Dogma Is the Enemy of the Middle-Class Investor

I recently wrote a Guest Blog Entry for the The Oblivious Investor blog entitled Dogma Is the Enemy of the Middle-Class Investor.

Juicy Excerpt: Perhaps I’m wrong. If so, I’d like to find that out. Or perhaps I’m right. Either way, what’s needed today is a national debate on the merits and flaws of the conventional investing wisdom.

A rockin’ comments section on this one.

Juicy Excerpt: Does it make sense to pay attention to how much you’re paying for something? Of course it does. There is no question that a share of the stock market purchased now is going to earn a greater return than a share purchased last summer. That said, I disagree pretty strongly with blaming market bubbles on passive investors.

Comments

  1. DRiP Guy says

    “What I want to talk about in this blog entry is a process question”

    Kinda sums up your whole life, doesn’t it Rob?

  2. Rob says

    I don’t think that’s right, Drip Guy. I view your question as the product of black-and-white thinking. It comes from a cartoonish perspective. The question evidences goonishness.

    But it certainly is so that I put more focus on process than on substance. There’s lot of evidence of that in the record. I believe that, if we get the process questions right, we will figure out the substance stuff sooner or later.

    I am of course grateful for the efforts of the many community members who focus on substance. I appreciate that they add a great deal to our discussions.

    What makes community great is that we have different people coming to the same questions from different places. The combined effort is something powerful. When things are working, the community as a whole comes to know things that no one individual community member knows.

    My take.

    Rob

  3. says

    In terms of Jim Cramer’s comments:

    I notice that John Bogle is now advocating international allocations (NEW to me)

    AND

    Cramer misses the biggie: Shifting allocations according to valuations (Rob Bennett’s Valuation Informed Indexing).

    The second point would retain indexing, which is John Bogle’s strongest suit while rejecting short term timing, which is difficult at best.

    Have fun.

    John Walter Russell

  4. Rob says

    Thanks for the link, Evidence.

    I like the guy (Mike) who runs that Oblivious Investor blog. He obviously puts forward his own views. But he does so in an open and good-hearted and warm way. I think that’s key. He reminds me of Michael Kitces in that regard. I believe that these guys may serve as models for the rest of us and lead us out of this darkness.

    Rob

  5. Rob says

    Thanks for adding your thoughts, John.

    I am not a big Jim Cramer fan. But I thought that his little tirade shown at that link was an emotionally healthy one. People need to begin holding the Passive Investing advocates to the same standards that apply for all others.

    Rob

  6. Evidence Based Investing says

    I notice that John Bogle is now advocating international allocations (NEW to me)

    Here is a quote from a 1997 speech (The Investment Outlook and Strategies in Our Global World) at John Bogle’s site.

    Skeptical as I am, however, I will concede there is a place for international investing from a diversification standpoint. Indeed, I have no hesitancy recommending an international position—say, from 5% of equities to no more than 20%, given the extra economic and financial risks and the ever-elusive ability to forecast the strength of the dollar.

  7. says

    I am always suspicious of index fund claims. They strike me as sorting everything after the fact. They suppress the idea that an active fund manager might shift holdings and allocations over time. They gloss over the objective of a fund, which might include downside protection.

    They also gloss over the failings of mutual funds as investments: managers have to focus on the short term to hold their jobs.

    Have fun.

    John Walter Russell

  8. says

    Warren Buffett showed years ago that there are superior investors in The Super Investors of Graham and Doddsville (speech at Columbia University). He showed that you could identify them in advance. Yet, diehards still claim that doing so is impossible.

    Professor Robert Shiller showed that prices predict long term returns reliably. Yet, too many refuse to acknowledge the obvious.

    We have too much rhetoric and not enough truth.

    Have fun.

    John Walter Russell

  9. Rob says

    I am planning an article in which I will list a sample of the inconsistencies in Bogle’s investing recommendations.

    I have given up hope of resolving the many inconsistencies. If you read only Bogle’s best statements, he is the best investment advisor out there. If you read only Bogle’s worst statements, he is the worst investment advisor out there. So how can anyone say whether his advice is good or bad. It’s both!

    Rob

  10. says

    “Indeed, I have no hesitancy recommending an international position—say, from 5% of equities to no more than 20%…”

    Yes. This sounds like Bogle: NO MORE than 20%. A lot different from what a TV viewer would have concluded.

    Have fun.

    John Walter Russell

  11. Rob says

    There’s an article at the site in which I compare investing “experts” with politicians. The skill that pays off biggest is being able to say different things to different audiences without getting called on the contradictions.

    This is the sort of topic that needs to be explored in more depth. It’s nice to know the numbers. But you never know what the real numbers say unless you know how much spin was applied to the numbers that were reported to you. The amount of spin applied is obviously much greater at times of insanely dangerous prices. So you need to know how high valuations are to know how much to adjust the numbers reported for the spin factor.

    Rob

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