I've been a Boglehead for a long time, although to be fair, I was a Bernsteinhead before I was ever a Boglehead. But I was on the Bogleheads forum before there was a Bogleheads forum, back when it existed as the largest forum at Morningstar.com called the Vanguard Diehards. I was once the 8th most prolific poster on the forum and still rank in the top 20 despite putting 99% of my online efforts over the last decade here at The White Coat Investor. I've attended a couple of national Bogleheads meetings, spoken at local Bogleheads meetings, been on the Bogleheads podcast, been censored, moderated and banned on the forum, written a chapter in a Bogleheads book, and read all three books. In a lot of ways, the origin of The White Coat Investor was simply the adapting of the “Boglehead Message” to physicians and other high-income professionals.
So let me be very clear when I criticize my fellow Bogleheads that the amount of good being done on the forum is several orders of magnitude larger than the amount of harm. But if you can't step back and chuckle at yourself every now and then, you're probably wound a little bit too tight. So today, let's step back and look at some of the silly things that happen among Bogleheads, have a little fun, and maybe even learn something in the process.
Ten Boglehead Errors
Maybe there are more, but in relatively short order I was able to come up with ten areas where I think many Bogleheads are missing the mark.
# 1 There is “Boglehead Consensus” on Every Topic
This is one of my personal favorites. Sometimes it shows up as a poster asking “What do Bogleheads think of……” or “What is the Bogleheads Doctrine on….?” But more often it shows up in the answers from someone who feels like they speak for all Bogleheads. Well, there are over 91,000 Bogleheads and if the ratio of posters to lurkers is the same as on the WCI Forum, there are likely over a million people using the forum regularly. Needless to say, there is nobody who can actually speak for the entire community and there is actually very little that the vast majority of the community agrees on. Those principles are best summarized on the wiki:
- Develop a workable plan
- Invest early and often
- Never bear too much or too little risk
- Diversify
- Never try to time the market
- Use index funds when possible
- Keep costs low
- Minimize taxes
- Invest with simplicity
- Stay the course
It's pretty hard to argue with much of that, but you'll occasionally see someone arguing against numbers 5 and 6, but that is about it. Otherwise, people pretty much agree. But beyond that? There is very little consensus about anything.
# 2 The Three Fund Portfolio is Special
This is the classic dogma that isn't doctrine. It has been prevalent for years and seems to only be getting worse since Taylor published his book. As I wrote in my post “150 Portfolios Better Than Yours“, there is nothing special about the three-fund portfolio (US Total Stock Market, Total International Stock Market, and Total Bond Market.) It isn't objectively better than a two fund portfolio or a four fund portfolio. Total Bond Market Index Fund is not necessarily better than the Intermediate-Term Bond Index Fund.
Now, the three-fund portfolio is fine. It's reasonably simple and quite diversified, unless you're into factor investing. But an investor who doesn't follow its prescription is hardly a Boglehead heretic. In fact, I suspect the vast majority of Bogleheads do NOT use the three-fund portfolio, but you would never know it due to the vocal minority chanting in unison….”Three Fund….Three Fund….Three Fund…”
# 3 Optimizing Investments Is The Key to Wealth
The Bogleheads are very good at optimizing investments. They'll help you pick the best funds out of your 401(k) line-up, do some tax-loss harvesting, get your average expense ratio down, and save some tax dollars. But they sometimes miss the forest for the trees. When it comes to reaching your financial goals, optimizing your investments is generally not at the top of the list, at least until the distribution phase.
When someone comes to the forum with an income of $25,000 a year and a $1,200 portfolio they need to be told that they need to increase their income, not swap their Target Retirement 2040 for a Life Strategy Moderate Fund. When someone comes to the forum making $100,000 and saving $5,000 a year, they need to be told that they should spend less and save more, not tax loss harvest. Boosting income and increasing your savings rate are dramatically more important steps, but are ignored far too often.
# 4 Risk Tolerance is Really Important and Static
Larry Swedroe is fond of saying that your portfolio needs to recognize your own individual need, ability, and desire to take risk. Bogleheads have adopted that statement wholeheartedly and repeat it frequently with long discussions about risk tolerance. There are two issues with risk tolerance that are far more nuanced than many Bogleheads recognize:
- It is essentially impossible to measure accurately until it matters most
- It is not static
First, the best test of risk tolerance is what you actually did in a bear market when you lost a substantial amount of money. But all bear markets are not created equal. What you really want to know is what you will do in the worst bear market you will ever see in your life. Unfortunately, by the time you get there, it is too late to adjust your asset allocation to your risk tolerance. All those “risk tolerance” surveys professionals and laymen alike use probably aren't worth the paper they are printed on as far as predicting actual behavior in market downturns.
Second, risk tolerance is not static. It has been clearly shown that our estimated risk tolerance is higher in bull markets than in bear markets. Plus, what really matters is your behavior, not your risk tolerance. As Phil Demuth said,
Even if risk tolerance existed and could be measured accurately, why would it be an important factor to consult when considering how to invest? You should invest in the way that has the greatest prospect to fulfill your investment goals. That might mean taking more or less risk than you would prefer. If you are a sensitive soul who can brook no paper losses, the solution is to get a grip, not to invest “safely” if that locks in running out of money when you are old.
A lot of people need to be told to “get a grip” instead of having a long discussion about risk tolerance. I'm just amazed to see people who have decided they could tolerate a 65/35 portfolio but not a 70/30 portfolio. Don't kid yourself. Those portfolios will perform almost exactly the same. If you can't tolerate one, you almost surely won't be able to tolerate the other.
# 5 Expense Ratios Always Matter
I find it hilarious to watch people try to reduce their overall mutual fund expense ratio by a basis point or two. It was particularly interesting to watch those same people get flustered when Fidelity came out with index funds with a 0% expense ratio. As discussed under # 1, cost matters, and it matters a lot. But little costs don't matter a lot. When costs get down to a certain level, other things matter more. For instance, with an index fund three things matter:
- What index
- How well the fund tracks it
- At what cost?
Once you get down below 10-20 basis points, # 1 and # 2 matter a whole lot more than # 3.
# 6 Investing in Real Estate Means 3 am Toilet Calls
One of the most bizarre things I've run into over the years is the battle between mutual fund investors and real estate investors. Each is convinced that the other school of thought is composed entirely of fools. The mutual fund investors are derided for their “paper assets” and the real estate investors are told their investments are really “a second job.” However, I've simply run into too many real estate investors who know nothing about the importance of portfolio construction, risk management, minimizing costs, and diversification. I've also run into too many mutual fund investors who don't know there are real estate investments outside of managing single-family homes, think depreciation is always a bad thing, and can't believe that a real estate investment with an expected return of 15-30% could possibly exist.
Wise investors take advantage of the benefits of both schools of thought. Publicly traded REIT index funds are not the only viable real estate investment. You can invest in real estate without getting 3 am toilet calls. Index funds are real investments in real companies with real profits, not “paper assets.”
# 7 Entrepreneurship is a Bad Idea
Along with real estate investing, any type of entrepreneurship is also frequently poo-pooed on the forum. It may be that the forum attracts conservative investors who tend to have stable jobs in engineering firms, corporate America, or medicine. They are correct that most small businesses fail in short order. However, there are plenty of examples right on the forum of very successful entrepreneurs who end up with portfolios of $5M, $10M, or even $50M. Instead of simply telling people not to engage in any sort of entrepreneurial pursuit, it would be better to provide advice about going about the process in a smart way, minimizing leverage and providing the longest possible runway, especially if it can be done initially on the side.
# 8 Liquidity is Critical
Talking to some investors you would think there was a high likelihood that they would need to liquidate their entire portfolio tomorrow. For a group that encourages a long-term perspective and avoids market timing, you would think they would be a little more open to capitalizing on the illiquidity premium with at least some portion of their portfolio. I simply cannot reconcile the need to have 100% of a portfolio be liquid when one only needs about 4% a year from it. I have surveyed groups of docs and asked how much of their portfolio they would keep liquid if they were being paid significantly more for being illiquid. Most respondents chose to place a majority of the portfolio into illiquid investments! Certainly putting 10-25% of a portfolio into illiquid investments is not an insane move.
# 9 Doctor Bills Should Always Be Negotiated Retroactively
The last couple of years an “anti-doctor” vibe seems to have crept onto the forum. Post after post in the “consumer issues” section seems to relate to a medical bill and how unfair it is. While I'll be the first to admit that our health care system (and especially how we pay for it) has serious problems, the repeated suggestions on the forum to not pay bills or demand discounts wear thin. Guess what? Doctors are expensive. If the bill is accurate and your insurance company has paid its portion, then it's time for you to pay your portion. If you don't like the deal you made with your insurance company or the deal the insurance company made with the doctor on your behalf, then go to a new insurance company. But singling out physician bills over all other professions is not fair when they have already provided you the promised services.
# 10 Mr. Money Mustache and Dave Ramsey Are the Devil Incarnate
Once or twice a month there is a thread dealing with one or the other of these two individuals. Rather than acknowledging the massive amount of good these two public figures have done in the world, posters nitpick the things they do not agree with and warn against ever reading anything these two gentlemen have written or said.
I don't think there is ANYBODY in the financial world that I agree with on every point. And I think any reader or listener of mine that agrees with EVERYTHING I say probably needs to do more reading. But that doesn't change the fact that there is a lot of wisdom coming out of both of their mouths. Take what you find useful and leave the rest. The same applies to every advisor you ever listen to and book you ever read.As I mentioned at the beginning, there are many Bogleheads who aren't holding on to any of these misguided beliefs. It is a very diverse community after all with a variety of incomes, professions, genders, races, sexual orientations, and religions. But there are too many Bogleheads who are not only making these mistakes, but evangelizing them.
What do you think? Anything else that Bogleheads frequently get wrong? Do you think these are valid criticisms? Comment below!
The Bogleheads were the first community I found after my divorce and was wallowing with about $800k in debt at the age of 40.
They really talked me off the ledge and offered me support and motivation to pick myself up so I will always hold them near and dear to my heart. (I shortly found white coat investor soon after and hold you in similar esteem).
I started out with the 3 fund portfolio but felt it was not enough and morphed into the portfolio I currently have.
It does seem like real estate takes more of a beating than it should on their forum but for me I am happy to incorporate to a point that it is in the majority of my overall net worth.
Can’t complain too much about them but the points you brought up are certainly valid.
I agree the points are quite valid but #1 for me is they have an “over-inflated” view of what is considered “Solicitations.” In the past, I use to frequent the site a lot more but I got tired of having to re-type “blogs” or parts of “articles” I had posted on Seeking Alpha even though just to avoid any conflict of interest I did not get paid for any of the articles I wrote and the “blog” portion of their site is truly just your own personal blog that is not edited or paid by them.
The Bogleheads site is still a great site, and like WCI I follow most of what they believe in and have read all the books, but I think as WCI alludes to in the above article, you aren’t going to change their mind on anything, which is in fact a great way to invest – have a conviction that what you do is the best plan. It just doesn’t seem to be a good point for “constructive communication.”
I halfway thought you were going to mention Hedgefundies Excellent Adventure.
your wrong about physician bills…. the service may have been provided but we often times have no choice in our insurance our company offers and are NEVER told upfront what things cost by either the insurance company or doctors’ office
I can’t speak for outpatient billing, but monster inpatient bills usually benefit the hospital. Doctors and other health care professional aren’t making the money. Hospitals, administration, and device manufactures (probably big pharma too) make the outsized profits.
So I’m wrong about the fact that I think it is inappropriate to not pay your doctor anything because she functions in a screwed up system? I guess we’ll have to agree to disagree.
It’s inappropriate to pay *nothing*.
It’s appropriate to negotiate on a medical bill, since the medical system is incredibly opaque when it comes to costs and consumers often aren’t informed of the costs of their medical care until they receive the bill. Particularly given that patients can go to “in-network” facilities and then receive care and high bills from out-of-network providers.
I know of several Amish communities requested a meeting with local OB/GYNs and hospital administrators to negotiate labor and delivery rates and healthy baby services. As they represented a high percentage of the deliveries in the county, they were able to negotiate the same or better rates than many of the insurance companies received. Had the locals not negotiated, they had another hospital in the background.
But all of the hard work was done in the background.
The cardiology group that I am a patient with is the first one to ever discuss costs upfront as many in this area lack the proper insurance.
You’re misdirecting. Both can be true. You can be opposed to someone not paying their bill and also be correct to point out that you’re flat out wrong about “choosing” a different insurance company. That is nearly never a reasonable option. And to pretend like there’s some sort of competitive market out there where you could easily find an insurance plan that wouldn’t be a mafia level, claim-denying weight around the patient’s neck is ridiculously dishonest.
Good list, but you lost me on the medical bills topic. If a bill is incorrect (which is all too frequent) or significantly higher than the average for the procedure in the region, the patient has every right to negotiate. Especially in the latter case, it’s called the free market. We very often don’t get to see medical prices until AFTER care is delivered, so at billing is the only time for market action to work in America. The alternative is socialized medicine and I don’t think docs want to go there.
I’m pushing back less on that than the idea that all medical bills are too much, should be negotiated, or worse, should not be paid.
#7- a fear of entrepreneurship is spot on and the one that probably bothers me the most. There is a board mentality that the best way to build wealth is to work for a megacorp, keep your head down for 30 years, save aggressively, and put all your savings into index funds. Anyone who brings up the idea of starting their own business is met with intense pessimism from the highly risk-averse. Starting a business is a solid way to increase income and build wealth. Yes, a lot of businesses fail. The people that are drawn to bogleheads are often diligent hard-working types who I suspect would be way more successful than average if they set off on their own. Starting a business is a path to greatly increased income and makes it much easier to build wealth. It is harder at first, but I make way more money than I ever could working for someone else.
I have posted many comments on Bogleheads over the years stressing that entrepreneurship where you build a business you control is a far better way to grow wealth than picking up the crumbs the corporations throw their retail investors, but these comments rarely get any response. The assumption seems to be that everyone has a highly paid, utterly secure corporate job with a matched 401K, which they work for decades while postponing all their hopes and dreams to when they retire.
The emphasis, nay, obsession, with retirement in the Bogleheads forum strikes me as reflecting how many of the members waste most of their productive years working jobs they hate. This, in turn, pushes them into high cost lifestyles where they try to replace the internal satisfaction they have sacrificed with things they can buy. They become convinced they need obscene amounts of money to be happy, which means that no matter how much retirement savings they acquire they always need more.
I have seen too many people die before retirement to think that sacrificing your youth for money working a job you hate makes sense. I have also seen far too many people assume they will write that book, play that music, or have those adventures when they retire, only to discover that they have lost their spark by the time they are in their late 50s and can only consume when they no longer are wage slaves.
Obviously, entrepreneurship isn’t for everyone, but it is a far better way to live life for many people, even if the financial gains aren’t as high. A happy person doing something they love with people they have selected to work with needs a lot less purchased stuff in their life to be happy.
Bravo, clap clap. Particularly agree with the point on expense ratios and missing the forest for the trees. Some folks in there will let people extort them to the tune of 2-3k on badly done home repairs or contracting, misfiling (not necessarily by medical establishments), or anything else, and the prevailing tone is, “just let it go, not worth the fight,” but as soon as they can save a basis point with a new mutual fund, every cost suddenly matters.
It’s a very valuable forum with some fairly inexplicable cognitive dissonance in terms of crowd opinions on certain things.
I was getting worried you weren’t going to list doctors being money hungry, overpaid tyrants. You let them off easy! 😉
4. Risk profile is not static.
You hit the nail on the head here. 10 years ago right out of residency my risk profile was infinite. I had a new high paying job (compared to residency). I had energy to perform my service for 20-40 years. I had time to withstand losses. And most importantly I had nothing to lose (except a huge amount of debt)!
Fast forward to now and I have a very high net worth. I have a very successful career. I have 2 young kids. I have neck problems. And I’m losing my hair! Although many on this website may perceive me as “high risk” based on past comments….in fact my risk profile has dramatically changed to being far more conservative. I continue to accumulate wealth and understand the financial implications of various decisions. However, my overall risk tolerance is significantly less than it was 10 years ago and I now consider how much I have to lose. I believe this is a normal change over the course of ones life and career. So I completely agree with your statement that Risk Profile is NOT static!
Thanks,
#4 – risk tolerance is not static. I held my ground through the recent downturn and have been happy to ride things back up. That said I realized my risk tolerance in the next downturn is likely going to be lower. I haven’t “won the game” yet but I am pretty close and realizing I stand to lose more than I used to and that maintaining what I have is a lot more important now than growing it at the highest rate possible. But how do you effectively change your asset allocation from a 95/5 stock to bond ratio to a 70/30 or something less aggressive without essentially trying to time the market?
Previously I would just change my contributions to make changes in asset allocation but as the “nest egg” has gotten larger this doesn’t work anymore. What’s the most effective way to make significant changes in asset allocation over a relatively short time (ie before September when I feel like there’s a good chance it all starts becoming volatile again.
It’s hard eh? No right answer. You can change gradually to minimize the market timing aspect, or wait until the market is at all time highs again before dialing back. But you’re right there is a market timing aspect unless you already had a plan written into your written financial plan about how to do that.
I don’t know why you think August is different from September is different from October, but the only way to make rapid changes is to sell stocks to buy bonds. Why not write down a plan and follow it? For example, if you plan to retire in 5 and want to be 70/30 then, why not dial back 5% a year every January 1 for the next 5 years?
Hey Kelly I have in my written plan now 100% equities (I know I’m crazy!). But I plan to have “won the game” 10 years prior to retirement, at which point will with new contributions to my retirement accounts make new contribution all to bonds, as well as rebalance within those account gradually to make it 50/50 stock/bond by the time I retire. Of course any bear market that occurs during that process will get me to that 50/50 allocation sooner, and if that happens my plan says just to keep rebalancing yearly at 50/50. Then when I retire I plan to do the reverse glidepath thing where I draw down my bond portfolio in the first 5 years of retirement. I sort of drank the cool-aid with Wade Pfau and Mike Kitces about that bond tent thing to lower my SORR.
There is no real most effective way to do this, but for me my plan seems reasonable given my presumed future risk tolerance as well as avoiding market timing as much as possible. And in regards to that point, picking september, or any other month, is market timing seems to me. Was it Mark Twain that said there a whole bunch of months that weren’t good to buy stocks? I think that also applies to buying bonds to change your asset allocation too.
All good points. I cannot wait for the thread discussing this article on the forum.
I didn’t see one when I looked this morning. You can start it, but I can’t. I’m not allowed to link to my blog on the forum.
Why aren’t you allowed to do that? Aren’t you the one in charge of the allowing?
No, I don’t own the Bogleheads forum nor set its moderation policies. I can link to Bogleheads from here, but I can’t link to here from Bogleheads.
When he said, “I cannot wait for the thread discussing this article on the forum.” , I thought he was talking about WCI forum.
Here that is:
https://www.whitecoatinvestor.com/forum/general-welcome/212514-discuss-latest-wci-blog-post-top-10-things-bogleheads-get-wrong
No comments on it yet.
Fairly accurate characterization. It tends to be an echo-chamber. And that probably drowns out the dissident voices further. Like everything else, moderation is key.
For #4, to make the point that people need “to get a grip”, I love how JL Collins simply says, “Toughen up, cupcake”.
-PFB
Ha! love that guy!
Bogleheads is an indispensable site, but perhaps by definition characterized by groupthink. As other comments here have noted, frequently posts that fail to reinforce the dogma are met with “the frozen silence.” Their luminaries, some quite aged, are no doubt wonderful people who have helped many investors; but either they themselves, or perhaps their acolytes, seem threatened by even mildly discordant views, on matters which would seem open to legitimate debate.
One example: I have proposed that it may be that bond investing, due to its more opaque and less efficient regime, may benefit more from active management; or to put it another way, it’s not so obvious as many claim is the case with equities that just buying the bond index or an ETF like BND is the superior investment strategy.
Chilly silence—even though, paradoxically, a Boglehead forum fund favorite is Vanguard Wellesley (VWIAX), which “gets a pass” even though it’s an actively managed fund, heavily bond-weighted.
I won’t complain too much though, as the site’s many merits more than compensate. And credit goes to the numerous frequent posters who generously devote time to assisting the “newbies” who come on, eternally asking “the same questions”— but questions always brand new to the young investor.
I think there’s pretty good data for indexing bonds too. Costs obviously matter relatively more when yields are low and the SPIVA data suggests the same advantages exist as in equities. I hear this a lot with EM, international, small etc but when you run the numbers, you get the same results–over the long run passive beats active 80%+ of the time, more after tax.
11. An ginormous amount of behavioral bias exhibited in too many threads in the forum.
12. The ongoing veiled advertising for some individuals there is…annoying at best.
I refer to the BH Forum as the Reddit Community of personal finance and economics. People with nothing better to do than post the latest SSRN paper, then ask, “your thoughts?” A Boglehead can spend hundreds of posts arguing over that which cannot be argued with certainty.
One of my greatest accomplishments last year was no longer posting there. I have reallocated that time to expanding my study of history, risk, decision-making, complex adaptive systems, etc. This stated, the forum continues to have many valuable threads on practical matters such as buying a mattress, water heater, etc.
Though not in health care, I have always appreciated the straightforwardness, simplicity, and practicality of The White Coat Investor. Your posts on the BH Forum have been invaluable in expanding my effectiveness navigating health care, insurance, etc.
Agree. I got tired of reading post after post after post from the same individuals who are often more interested in showing off how intelligent or successful they think they are, than showing genuine interest in helping the OP. For so-called intelligent people, many of the common posters sure do waste a ton of time arguing with people they don’t know, and often about stupid stuff. It’s sad, and I don’t get it.
I still visit now and then, but mostly just to read the same things you’re looking at: practical matters.
It’s history now, but yes, MMM was the devil incarnate for sure on the forum. I patronize another forum, Early Retirement, and it’s the case there too.
Jacob, from ERE, used to post there but he was unwelcomed and quit sharing his ideas.
I’ve certainly gained much from The Bogleheads, lots of smart people, but it seems like it’s gotten stale. Maybe there’s only so much to be said and that’s it. Perhaps true of most financial bloggers, that’s why I’m not seeing them post hardly at all, and the present posts are less interesting.
#3 is spot on. We make a lot. We save a lot. I’ve learned a ton from you and others. Although I could refine things a bit, our savings rate, discipline, spending habits, and income get the job done. I’d rather go for all of those things plus simplicity.
The last one — I am a lawyer married to a surgeon. I am also a Dave Ramsey kid — my dad taught me all of that (and oh by the way retired a multi millionaire at 57 without a college degree…). I would never be at your site or boglehead site without Dave. He got me started on this journey and got me interested in the topic of personal finance. You guys helped refine it. Behaviorally he is on point in this area. Like you said, I can critique him, but he changed my life.
I feel the same way about Dave. Simple, straightforward stuff written at a 4th grade level despite the warts.
He’s done far more to advance personal finance than anyone out there actively criticizing him. The number of people he’s helped become debt-averse and debt-free (including myself) dwarfs the number who really need to understand basis points. Most people prefer a straightforward “set it and forget it” approach to finance. Given the sheer volume of forum participants, I’m highly skeptical the typical Boglehead finance nerd arguing edge cases is any better off financially than the typical American.
What I like about Dave Ramsey’s approach was that his advice, when followed, would give people mired in debt a PLAN. Many people that far in debt feel there is no way out other than bankruptcy. He gives them hope. His plan gives the debtor the tools and encouragement needed to continue to the finish line.
What I do not like about the Boglehead Forum is that for some of the frequent posters, it who can piss the furthest rather than an honest exchange of information from different points of view. There are a lot of ways to hit financial independence and success that are not consistent with the Boglehead dogma.
It reminds me of my father in law, a farmer, From 1978-1984, he invested his portfolio of CD. It sounds terrible until you see that they were paying 10-15% annually.
I have pretty much limited my participation on the forum to the Personal Consumer Issues
“What I do not like about the Boglehead Forum is that for some of the frequent posters, it who can piss the furthest rather than an honest exchange of information from different points of view. ”
You wrote it. I’ve thought it. There is also an almost veneration (strong appeal to authority bias) for some forum members who have the most-est, longest, strongest, and most erect posts (you know the ones, those with 10’s of thousands of posts). Then you’ve got those new members who in space of a mere couple of years have accumulated an ungodly number of posts (one wonders between their FB, Instagram, Twitter, Reddit and all manner of other social media posts if they *ever* spend time away from a screen).
I was just thinking this morning of the criticality of my ceasing to post on the BH forum last year to my ability to locate much more important/value adding information sources. As the Coronavirus has proven *yet again*, our very lives are embedded in systems within complex adaptive systems, and those who live *solely* by the investing, personal finance, and economics sword, die by it. The answer is “what to do?” is to read. Widely. *Outside* those investing, personal finance, and economics fields.
Now I have to undo that “notify me of followup comments” box because boy it seems WCI’s post has hit a nerve. BH mods, Board Members, are you listening? Is this thing on (tap, tap)?
Not sure I hit much of a nerve. I haven’t even seen a Bogleheads thread about it yet.
Oh, never mind. Here it is:
https://www.bogleheads.org/forum/viewtopic.php?p=5329666#p5329666
LOL, I love Bogleheads, and they gave me the courage to leave FA and manage my own finances, but you really nailed the top 10. Here are a few lesser BH memes/examples of group think:
–Edward Jones is the devil. You must leave immediately before they fleece you of everything. They’ve already stolen most of your money in hellishly high fees. But don’t try this at home. Call Vanguard to initiate a transfer.
— The humble brag, posed as a “Can I afford to retire” question: I’m 55, my house, cars and boats are paid off, and I’ll have a large pension, but I only have $5.5 million in investments. Can I afford to retire?
And as someone who retired to Mexico last year, I can attest that most Bogleheads, except for a few who are expats, aren’t very savvy about living abroad. The occasional threads about living/retiring overseas tend to dwindle into a consensus that: 1) it’s better to live in the U.S. 2) healthcare overseas sucks (not true) and 3) U.S. banks will spurn you and Social Security won’t send your checks (also not true).
“— The humble brag, posed as a “Can I afford to retire” question: I’m 55, my house, cars and boats are paid off, and I’ll have a large pension, but I only have $5.5 million in investments. Can I afford to retire?”
Well, you may want to work a few more years to mitigate sequence of returns risk. Also, does your pension adjust for inflation? If not, you’ll be eating cat food under a bridge.
Unfortunately what I found most detrimental to not using the Bogleheads forum is they are really serious about not endorsing companies, even the good guys in the industry. I has used 1st republic to finance my loans at 1.95%, and recommended that a physician with similar student loans not going for PSLF look into it, and was kicked off for a month for the endorsement of 1st Republic. I understand their stance, but really impedes helping people with their finances, making WCI a huge leap above the Bogleheads forum.
That being said I love how optimized these guys are! Despite at times losing the forest for the trees, I ended up getting every penny out of buying a used Honda, used Toyota Highlander, buying a pair of Nike’s, etc! The forum is really a tightwad’s dream like me!
Perhaps you should counter this post with another post about the top ten things WCIs get wrong. Remember that all groups have something to bring to the table. Go easy on those Bogleheads as you, along with the rest of us, still have much to learn. “Take what you can use and leave the rest behind.”
Not sure I’m qualified to write that post. But you might be. It might be a fun guest post. Here are the guidelines:
https://www.whitecoatinvestor.com/contact/guest-post-policy/
I will never leave bogleheads while Gill and bsteiner are giving away multi thousands of dollars per year of free advice on their areas of expertise.
Real estate: if you go for direct ownership then you get tax benefits not available in many other investments. Very few that one can do as a side gig. If you want the calls about leaky faucets, have the time and skills to do simple repairs yourself and this makes financial sense, then it could work for some people. If you hire a company to do everything and are just a passive owner then you turn over much of your revenue to those people.
If you get further from direct ownership then you lose the tax benefits. At that point you are investing in a small business that runs real estate. Not different than investing in a bicycle or printing shop, gas station, florist, etc.
Learning enough to evaluate these more distant RE investments would take more time than I am willing to spend. I am far from convinced that these private real estate deals are better, after accounting for volatility, risk of major losses, illiquidity and limited oversight, than the public markets. Many proponents of RE assume it is better but for the life of me, I cannot find systematic data. I will ask again: does anyone have systematic, unbiased data on the risk and return of private real estate as compared to public securities?
You can keep asking. But nobody really has the data. Just like no one has data from all the small businesses in the country. The closest thing I’ve seen to real data is not reassuring either. It comes from NAREIT and others. I saw a nice comparison they had done the other day but can’t seem to find it right now. Found this though:
https://www.reit.com/sites/default/files/media/DataResearch/2018_Arnold-Ling-Naranjo.pdf
Interesting paper. Thanks.
It shows how the returns are related to macro factors and the details of individual private funds.
The authors had the data to compare the private real estate funds to REITS but did not say much about it.
They did report that
“Our calculated PMEs suggest that
most funds in our sample substantially underperformed relative to the chosen public market”
Where PME stands for public market equity. They used a variety of benchmarks for this including REITS.
If there is so little evidence that private real estate performs better than REITS, then why do so many people show such enthusiasm for the investment? Absent the tax benefits, which appear to be sacrificed in these syndicated deals, what is the appeal?
I disagree that the tax benefits are sacrificed. Consider an investment I made last year. $100K investment and I had $35K depreciation in the first year. Hardly insignificant.
EmergDoc
I don’t go back as far as Diehards but I did start on Bogleheads in 2009 and began with you (WCI) in about 2015
I am amused by your Bogleheads critique. A high percentage of Bogleheads are in engineering fields including computers. People who work with numbers don’t believe you can put the essence of investing on a 4×6 index card
To them; if you buy low ER index mutual funds and avoid the big mistakes you should be ok, is grossly imprecise
advise. Just avoid the discussions about how to define Statistical Significance, most of the rest of Bogleheads is excellent. Jack Bogle and John Neff are my Heros
You have your MDs and Dentists and at least one Veterinarian ………gwrvmd
We have a few vets. You’re in good company.
Good critique.
With regard to – “# 2 The Three Fund Portfolio is Special”:
While it is a fine portfolio, we should be aware that it mostly ignores by weighting the two largest global asset classes.
1. international and much of Domestic Real Estate
2, International Fixed Income
For a portfolio that touts market weighting, this seems like a huge blind spot.
Option’s Observation
(comment above – #12. The ongoing veiled advertising for some individuals there is…annoying at best.) Is spot on, One individual who is a professional and part of an investing network receives considerable attention and the individual’s articles/websites are linked by shadowy members constantly. Some professionals who were involved early on are grandfathered with regard to this sort of conflict of interest (sounds like WCI is not given special status). Woe to those of us who call out the conflict and suggest that the site should not allow this subtle advertising for certain advisors – we are excoriated. Those running the site choose to ignore their own rules and principles for certain select individuals.
Agree with all points, and add one of my own…
#2 (part 2). The myth that any number of fund positions above three, is way too complicated to maintain and rebalance.
It is ironic that individuals which are able to save as much money as they have, and be successful in their career, will fall to pieces if they have to rebalance 6, 8, or even 10 funds/factors. The ever-sacred “haystack” can be shaped and stabilized by many different bales of hay.
#10 — Fidelity/TRowe/Schwab are the homes of the Devil.
Doesn’t matter what the fund is, its composition, expenses, goals….. if the word “Vanguard” is in the title, then it is automatically superior.
If you dare disagree, they can’t hear you over the beating of their chest.
Yes! I find fidelity to be a lot more user friendly and customer service is faaaar superior and available 24/7 (which helps with a spouse who doesn’t have 9-5 m-f availability). Plus vanguard’s weird holding period for backdoor Roths is unnecessary and trips people up. PLUS vanguard still requires paper forms to be mailed in for things that other companies allow you to do online. The list goes on. Vanguard is overrated.
That’s actually a more recent issue. Vanguard was much more superior to Fidelity etc 16 years ago when I became a Boglehead than it is now. In fact, in many respects now that Schwab and Fidelity and iShares have low cost solid ETFs available, their customer service perhaps makes them an even better choice than Vanguard.
I had all my investments with Vanguard for over 30 years but recently moved everything to Schwab. I will always be a “bogle-style” investor but I think Vanguard has fallen behind the times at least for small, individual investors. It ain’t Jack’s company anymore.
Many years ago, when AT&T was the ONLY game in town and it cost me more to call my parents 50 miles away than my roommate’s parents 2000 miles away, getting MCI was a game changer cutting my bill 75%. After a couple of years, AT&T sent me an offer matching the MCI deal. At that point, I just decided to stay with MCI as they brought down the prices. Ditto on Walmart for prescriptions when all my medications went to $4/ month saving me a considerable amount of money.
Sure, I could get equivalent deals at Fidelity these days. However, I think that I will stick at the company that made lower rates at Fidelity a necessity. I did move my HSA to Fidelity last year. However, the folks at the Tucson Fidelity office always make treat me like I am a third class citizen and are annoyed at my questions.
Investment strategies that divorce ownership from control may have the unintended consequence of promoting a trend of managerial autonomy and lack of accountability. I often wish I could attend shareholder meetings more, but time and travel constraints make it difficult.
Just be prepared for the retaliation – The top ten things WCI gets wrong!
Only ten? Based on the comments I get, I’m wrong on a lot more than ten things–individual stocks, actively managed funds, the value of an advisor, whole life insurance, cryptocurrency, etc etc etc.
WCI – you nailed it!
Well written and worthy of contemplation for all forum members whether it is their dogmatic approach of the 3 Fund Portfolio, attacks on Dave Ramsey, market timing, investing in real estate, small business, expense ratios, portfolios that are more complex than a target fund, two/three funder, etc… .
You had me years ago with your blog post:
https://www.whitecoatinvestor.com/150-portfolios-better-than-yours/
Keep up the good work and thanks for providing the mirror for all to stare into and see their reflection.
Bruce
What other profession tells you what services cost AFTER the service is provided ? What other service charges every patient differently ? What other service codes bills cryptically so the client does not understand the bill and no explanation is offered ?
Post your prices like the service bay at my car dealer.
You should look into Direct Patient Care. I’d love to see something like that implemented in emergency departments, but there would probably still be third payer involvement there.