian

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Re: "Investing should be boring"
« Reply #19 on: October 22, 2015, 12:58:10 PM »
Making lots of money takes hard work and finding and creating value.

I disagree entirely.  I think people can have lots of money by working average jobs, maintaining average lives, not working overly hard, simply by using their heads and some resolve.

The main issue people seem to have is realizing that inaction is actually an intentional action in itself.  We're always looking for choices and things to do when sometimes sitting on your hands where you are *is* the best choice of things to do.

“When nothing is done,
nothing is left undone.”
- Lao Tzu


Another Jack Bogle article published this week:  http://www.scpr.org/news/2015/10/21/55164/george-washington-of-investing-jack-bogle-wants-yo/

Quote
"We live in this mythical world where we kind of believe the American way is if you try harder, you will do better — that if you pay a professional to do something, it will pay off," Bogle says. "And these things are true — except in investing!"

Bogle admits that owning corporate America and hanging on to it is a pretty dull investment strategy. "It is boring!" he says. "It is the most boring investment strategy ever invented in the history of time."

Very wise man.

YoungInvestor

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Re: "Investing should be boring"
« Reply #20 on: October 22, 2015, 01:15:01 PM »
As someone else already clarified, I was mostly referring to the structure (trust services, etc.).

Were I to win the lottery tomorrow (which won't happen unless I find a ticket on the sidewalk), my first focus would be on building a robust structure to protect my wealth and optimize my tax situation.

Paying 1.5% or so for sound advice, a solid structure and a personalized portfolio makes lots of sense in these situations. Even if you do end up with 0.02% mer index funds, a selection of blue chip stocks, muni bonds and cash in there.

Of course this shouldn't affect most people here (including me).

Ok then. I'm still not sold on it, but maybe it makes sense. If you have Bill Gates money maybe some trust is necessary, but with "only" a few million I don't see why simply holding some boring, tax-efficient index funds (stocks or bonds) isn't good enough. "Don't do something, just stand there" as John Bogle would say.. It's unlikely a "personalized" portfolio will serve you any better than equivalent index funds. I'm not super-rich and I own a muni bond fund right now. Guess I don't see the appeal of complexity just because your NW has en extra digit or two.

Out of curiosity; if (when..) I have $2 mill and put everything in a 60/40 stocks/bonds (muni fund in taxable), what would I be missing out on that this 1.5% adviser could do? The lawsuit protection angle I know little about. But I understand retirement accounts are protected? And there is simple umbrella insurance.

This is getting more complex than what I'd be comfortable with, especially as I'm far from an expert on US law, being Canadian, so I guess I can only point you to a quick search on the advantages of trusts, for this aspect of the discussion.

Maximizing withdrawal efficiency on the tax front may also be more complex than simply selling some shares when you need money.

I was simply stating that paying a bit extra for a solid legal structure, sound tax advice, potentially estate planning and asset allocation help and overall guidance on money management may actually be cheaper than making one big mistake in the next 50 years of your life.

Scandium

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Re: "Investing should be boring"
« Reply #21 on: October 22, 2015, 01:25:10 PM »
As someone else already clarified, I was mostly referring to the structure (trust services, etc.).

Were I to win the lottery tomorrow (which won't happen unless I find a ticket on the sidewalk), my first focus would be on building a robust structure to protect my wealth and optimize my tax situation.

Paying 1.5% or so for sound advice, a solid structure and a personalized portfolio makes lots of sense in these situations. Even if you do end up with 0.02% mer index funds, a selection of blue chip stocks, muni bonds and cash in there.

Of course this shouldn't affect most people here (including me).

Ok then. I'm still not sold on it, but maybe it makes sense. If you have Bill Gates money maybe some trust is necessary, but with "only" a few million I don't see why simply holding some boring, tax-efficient index funds (stocks or bonds) isn't good enough. "Don't do something, just stand there" as John Bogle would say.. It's unlikely a "personalized" portfolio will serve you any better than equivalent index funds. I'm not super-rich and I own a muni bond fund right now. Guess I don't see the appeal of complexity just because your NW has en extra digit or two.

Out of curiosity; if (when..) I have $2 mill and put everything in a 60/40 stocks/bonds (muni fund in taxable), what would I be missing out on that this 1.5% adviser could do? The lawsuit protection angle I know little about. But I understand retirement accounts are protected? And there is simple umbrella insurance.

This is getting more complex than what I'd be comfortable with, especially as I'm far from an expert on US law, being Canadian, so I guess I can only point you to a quick search on the advantages of trusts, for this aspect of the discussion.

Maximizing withdrawal efficiency on the tax front may also be more complex than simply selling some shares when you need money.

I was simply stating that paying a bit extra for a solid legal structure, sound tax advice, potentially estate planning and asset allocation help and overall guidance on money management may actually be cheaper than making one big mistake in the next 50 years of your life.

Sure, I guess.
For example if you have $5 mill, with 1.5% you're paying $75,000 per year, every year. That would have to be some serious mistakes.. Not saying it's not possible though, I'm sure it is. To each their own, but if I have $1-2 million one day I think I'll just keep three fund portfolio, take out the money I need, and not worry too much about it saving taxes beyond what I can find, rather than paying someone $30,000 a year. But I admit to liking simplicity.

Frankies Girl

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Re: "Investing should be boring"
« Reply #22 on: October 22, 2015, 01:29:01 PM »
It seems like we get an influx of new posters every other month or so that think that index investing is too boring or stodgy and people shouldn't be doing it and there are some superamazingcoolawesome website guy that advises getting into individual stocks and hey, he MUST know what he's talking about since he has a OMG website and can speak the financial language of the rich and famous...

sigh.

Seriously, no. It absolutely should be "boring" in as much as you don't have to have a paid adviser to hold your hand and dance you in and out of the latest hot stock. Or waste hours of your own time reading all that bullshit out there and trying to figure it out on your own. Because it IS most all bullshit. Unless you have psychic abilities of course.

All you people that think you're awesome and like spending hours every day/week/month scrutinizing multiple sources and making frequent trades - or think it's a better idea to pay a premium for some stranger to do it for you... well, you just keep doing whatever makes you happy even if it does require more money/work/attention than index investing.

I'll be sitting over here happily enjoying my life doing whatever the hell I please as my "boring" (simple/elegant/tax efficient) investments just keep chugging along making me richer... without me having to even think about it.


steveo

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Re: "Investing should be boring"
« Reply #23 on: October 22, 2015, 02:11:03 PM »
You're talking about changing asset allocation once you reach financial goals, and presumably changes in life circumstances (work to retired). Yeah, obviously. Change some from stock index fund to bond index funds etc. Or a tax-managed index fund. 

The person I quoted said "index funds are fine for low net worth.." and presumably meant that once you're rich you'd use something other than index funds. That's what I took issue with. I see no reason why rich people should pay more in fees for suboptimal returns. This is that myth that rich people have some secret, special methods to manage and grow their wealth. *cough hedge funds.. And that they have to be "hands on" and "do something". He/she didn't clarify what the alternative was though, except to mention mr. Kennon. From my reading of his blog I assume that means shares of coke and disney..

I completely agree with your comments here. The difference between the rich and the poor (which I don't even really understand from this context) is that the rich get charged more fees and get screwed over.

My parents are rich. They get screwed over. They own direct shares but their broker/investment adviser gets a nice healthy cut each and every year.

steveo

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Re: "Investing should be boring"
« Reply #24 on: October 22, 2015, 02:17:36 PM »
Seriously, no. It absolutely should be "boring" in as much as you don't have to have a paid adviser to hold your hand and dance you in and out of the latest hot stock. Or waste hours of your own time reading all that bullshit out there and trying to figure it out on your own. Because it IS most all bullshit. Unless you have psychic abilities of course.

All you people that think you're awesome and like spending hours every day/week/month scrutinizing multiple sources and making frequent trades - or think it's a better idea to pay a premium for some stranger to do it for you... well, you just keep doing whatever makes you happy even if it does require more money/work/attention than index investing.

I'll be sitting over here happily enjoying my life doing whatever the hell I please as my "boring" (simple/elegant/tax efficient) investments just keep chugging along making me richer... without me having to even think about it.

100% spot on.

I like investing. I like thinking about my asset allocation. I trade foreign currency (more for fun than anything else). When it comes to my retirement funds I will do it the smart way which also happens to be the boring way.

seattlecyclone

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Re: "Investing should be boring"
« Reply #25 on: October 22, 2015, 02:47:22 PM »
There are those who say you can do much better running your own business than you can by working for a company and buying index funds. That's true, you can! Most billionaires (and probably most deca-millionaires, for that matter) didn't get there working for someone else. You can also do a lot worse, though. Many (most?) small businesses fail. Either way, it's a lot of work. Your total returns are a mix of compensation and investing, and it's much harder to break the two components apart than it is for an employee who knows exactly what their work is paying them and what their capital is returning.

Saving enough to live a decent retirement is largely a solved problem. Save a healthy percentage of your salary, invest it in index funds, and you'll get there pretty reliably. I firmly believe that fewer people have what it takes to reliably grow a business to achieve the same results.

undercover

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Re: "Investing should be boring"
« Reply #26 on: October 22, 2015, 09:18:53 PM »
Quote from: Kaspian
Quote
"We live in this mythical world where we kind of believe the American way is if you try harder, you will do better — that if you pay a professional to do something, it will pay off," Bogle says. "And these things are true — except in investing!"

Bogle admits that owning corporate America and hanging on to it is a pretty dull investment strategy. "It is boring!" he says. "It is the most boring investment strategy ever invented in the history of time.”

Very wise man.

It's obvious that working harder doesn't necessarily yield better results, but it can still be applied to investing. You just have to broaden your sense of the term “investing”. He's obviously referring strictly to stocks, as there are MANY other avenues of investing where more effort obviously equates to more reward. Real estate, as one of them. I do agree with him that very few people are likely ever to beat the market through individual stock picking. But he’s obviously inherently wrong by the fact that there are people who HAVE put considerate amount of effort into beating the market and have been successful.

Quote from: Frankies Girl
All you people that think you're awesome and like spending hours every day/week/month scrutinizing multiple sources and making frequent trades - or think it's a better idea to pay a premium for some stranger to do it for you... well, you just keep doing whatever makes you happy even if it does require more money/work/attention than index investing.

I’m not sure exactly who/what you’re replying to but that’s not really the purpose of this thread at all, at least certainly not the intention. I’m not suggesting people solely pick stocks and spend all of their time researching said stocks.

Quote from: seattlecyclone
There are those who say you can do much better running your own business than you can by working for a company and buying index funds. That's true, you can! Most billionaires (and probably most deca-millionaires, for that matter) didn't get there working for someone else. You can also do a lot worse, though. Many (most?) small businesses fail. Either way, it's a lot of work. Your total returns are a mix of compensation and investing, and it's much harder to break the two components apart than it is for an employee who knows exactly what their work is paying them and what their capital is returning.

There is an extreme amount of work and time involved, at least in preparation, to make decent money by working for someone else. The largest of which is obviously college. And most of college is pointless because you won’t actually use any of that stuff IRL. Yet, employers think that by virtue of you having a degree that you’re somehow more worthy. At least, there’s no reason to even consider someone without a degree when so many people think they need one. I have a degree, I’m just saying, it’s an idiotic system. Basically, by working for someone else, you’re finding a middleman to the customer when the employer already has a link to the customer. What if you spent your time focusing on the customer instead of focusing on the employer?

Sorry to get off on such a tangent. I was just really shocked by the fact that you said it takes lots of work to start a small business when I can almost guarantee it takes much more work/time to prepare yourself to work for others. And I can likewise guarantee that more people are capable of starting successful businesses than they think. The problem is, few people are willing to take chances so they’ll never know. That's the purpose of this thread.

brandino29

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Re: "Investing should be boring"
« Reply #27 on: October 22, 2015, 09:43:05 PM »
That's the purpose of this thread.

I feel like we're confusing "work" (starting a business, flipping homes, etc) with "investing in the market" which are decidedly two different things.  The Bogleheads and the value sentiment that investment should be boring is specifically referring to investing in the market.

I don't disagree with the posters stating that it's possible to outperform the market (though if we're talking picking your own stocks, unless your name is Warren Buffet or Peter Lynch, good luck) but don't confuse opening a small business as investing.  That's working --- it's working under your own terms and conditions certainly but it's not investment in the sense of this statement.   

And that's the purpose of this sentiment -- "investing [in the market] should be boring [because you've got other work to do]."

(Actually, that reminds me of some good advice I've come across before suggesting that the riskier your primary income source, the more conservative your investment strategy should be)

Take a high income earner ($200k+) that enjoys his busy but flexible job and has a family and a number of recreations that don't involve trying to make more money --- I'm comfortable, I'm not concerned with squeezing out every last dollar, I want to enjoy the time that I have, most of which doesn't take spending money to do so --- so yes, I want my stock market investments to be boring because I want to focus my energy in life on other things that are more meaningful to me. 

If your values are different, that's great.  But it doesn't really apply to the "investing should be boring" statement.

Maybe what you're trying to say is "earning money can be fun and exciting."  I bet all of us would agree with that.

andyp2010

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Re: "Investing should be boring"
« Reply #28 on: October 22, 2015, 09:50:21 PM »
It's quite a challenge to mentally get around the idea that not everyone thinks like you do. In this sense, risk profiles.

I myself take quite considerable risks in most peoples eyes but I'm 100% comfortable in everything I do. I'd be bored to tears with index funds. Completely disagree with wanting to hold on to extra wealth, the cashflow off my last investment helps my next one be bigger and bolder. Judging by how markets get over-inflated, I'd guess others are of a like mind.

However It helps to be aware that a single mother with 2 kids can't gamble the house on it, index investing has got to be the ultimate vehicle for the armchair investor. 7% or whatnot in this low inflation environment is pretty decent.


Kaspian

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Re: "Investing should be boring"
« Reply #29 on: October 23, 2015, 10:59:18 AM »
...capable of starting successful businesses than they think. The problem is, few people are willing to take chances so they’ll never know. That's the purpose of this thread.

Haha...  Well, the thread won't stay on topic or suit your purpose if you give index investing a little bitch-slap on the back of the head as soon as you walk in the door.  (See your very first paragraph. Them's passive-aggressive fightin' words. (Pun intended.)) 

k9

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Re: "Investing should be boring"
« Reply #30 on: October 23, 2015, 11:21:06 AM »
The person I quoted said "index funds are fine for low net worth.." and presumably meant that once you're rich you'd use something other than index funds. That's what I took issue with. I see no reason why rich people should pay more in fees for suboptimal returns. This is that myth that rich people have some secret, special methods to manage and grow their wealth. *cough hedge funds.. And that they have to be "hands on" and "do something". He/she didn't clarify what the alternative was though, except to mention mr. Kennon. From my reading of his blog I assume that means shares of coke and disney..
When you're rich, making your own "fire & forget" index fund makes sense and, litterature seems to indicate you would do no worse, even a little better, with this strategy (see ING Corporate Leaders Trust strategy, or coffee can portfolio). I think even a not-so-wealthy can implement it, though, but it's a little harder.

Eric

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Re: "Investing should be boring"
« Reply #31 on: October 23, 2015, 12:09:00 PM »
Don't just do something, stand there!

Of course investing should be boring.  If you're getting that dopamine release that's the same as playing blackjack, well, guess what?

Frankies Girl

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Re: "Investing should be boring"
« Reply #32 on: October 23, 2015, 12:09:56 PM »

Quote from: Frankies Girl
All you people that think you're awesome and like spending hours every day/week/month scrutinizing multiple sources and making frequent trades - or think it's a better idea to pay a premium for some stranger to do it for you... well, you just keep doing whatever makes you happy even if it does require more money/work/attention than index investing.

I’m not sure exactly who/what you’re replying to but that’s not really the purpose of this thread at all, at least certainly not the intention. I’m not suggesting people solely pick stocks and spend all of their time researching said stocks.




From your original posting: I would say everyone should have a "boring" portfolio just for possible rainy days (enough to cover basic expenses) but should also be heavily thinking about alternative avenues of investments like real estate, private lending, startups, (don't shoot me) individual stocks, etc...

So again, I say: Nope, don't agree with your basic premise. There is no reason at all (other than you find them personally interesting/entertaining) to veer off into alternative streams like real estate or startups, especially once you are FIREd or "rich." It really is a waste of time unless you're getting some other thrill or excitement from pursuing those types of investments. Index investing is safe, elegant and boring, and will provide a pretty much fail-safe way to live out the rest of one's days without having to worry about money.

And there is the whole concept of having enough. I'm not greedy. I just want security, and to understand the workings of my investments and pretty much not think of them more than a few times a year when I need to rebalance or pull out money for expenses. And I have both of those, and I also have "enough" and will be heading into "abundance" within the next couple of decades.

I'm currently on track to die with over 15 million in assets if I live out my natural lifespan, and that is counting on the market conservatively follows it basic upwards movement, with lots of crashes and corrections along the way. Why on earth would I waste more of my very limited on this earth time trying to push that to 30 or 40 million?  I could never in my wildest dreams spend even a quarter of that, and I'm already leaving everything to charity when I go.

It is ridiculous to me for anyone to say that we need to be doing anything else, unless the pursuit of even more money main focus in life. If that's your main hobby, go for it. But it isn't necessary, or even really the best move if you want to go live your life and do stuff without actually obsessing over money. ;)


Sorry to get off on such a tangent. I was just really shocked by the fact that you said it takes lots of work to start a small business when I can almost guarantee it takes much more work/time to prepare yourself to work for others. And I can likewise guarantee that more people are capable of starting successful businesses than they think. The problem is, few people are willing to take chances so they’ll never know. That's the purpose of this thread.

It is NOT about taking chances or risks. If I wanted to gamble with my money, I'd go to Vegas. But I prefer to get my thrills from my actual hobbies and enjoy myself, and let my money plod along in index investments earning more than I'll ever need.

And frankly, I am pretty sure I could handle a small business; I've freelanced and earned serious dough. But I don't have the temperament to deal with all the bullshit that goes with it and that actually sounds pretty awful an idea to me because of it. So my not taking a risk/chance on going out on my own or taking it a step further, choosing to not invest in some amazing scheme? Sure, I'll never know what might have been. Thing is, I also don't care. Why should that be an issue? As long as a person is happy doing what they're doing and it works well, why veer off and insist that one try something else just because one might be even more happy/successful? At what point do you decide you are happy enough and content enough to just stop chasing after the next big thing?

(and not trying to be a smartass or mean or anything... just putting this stuff out there for consideration)
« Last Edit: October 23, 2015, 12:20:57 PM by Frankies Girl »

mr_orange

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Re: "Investing should be boring"
« Reply #33 on: October 23, 2015, 01:23:20 PM »
Everyone is different and has different goals, skills, interests, initial conditions, etc.  //End Thread

It sure would be a boring world if everyone was the same or thought the same way. 

k9

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Re: "Investing should be boring"
« Reply #34 on: October 23, 2015, 01:41:57 PM »
Anyway, by definition, not everyone can invest the same way as each other. The moments that happens are called speculative bubbles (crashes are speculative bubbles in their own way). The very definition of a market is a place where participants don't value assets the same way.

Kaspian

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Re: "Investing should be boring"
« Reply #35 on: October 23, 2015, 02:09:41 PM »
Business ventures, speculation, hard financial work, start-ups, real estate... Sometimes not all they're cracked up to be.

Eric

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Re: "Investing should be boring"
« Reply #36 on: October 23, 2015, 02:25:39 PM »
Anyway, by definition, not everyone can invest the same way as each other. The moments that happens are called speculative bubbles (crashes are speculative bubbles in their own way). The very definition of a market is a place where participants don't value assets the same way.

Everyone is different and has different goals, skills, interests, initial conditions, etc.

But even if everyone is investing differently, it should still be boring.  If it's not, you're probably at risk of screwing up and/or underperfoming due to behavioral factors that all humans are susceptible to.

k9

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Re: "Investing should be boring"
« Reply #37 on: October 23, 2015, 02:28:53 PM »
Yes, but boredom shouldn't be the only criterion considered. I'm a little scared when I read about all those super stock heavy allocations in this community, for the behavioral reasons you mention.

Cookie78

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Re: "Investing should be boring"
« Reply #38 on: October 23, 2015, 02:42:34 PM »
Don't just do something, stand there!

Of course investing should be boring.  If you're getting that dopamine release that's the same as playing blackjack, well, guess what?

Uh oh!

I get an incredible rush buying Index funds each month, then watching them go up and down. Am I doing it wrong?

mr_orange

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Re: "Investing should be boring"
« Reply #39 on: October 23, 2015, 02:55:46 PM »
But even if everyone is investing differently, it should still be boring.  If it's not, you're probably at risk of screwing up and/or underperfoming due to behavioral factors that all humans are susceptible to.

Or maybe you have a small business where the line between "investing" and "working" is very blurred.  For people with these circumstances they may derive enjoyment from the activity and thus it is NOT boring.  Many of these same people invest part of their portfolios in index funds and a (sometime large) portion in activities they can deliver great returns on. 

You can't take studies that confine themselves to publicly-traded securities and extrapolate them to ALL types of investing for ALL people.  The underlying assumptions of much of the efficient market hypothesis and other securities-confined studies do not work in many real world situations in a broader personal finance discussion. 

Anyway....I am sure there will be much more spirited discussion herein where those that are blindly following the indexing mantra will refuse to take a step back and realize that everyone's situation is different and their tidy little view of the investing universe is not flawless.  I'm all for encouraging people to avoid trying to beat teams of people and supercomputers in the securities market.  However, this analysis breaks down when you layer in other types of investing for many people with different goals and circumstances than you have. 
« Last Edit: October 23, 2015, 02:58:14 PM by mr_orange »

DavidAnnArbor

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Re: "Investing should be boring"
« Reply #40 on: October 23, 2015, 06:07:00 PM »
Yes investing should be boring index funds, which provide the cheapest costs and yet highest returns available on a risk-adjusted basis.
A lot of rich people are plain stupid, and they get fancy private equity investments and spend a lot of money for sub-optimal returns for enormous risk.

mr_orange

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Re: "Investing should be boring"
« Reply #41 on: October 23, 2015, 06:24:19 PM »
A lot of rich people are plain stupid, and they get fancy private equity investments and spend a lot of money for sub-optimal returns for enormous risk.

I actually see quite the opposite daily.  There are many super sophisticated passive investors that invest in other people's funds or syndicated offerings professionally and make great returns (20%+) with risks lower than what the broader market offers. 

There is certainly a fair share of very dumb money that is rich too. 

forestj

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Re: "Investing should be boring"
« Reply #42 on: October 23, 2015, 06:39:03 PM »
I am going to work for a wage and invest in indexes because I am not willing to risk my entire financial well being on a business venture that may or may not succeed. I'll start working on my own and trying to build and market something of value after I have enough money that I know I can quit my job and I will probably be ok no matter what. I definitely agree that there is more money to be made by innovating and out-competing, but I also agree with a lot of the sentiment in this thread regarding small business: It is very hard and very risky.

I can do hard, and I can do risky, as long as the stakes are relatively low. But I'm not about to risk everything trying to make "big plays" and get 1000%+ returns in a startup. I know that I can get the same chance at greatness later, but with a fallback plan, if I stay passive for now.

And heck, passive? I know most people think that being a wageworker sucks, but especially in tech, it can be interesting and exciting. I don't mind my job and I get to learn something new every day. That's enough for me.
« Last Edit: October 23, 2015, 06:46:41 PM by forestj »

mr_orange

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Re: "Investing should be boring"
« Reply #43 on: October 23, 2015, 06:46:59 PM »
And heck, passive? I know most people think that being a wageworker sucks, but especially in tech, it can be interesting and exciting. I don't mind my job and I get to learn something new every day. That's enough for me.

Agreed here.  I like my job and it something I plan to keep until I am completely FI at the income level that suits me.  There is nothing to say that you can't do a W2 job and a small business though.  The OR operator can be substituted by the AND operator if this is something you enjoy to do.  I understand others don't wish to work that hard and that is okay. 

Again, everyone is different. 

JetBlast

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Re: "Investing should be boring"
« Reply #44 on: October 23, 2015, 08:18:54 PM »
Business ventures, speculation, hard financial work, start-ups, real estate... Sometimes not all they're cracked up to be.
The Donald Trump net worth comparison to index investing is irrelevant. Beyond his profligate spending on luxuries that would have reduced his net worth and the attorneys to set up a web of legal entities to protect his wealth from lawsuits, there's the more basic problem that he wasn't playing the same game as the average Mustachian.

The point of money is to get utility from it, whether that's retiring early, donating to charity, a fancy round the world trip, or countless other possibilities. Most of us need to grow the money at a reasonable speed while preserving our time for jobs, kids, cooking, cleaning, yard work, etc....and index funds are ideal for this purpose. One day we have enough to utilize it for ER.

In Trump's case he already had the money. The utility of it to him is to feed his ego by putting his name in big lights and making splashy investments that he can use for shameless self-promotion. His investments have certainly served that purpose while easily beating inflation. He doesn't care about beating a broad market index, he wasn't even trying. He cares about having fun (however he defines it) with his money while making sure it grows quickly enough to support his lifestyle. It has done that. 


undercover

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Re: "Investing should be boring"
« Reply #45 on: October 23, 2015, 08:27:08 PM »
Everyone is different and has different goals, skills, interests, initial conditions, etc.  //End Thread

Yep, that's what I've learned from this thread. It was interesting. Some people are satisfied with "just enough" or even barely beating inflation. I'd rather get to and beyond FIRE as quickly as possible while managing risk to a reasonable level. That usually doesn't involve working for someone and investing solely in the index. That's a great path if it works for the person, I get it. Being diversified is great - I totally believe in that - I just think most everyone's portfolio should consist of active investing as well as riskier passive plays.

steveo

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Re: "Investing should be boring"
« Reply #46 on: October 23, 2015, 08:54:26 PM »
There is no reason at all (other than you find them personally interesting/entertaining) to veer off into alternative streams like real estate or startups, especially once you are FIREd or "rich." It really is a waste of time unless you're getting some other thrill or excitement from pursuing those types of investments. Index investing is safe, elegant and boring, and will provide a pretty much fail-safe way to live out the rest of one's days without having to worry about money.

100% correct.

Money in my opinion should be something to focus on so that it provides you with the lifestyle that you want. I want my investments to be boring. I also think most people will do a lot better if they choose a boring approach.

Save plenty of money. Choose a simple asset allocation. Invest in index funds. I also intend to buy the house that I live in. The simple, easy, safe way to get ahead which I am 100% confident on average will beat all the fancy investment ideas that people come up with. Note that I said on average. Some people might beat me doing their fancy investments. Most won't.

That leaves me to do things that I enjoy within my life without having to worry about money. More jiu-jitsu, reading, chess, cooking and eating, gardening etc.

hodedofome

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Re: "Investing should be boring"
« Reply #47 on: October 24, 2015, 05:55:10 AM »
I am an active trader but I agree with the statement that it should be boring. Boring in the sense that I am not looking to the market to get excitement in my life. I am looking to the market to make money and that's it. If I want excitement, I'll go watch a football game with friends.

Looking to the market to gain some emotional pleasure will cause you to make many mental and emotional mistakes costing you lots of money.


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k9

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Re: "Investing should be boring"
« Reply #48 on: October 24, 2015, 07:43:16 AM »
Stock picking for the long term can be extremely boring. I mean, when you end up buying parts of a company that recycles metal or that produces cement, or pencils, you can't really get excited. Or talk about your last investments at a cocktail party "Oh, you invested in HipsterTech ? Cool. Well, I just bought new shares of that company that produces lubrification oils for backhoes and... hey, where are you going?"

mrpercentage

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Re: "Investing should be boring"
« Reply #49 on: October 24, 2015, 08:41:00 AM »
I once almost multiplied my money 10x in 10 minutes. I bet on the horse Mr. Wolverine just because he had a bad ass name. I think the odds were 40:1. He led the whole race and went nose to nose at the last second. I was jumping up and down like an idiot. Photo finish. I did not win. Totally worth it.

Stocks can be like this. Investing should not.

Conoco Phillips is giving me over 6% in dividend alone on initial investment. Now I auto invest monthly into both Conoco, Exxon, Pamcx, and VSCIX. I think there is room for both stocks and index. I think it wise to do both. Expose yourself to possible higher returns through individual stocks and market return through index.

Yin and Yang. A nice balance usually proves both wise and prudent. Im drinking my 3rd glass of wine before bed. Cheers.