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My reference to mediocre was to someone accepting returns just slightly worse than average where average is the index and the drag is a small MER and tracking errors.
Your statement is true, of course, but it only provides a partial view of the whole picture. Therefore, it is somewhat misleading.

To paint a complete picture (for the sake of newbie investors), you should have mentioned that disciplined couch potato investors achieve above average results in the long run. Above average when compared to all retail investors as a group. *That* is not a mediocre result.

Peace.
 

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Maybe we should create a new thread under investing where us investors can do a self-case study and point out how long we've been investing for, what is our style, and what our total or annualized return on capital has been. This hasn't been the first time the couch potato vs. do-it-yourself has been debated and it would be interesting to see everyone's results if people would feel comfortable doing so?
 

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Y & A i don't think so. Hi net worth investors are never going to publish their figs on anonymous chat boards.

furthermore, your concern has already been addressed. All you have to do is ask the previous poster, author of the quote below, where he obtained his information. Once you have verified that the study source is legitimate, peer-reviewed, published, objective, not sponsored by one faction or another of the investment industry, then you will know whether elite indexation produces better long-term results than any other approach ever before in the history of mankind.

although i wonder to myself about this disciplined index criterion, though. I mean, an index is an index. Does it matter if the folks investing in the same index derivative are elite disciplinarians or quel horreur a little bit messy.

BTW if what he produces is another one of those 30-year studies, like so many others keep citing in this forum, then i'm even more skeptical. AFAIK index investing hasn't been available to the masses for 30 years. It was developed by economist Carl Otto & others, who sold their firm to TD securities in i believe the 1980s. TD wanted to acquire Otto & partners for their pioneering & proprietary indexation modalities, which TD would subsequently popularize into funds intended for mr & mrs retail investor. So i believe that no 30-year time frame is available for proper study ... anything less would be inconclusive ...


... disciplined couch potato investors achieve above average results in the long run. Above average when compared to all retail investors as a group.
 

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I often see or feel there is too much emphasis on 'outperformance'.

Personally, I pick stocks & use index funds (my wife's portfolio whom I manage is exclusively indexed), so I sit square on the fence regarding this issue.

It's ego boosting if my stock picking portfolio beats my wife's indexing strategy, but what I know for certain, is that using either approach, or a combined one as we do, we will reach our financial goals/objectives. In the end, I don't care how we get there, as long as we eventually make it.

And just out of morbid curiosity, I'll post our annualized returns later when I get home. Take a guess whether (1) Sam's portfolio of goodness will be (2) Wife's boring slice and diced indexing strategy comes out on top.
 

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It would be interested to compare the forum users against a index or mutual fund.
actually i've posted figs like this. Probably a couple times. Benchmark against XIU. Can't keep posting same stuff.

i've held XIU since 2001. Sell calls continually. It underperforms. Of late the option premiums are so pathetic that i believe i'll sell the holding in 2013 (reluctant to take any more 2012 gains.)

or i might keep. I originally bought 3000 XIU as a sort of skewed or sidebar bond proxy ie it will never go bankrupt. Depending on how 2013 goes i might keep em after all. I do not keep & will never keep XIU because it might provide me with a "better" return than what i can do myself. The opposite is the case.

XIU without selling options would be a far worse experience for an investor imho. If you would like see a simple chart to weep, look at SPY over the entire past decade. Most of those core equity index etfs have gone nowhere in 10 years. Some have lost money.
 

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Annualized since 2008
Sam's portfolio of goodness = 7.0%
Wife's boring slice and diced indexing = 19.6%

And as pie points out, low net worth (since I'm willing to post these details)
 

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Wife's boring slice and diced indexing = 19.6%
Interesting...which index is this that is returning 19.6% annualized since 2007?
All the major market indices - US, Canadian, Emerging Market, Europe are below their 2007 highs, even including dividends.
Unless, perhaps, the majority of the contributions into this investment were made between 2009 and 2010.
 

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Unless, perhaps, the majority of the contributions into this investment were made between 2009 and 2010.
This is the case.

I don't even think my results are meaningful. I am much more conservative with my wife's money, only buying into real dips, this began heavy beginning the fall of 2008, again Jan through May of 2009, again in July of 2010, October of 2011, and just this past May. I don't think it is because my timing is good, since I have been adding similar amounts into my portfolio, I'm just too eager and jump in too soon. Our incomes have been growing well over the past 5 years, so we have been more lucky than anything else.

Maybe the trick to market timing is not greed, but fear of spousal retribution.

Her portfolio is comprise of:
CND LRG CAP
CND SML CAP
US LRG
US MED
US SML
INTL LRG
INTL SML
EMERGING Markets
REITS
DOMESTIC Short Bonds
CASH

All have value tilts where possible. A little exotic, but diversification and timing have given excellent returns. I don't think this will continue, but let's hope.
 

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pant!
pant!
indexes are returning 19.6% every year since 2007?
you win!
gameover!
gotta have em!
which izz they?
 

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But pie, this is why my case is a little meaningless in the debate.

Indexing gains were mainly driven by timing and not the fact that they are diworsified. I suppose for me also, it is much easier to dump money into the market and into one or two index funds, rather than dumping money into my massive stock portfolio.

Maybe this is a lesson for myself, I should compress my stock picking to a dozen or so holdings and focus efforts of those. Maybe a Fantastic 15 or something like that.
 

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i'm wondering whether you might be counting new contributions, at least in part, as growth in portfolio return.

someone else is doing this - quite innocently - he just doesn't realize it's not the right way to track portfolio - & so he has an inflated portfolio "return."

highly exaggerated false example:

- portf is worth 10,000.
- investor contributes 10,000.
- portf now worth 20,000.
- investor now thinks he has a "return" of 100%.
 

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Not at all pie. XIRR all the way.

Let me give you some examples.
XDV - purchase price $12.50 - 8% of portfolio
XRE - avg pp $11.10 - 10% of portfolio
IJJ - avg pp $39.64 - 8% of portfolio
IJR - avg pp $43.89 - 6% of portfolio
AAXJ - avg pp $29.70 - 5% of portfolio
SCZ - avg pp $23.88 - 6% of portfolio

I also calculate returns based on CAD invested - there has been some 'inflating' of the portfolio due to the strong CAD:USD. Perhaps this is a little falsification since some of the return is from FX and not equities per se.

A couple of big winners stock-wise, but I don't want to disclose too much.
 

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U are not disclosing winners stock-wise ? what a pity, perhaps you could reconsider ?

my big winner this year is africa oil, which has doubled since i started buying it on march 5th.

lately though my interest has strayed to kurdistan, a remote & beautiful biblical land which ignites romantic longings. Plus it has some monster oil wells being drilled/operated by smart canadian companies.
 

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BTW if what he produces is another one of those 30-year studies, like so many others keep citing in this forum, then i'm even more skeptical. AFAIK index investing hasn't been available to the masses for 30 years ...
The Vanguard 500 Index Fund has been available since 1976. The predecessor to XIU, TIPS 35/TIPS 100 was introduced in the early nineties. Even if you assume that no index funds exist, it is simple math that investors as a group will experience average aka index returns before expenses over any time frame -- 1 year, 1.5 years, 5 years or 500 years in whichever market you look at. After expenses, investors as a group will trail indexes by exactly the frictional costs. Index investors keep the frictional costs low by investing in the lowest cost products available and keeping transaction costs low. Active investors, by definition, incur higher frictional costs. Therefore active investors (as a group) must trail index investors (as a group).

Of course, the immediate objection is that "... but by doing X, Y is able to beat the market". The arithmetic of indexing does allow for winners. It is quite possible that skilled participants are able to beat the market. But that doesn't change the logic for the group as a whole.
 

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sorry, poor dumb pie is having trouble with densely packed language at this hour of the night ...

what bothers me is that, if roughly half a cohort of investors could, by learning a few skills, do better, then why should so many naysayers have a field day trying to discourage them with dour warnings that they should settle for mediocrity.
 

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The predecessor to XIU, TIPS 35/TIPS 100 was introduced in the early nineties.
nobody really bought TIPS in the early '90s. You will never be able to convince me that proper statistical surveys were carried out, comparing TIPS buyers' returns to self-chosen investment returns in large populations from the early '90s to, say, the year 2010. Even that would have represented a time span of 18 years, which is not enough to infer lifetime achievement.
 

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U are not disclosing winners stock-wise ? what a pity, perhaps you could reconsider ?
We haven't bought much this year at all.

Some of our biggest winners have been SBUX, MCD, VZ, WFC, WMT, SYT, TD, CNR, HR.UN, BEI.UN. Boring I know.

But these have been offset by the equally horrendous,
OIL, RIM, WJA, WWE, UNH.

I'm a pretty boring buy pie, nothing exotic - although I've been getting into Brazil of late.
 

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sampson i like your list very much. It's not boring at all. I don't think strong lists are ever boring.

actually i had OIL too. Wasn't it a while ago, though. Something about north sea operations were dependent on a scottish bank but 2008 happened & the bank went under ...
 

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I'm enjoying this thread. For the first time, it has really made me stop to think about why there has been such a dramatic difference in performance.

We initially revamped our portfolios in 2007, culminating in many of the fortuitous buys during 08/09/10. I am a believer of the couch potato model, CC is a stalwart when it comes to knowledge, practice and reasons why it is a decent strategy for common investors - therefore 95% subscriber in my wife's portfolio. However, I wanted to prove this wrong (hence my own stock picking in my portfolio). Looks like the small-cap, value indexing proved me wrong. However, the psychology really played a big role. For ever mistake I made in my timing or choices, I did not want to do the same for the other portfolio.

This made us buy only when things got really rough, like SBUX @ $17, MCD in the $50s, WFC in the teens as well as all those juicy index funds. And when things got rough, I even dipped into stocks for my wife's account - again screaming buys based on both trailing earnings, and projected future returns, but when things serious problems like Bear Sterns, Europe part I and II etc.

Now I feel the portfolios will stabilize now, presuming traumatic events will become rarer and rarer, so only time will tell who has more money at retirement. I'm hoping its me, but if my wife has more, I'll be happier. Perhaps I really do need to modify my own strategy and generate a Fab 15, or Terrific 20 - easier to manage and keep in check.
 
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