Warren Buffett's advice for his wife

jamesd

planteria wrote: »

so the S&P 500 is the winningest index:dance:

Provided you ignore the ones like NASDAQ and Techmark which have done better and pick a suitable time period.

_CC_

I'm sure his true advice would be to hold Berkshire stock, but that would probably come across as pushing his own interests.

He's been consistent in saying most people would be best sticking to low cost index funds and being passive. I think this is what he's trying to get across here, not that the S&P is necessarily the optimal choice.

Advice given on here is usually along the same line - keep it simple, passive and low on fees.

bigfreddiel

racing_blue wrote: »

Plenty of support for 2 or 3 fund passive portfolios over on Bogleheads. I'd love to have the chutzpah to go 50% total stock market, 50% total bond market, annually rebalanced.

Instead of actually doing it, why not just back test? fj

bowlhead99

Back testing tells you what did happen rather than what might happen, and the purpose of a diversified portfolio is to be prepared against unexpected events.

So seeing what a 2-fund portfolio like a 50:50 bond index /equity index *did* (particularly running to end in a period where global interest rates have fallen to the floor) is not necessarily going to give you the confidence to hold that portfolio yourself.

TheTracker

racing_blue wrote: »

Plenty of support for 2 or 3 fund passive portfolios over on Bogleheads. I'd love to have the chutzpah to go 50% total stock market, 50% total bond market, annually rebalanced.

Funny you say that. To me, it's the inverse with chutzpah that permits one to move away from such a portfolio, given that it's effectively the average of what everyone else holds you're betting on knowing better than that collective wisdom. Meh.

bowlhead99

TheTracker wrote: »

racing_blue wrote: »

Plenty of support for 2 or 3 fund passive portfolios over on Bogleheads. I'd love to have the chutzpah to go 50% total stock market, 50% total bond market, annually rebalanced.

Funny you say that. To me, it's the inverse with chutzpah that permits one to move away from such a portfolio, given that it's effectively the average of what everyone else holds you're betting on knowing better than that collective wisdom. Meh.

But the market is made up of people and institutions with many vastly different objectives and the "total market" is just some average that falls out. It is not the average of what all individuals think is appropriate to put in their ISA or their pension pot, so it does not mean that by choosing to ignore it you are defying "collective wisdom".

Also, as has been mentioned on these sort of threads before, the fact that there are $200 trillion of debt markets - made up of debt investors and companies and governments seeking loan finance - and $50 trillion of equity markets - made up of equity investors and companies seeking equity capital - does not mean you should think, "well, sounds like there are two choices, debt or equity, and if I tossed a coin between two choices I'd get one or the other, so that is a 50:50 choice and I will probably get the best retirement fund if I simply split my cash 50:50".

So, as you say, "Meh."

JohnRo

so the S&P 500 is the winningest index

It might be worth considering the real US economy is far from healthy and the S&P's relative out performance over the last 10 years only becomes apparent post meltdown.
No great surprise that it coincides with the implementation of astronomical bailouts and wall street welfare programs alongside the monetary life support extended to the casino banks ever since.
I'd favour a bit more of a global balance.

jamesd

_CC_ wrote: »

Advice given on here is usually along the same line - keep it simple, passive and low on fees.

Now add one of the long terrm most popular funds to the chart, Invesco Perpetual High Income, and observe that it handily beat the S&P index over five and ten years, with around 146% return for the fund but around 112% for the index over ten years.

Go back further, to a start date of 29/2/1988, and the fund return is about 500% while the S&P return is about 80-90%.

planteria

a clear case for a Managed Fund.. well worth the fee:)

bowlhead99

Well yes, there was a clear case for a managed fund: the desire for a higher level of income than the mainstream FTSE or S&P indices could provide. It was to be delivered by having an active fund manager research and select appropriate shares to meet the goal.

Of course, some rival fund managers who implemented their chosen strategy to deliver the higher level of income, failed spectacularly and had to close their fund with investors nursing large losses (or at least, significant underperformance against their goals and against mainstream indices). So the fact that IPHI achieved its goals and other funds in the sector did not achieve their goals does not really state the case either way for using a managed fund.

What states the case is simply that if the goal is higher income than the index, you will definitely fail the goal if you track the index.

My philosophy is along the lines of, if there is a clear case for using a managed fund, do, and if there isn't, don't.