Buy and hold?

I "Buy and Hold" then manage risk with derivatives while looking for stock market capitulation opportunities...

So, does the cost of the derivatives drag down long term performance? I was never very comfortable at calling market capitulation opportunities. Do you know how much value you're adding, above the trailing S&P index? I hear sophisticated RIA firms are adding value to the indexes, but I don't believe it.

I see all of this BS like, " Botique asset managers offer competitive advantages",  (for investment performance), but I don't see research showing ten or fifteen plus year superiority over the indexes.

Maybe I'm just a weenie.

" Advisors make a mad dash for cash". Now that's wild.

Yes anytime you try to hedge against the downside you are potentially limiting the upside. If you use the mindset of sticking with the indexes and not trying to mitigate some of the risk you might as well not diversify at all and just place one ticket for EEM or RWR. The idea of using derivatives for me is another way to try and smooth the ride out a little more.

I believe in an up market you cannot beat an index but in a down market you can (apples to apples of course so that depends on the index/portfolio being compared). I am not an analyst but I would hope there are some managers that can even beat an index in all markets. I am not very good at finding them though because mostly their strategies are specific to a set point in time. But if you can find one that has the ability to go long the good and short the bad it can be done but it is so expensive to hire those managers.

The funny thing about investment management is that even if an advisor sucks, over the long haul he will look competent if his clients are invested in a boring 50/50 allocation at least 75% of the time. Heck just stay in above the 200 and out below the 200 and you will probably be fine. Why do you think hedge fund managers, Buffet, Desmarais etc. have strong track records? Because they eat, sleep and shit thinking about ways to make money. Most FAs work 10-2 and spend most of that time playing the game and pretending to be a big swinging @#$%.

I can't address all the sophistcated strategies, but in basic terms, the purpose of hedging is to limit drawdown.  As we all know, losses have a much greater impact ona  portfolio than do gains.  Think of it this way....if in 2008 you only lost 10%, it meant in 2009 you only needed +12% to break even (rounded up).  SO that's great if you did +40% in 2009, but if you lsot 45% in 2008, you are WAY behind.  Bottom line, if you don't lose much, you don't need to make much on the upside swings.  Remember, the market VERY RARELY even comes CLOSE to the long-term average return in any given year.  SO you NEED to make those huge positive gains in order to offset big down years.  So it's not about making 38% when the market makes 30%.  It's about losing 5% when the market loses 25%.  So good risk managers will outperform in down years, and underperform in good years.  The net effect is beating the markets on a COMPOUND ANNUAL GROWTH RATE (CAGR), which is often much different than average annual returns.

year 1   +5%

year 2   -5%

Average   0%

CAGR   -0.25%

Start with $100, end with $99.75

Good points. I still maintain that the most efficient way to hedge risk is buy and hold, with the proper asset allocation. Which, long term, is about 60% equity and 40% bonds. Most clients will prefer a lighter equity load. Not trying to prove anything, I just have not been able to find hard evidence anywhere to justify derivatives, market timing, or any other smoke and mirrors. No hard evidence. If anyone knows where to find it, I would be obliged.

Of course risk means loss of principal risk, inflation risk, security risk, interest rate risk, market timing risk ( in or out), and so on, so there can be no perfect system to hedge risk, hence, buy and hold and asset allocation.

Buy and Hold the S&P 500 starting in 1999/200 and you went backwards.  Yes, I am am cherry picking dates, and this does not include dividends, but you get the point.  Sometimes, you should just not be invested (or take your gains off the table).  Simple analysis of market P/E can help that.

VFINX:

Yes, that's great that you got back to even in 2007 (only to lose it alla gain).  But if you retired in 1999 (or 1998 or 2000), THEN what would you do?  Wait 10-12 years to get your money back?  Most advisors don't understand the secular nature of the markets.  There is no harm in taking gains off the table in favor of consistent income and safety.  I wish I had done it personally in 1999.  For clients, I did take some off the table in 2007, but not nearly enough (the market itself wasn't over-bought as much as 1999).  I also took some off the table over the past 6 months (it remains to be seen whether it was enough ). 

FYI - Sorry about the chart above.  Those numebrs were copied in as a chart, but didn't come across that way.  Basically, it shows the Vanguard 500 Fund at $135 in 1999, and $100 in 2010.

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

60/40 allocation with client assets left on the tracks is exactly what's wrong with this industry today. And for this you collect a fee?

BG, I totally agree.  I just don't, for the life of me, understand how advisors could recommend the same allocation in 1996, 1999, 2002, 2005, 2008, 2010.  Even just a SMALL amount of analysis tells you that there are periods that are so overbought that there is simply no way for things to end well.  60/40 just seems so arbitrary.  If you are going to buy and forget, it might as well be 100% quality equities, or 100% muni's.

[quote=Milyunair]

Good points. I still maintain that the most efficient way to hedge risk is buy and hold, with the proper asset allocation. Which, long term, is about 60% equity and 40% bonds. Most clients will prefer a lighter equity load. Not trying to prove anything, I just have not been able to find hard evidence anywhere to justify derivatives, market timing, or any other smoke and mirrors. No hard evidence. If anyone knows where to find it, I would be obliged.

Of course risk means loss of principal risk, inflation risk, security risk, interest rate risk, market timing risk ( in or out), and so on, so there can be no perfect system to hedge risk, hence, buy and hold and asset allocation.

[/quote]What would you consider hard evidence? Do you want evidence that these strategies improve return or rduce risk? 2008 proved that asset allocation has its faults as well. All these components you refer to are beneficial if used correctly. They are designed to either smooth volatility (which is the entire thesis behind asset allocation) or improve returns (which is very debatable).

Buy and Hold hedges the risk of not being in the market.

Asset Allocation hedges the risk of volatility.

Market Timing hedges the risk of poor returns (very debatable and hard to do).

Options hedge volatility and risk of poor returns depending on intent.

Every hedge or investment strategy has its place. But you cannot simply compare "Buy and Hold" to "Sector Rotation" or "Buy Write". They are not comparable in apples to apples kind of way.

[quote=BondGuy]

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

60/40 allocation with client assets left on the tracks is exactly what's wrong with this industry today. And for this you collect a fee?

[/quote]

Great example of self- righteous BS. Just like your attack on Beck. High opinion of yourself, BG?

[quote=B24]

BG, I totally agree.  I just don't, for the life of me, understand how advisors could recommend the same allocation in 1996, 1999, 2002, 2005, 2008, 2010.  Even just a SMALL amount of analysis tells you that there are periods that are so overbought that there is simply no way for things to end well.  60/40 just seems so arbitrary.  If you are going to buy and forget, it might as well be 100% quality equities, or 100% muni's.

[/quote]

If you're referring to my posts, read them carefully. How about some evidence to back up your narrative claims. You guys suck up to BG the way he sucks up to the socialists.

[quote=N.D.]

[quote=Milyunair]

Good points. I still maintain that the most efficient way to hedge risk is buy and hold, with the proper asset allocation. Which, long term, is about 60% equity and 40% bonds. Most clients will prefer a lighter equity load. Not trying to prove anything, I just have not been able to find hard evidence anywhere to justify derivatives, market timing, or any other smoke and mirrors. No hard evidence. If anyone knows where to find it, I would be obliged.

Of course risk means loss of principal risk, inflation risk, security risk, interest rate risk, market timing risk ( in or out), and so on, so there can be no perfect system to hedge risk, hence, buy and hold and asset allocation.

[/quote]What would you consider hard evidence? Do you want evidence that these strategies improve return or rduce risk? 2008 proved that asset allocation has its faults as well. All these components you refer to are beneficial if used correctly. They are designed to either smooth volatility (which is the entire thesis behind asset allocation) or improve returns (which is very debatable).

Buy and Hold hedges the risk of not being in the market.

Asset Allocation hedges the risk of volatility.

Market Timing hedges the risk of poor returns (very debatable and hard to do).

Options hedge volatility and risk of poor returns depending on intent.

Every hedge or investment strategy has its place. But you cannot simply compare "Buy and Hold" to "Sector Rotation" or "Buy Write". They are not comparable in apples to apples kind of way.

[/quote]

I'm referring to the idea that many advisors are turning into pussies. Instead of teaching clients about risk, they are capitulating to the fears and emotions of their clients, at a cost. I'd like to see the numbers, where average advisors are beating indexes with "custom" risk management strategies. You know it doesn't exist, anyone with a CFP or CFA could say the same. No big deal. Like I said, I believe in a little tactical around a moderate profile, but in my heart I believe that is more pandering to the individual. Not sure I am adding value, my portfolios are way about the S&P over ten years with much less "risk" (equity percentage), but we'll see what happens going forward.

Just the fact that so many of the advisors here are so apparently politically liberal pretty much backs up the (economic) pussy claim. The fact that they are so righteous is almost scary. Gives new meaning to the term RR.

[quote=Milyunair]

[quote=BondGuy]

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

60/40 allocation with client assets left on the tracks is exactly what's wrong with this industry today. And for this you collect a fee?

[/quote]

Great example of self- righteous BS. Just like your attack on Beck. High opinion of yourself, BG?

[/quote]

No, a low opinion of  your investment strategy. Well, if you can call that a strategy. 60/40 fee'em and forget'em? There should be a law!!

As for your myopic political cheap shots at me, I'm Boston Irish, sticks and stones dude ! But, it really is getting old. This thread is on your vaunted investment strategy. Maybe you should try to stay on topic and leave the cheap shots to political threads. Your time would be better spent proving that your strategy is still valid and worth your fee. Whatcha got?

For anyone who wants to have a discussion, obviously, portfolio construction begins with goals, timeframes, and "risk". Retired clients are likely but not always more conservative - I like a range of about 25% to 35% equites for those conservatives who can handle risk. Maybe 40 to 50% equites for moderate, and so on. Tactical to the economic cycle, not geopolitical events. I do a complete portfolio analysis twice a year, and run my b/d affliliated book like an RIA. Yeah, I charge for proactive portfolio management, and general financial advice. Anyone who has a CFA think it's worth adding to the CFP?

[quote=BondGuy]

[quote=Milyunair]

[quote=BondGuy]

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

60/40 allocation with client assets left on the tracks is exactly what's wrong with this industry today. And for this you collect a fee?

[/quote]

Great example of self- righteous BS. Just like your attack on Beck. High opinion of yourself, BG?

[/quote]

No, a low opinion of  your investment strategy. Well, if you can call that a strategy. 60/40 fee'em and forget'em? There should be a law!!

As for your myopic political cheap shots at me, I'm Boston Irish, sticks and stones dude ! But, it really is getting old. This thread is on your vaunted investment strategy. Maybe you should try to stay on topic and leave the cheap shots to political threads. Your time would be better spent proving that your strategy is still valid and worth your fee. Whatcha got?

[/quote]

Haha, Irish, you finally come out of your corner. I don't plan on building your straw man here, lefty.

FWIW, I am not even close to the same political persuasion as BG.  And that would actually have nothing to do with my opinion of his investment theory.  Not sure how one has to do with the other.

You turned a perfectly good debate about investment theory into a wet t-shirt contest.  Nice job.

[quote=Milyunair]

[quote=BondGuy]

[quote=Milyunair]

[quote=BondGuy]

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

60/40 allocation with client assets left on the tracks is exactly what's wrong with this industry today. And for this you collect a fee?

[/quote]

Great example of self- righteous BS. Just like your attack on Beck. High opinion of yourself, BG?

[/quote]

No, a low opinion of  your investment strategy. Well, if you can call that a strategy. 60/40 fee'em and forget'em? There should be a law!!

As for your myopic political cheap shots at me, I'm Boston Irish, sticks and stones dude ! But, it really is getting old. This thread is on your vaunted investment strategy. Maybe you should try to stay on topic and leave the cheap shots to political threads. Your time would be better spent proving that your strategy is still valid and worth your fee. Whatcha got?

[/quote]

Haha, Irish, you finally come out of your corner. I don't plan on building your straw man here, lefty.

[/quote]

That's because you've got nothing!  Straw man my butt!!

You push a tired and ultimately useless investment strategy on the unsuspecting. That's indefensible! You're smart not to try to defend it. Aren't your clients tired of getting run over by the same train?

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[quote=B24]

FWIW, I am not even close to the same political persuasion as BG.  And that would actually have nothing to do with my opinion of his investment theory.  Not sure how one has to do with the other.

You turned a perfectly good debate about investment theory into a wet t-shirt contest.  Nice job.

[/quote]

Thanks, I was getting bored of my posts.

Let me put it together for you: we are all artists, working on a total package for our clients. No way is the best way. None of us wants to be held to performance, but many of us pretend like we are adding value in our investment approach, as was pointed out, since that has to do with "risk" (volatility) and client's ability to hold the course, and so on, I don't think there will be a definitive answer.

In my opinion, if you look back at BG's first response, I see a bigger picture. BG attacks my approach, which he really doesn't understand, as representing everything that is wrong with this industry.

What worries me is aggressive liberal economic pussies. I don't really know if the Irishman is one of them - but to the extent that they are attacking others, and making claims, and potentially pandering to client's "risk" (fear of volatility) - and making a virtue out of charging for it in their own special way - well, I guess politics and portfolio construction may be related.

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

As for self righteous, aggressive, economic pussydom, that could threaten the capital markets, ownership, investment, and appropriate  portfolio construction, too. No Monte Carlo for economic progressivism in the American capital markets.

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

[/quote]

First, you have to have cred.

[quote=BondGuy]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

Interesting. What does this have to do with long-term ownership of equities, versus holding cash or lending your money in bonds?

You tell a long story, and make no point.  Is this liberal diarrhea of the brain? Blowhards love to tell stories, and brag about cars and scare people, and have other people suck up to them. This is what scares me about  investing in America, and why buy and hold gives me comfort.

Warren Buffet says about buying a company, " Our holding period is forever. " Blowhards like to tell stories and cheat you out of your money ( policies, taxes, programs, systems, ideologies, fairness). And attack other peoples  ideas with stories.

[quote=BondGuy]

[/quote]

My main point is that buy and hold eliminates a lot of BS. What do clients pay us for? Nothing really new under the sun - I'm just here to check in, if you like, teach me a new trick, don't attack my cred.

[/quote]

First, you have to have cred.

[/quote]

Wow, thoughtful comeback. I guess we're done, lefty. At least you didn't run away and hide this time.

[quote=Milyunair]

[quote=BondGuy]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

OMG, please don't tell me you really said that?

Let me approach this this way. I'll tell a horror story.

Back in 1996 or there abouts Critter 592 crashed in the Everglades killing everyone of the 110 unlucky souls to have stepped aboard N904VJ that day. They were dead less then ten minutes after the plane left the runway. You probably have heard about this crash as the crash of ValuJet flight 592. The crash did so much damage to ValuJet's reputation that after the crash ValuJet changed their name and are now known as AirTran.

The cause of the crash was a fire caused by illegally packaged and shipped out of date chemical oxygen generators. A big no no! The generators were in the cargo hold below the passenger compartment. One caught fire igniting other cargo including tires. The fire was intense and burned through the floor mounted control cables making the aging DC 9 rather difficult to control. Not that that mattered as many of the passengers were busy being burned to death. Those not being burned alive suffocated in the thick toxic smoke. The out of control jet hit the swamp in a better than 500mph death dive that was a relief for anyone onboard unlucky enough to still be alive at that point. Investigaters doubt anyone was alive at impact.

Now I tell you that horrific story in gory detail to bring up this point and ask a question: In the history of aviation a chemical oxygen generator had never caught fire and had never caused a crash. In the 14 years since this crash a chemical oxygen generator has never caused a crash. And, by the way, they are on every airliner. Here's the question, should we ignore the events that took place on Critter 592?

Or should we learn from them?

About your business. Things sure are easier  if you ignore 2008. To do so is playing with fire.

[/quote]

Interesting. What does this have to do with long-term ownership of equities, versus holding cash or lending your money in bonds?

[/quote]

Thank you for chiming in on que! Two points for you!

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well. Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

60/40, collect the fee,let the chips fall where they may, about sums it up.

 I am going to try to set aside my own feelings for you as being a pompous liberal, and try to dissect your meaning in hopes of learning something.

Thank you for chiming in on que! Two points for you!

Thanks, dad.

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well.

Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

So I don't assume anything, what is the corollary? How is the fact that I don't see it interesting? When you say not our fault, are you excluding yourself as an advisor?

60/40, collect the fee,let the chips fall where they may, about sums it up.

What are you really trying to say? Is this a vague attack on wrap accounts and support for transaction trading, or what?

It seems like you have some ideas, and are also attacking others. It seems like you assume people are just supposed to know what you are thinking or assuming.

If you're trying to talk about a new reality of geopolitical turmoil and market volatility, and are justifying or sharing your own brand of active management, and talk about risk and fees, then perhaps you and I can get this discussion back on track.

Pardon me for trying to generalize your communications up until now as being support for concern about liberals trying to use the status quo to drive a social agenda, and I wish I could say I was surprised or that this is a good use my time, but I asking you to use your intellect  and experience to contribute, or at least don't get on my thread and attack my credibility with your BS, lefty.

Take some time and try to thoughtfully articulate your ideas, and receive some meaningful feedback. Why waste your time and other people's time here. No one is going to invest time here if you just satisfy your own need for emotional and political BS that reinforces your idea of the world.

Read this and think about it:

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

Don't just condescend and attack and try to win little emotional points. The reason I edit my posts is to make them better. Try waiting a few minutes and thinking a little before you respond, lefty.

[quote=Milyunair

[/quote]

Wow, thoughtful comeback. I guess we're done, lefty. At least you didn't run away and hide this time.

[/quote]

Two issues in responding to anything you write:

1. You constantly edit and re-edit your posts. I get cleaning up an unruly sentence or two, but you completely change what was written. Quite frankly, you come off as confused. So, not hiding, just scratching my head wondering what to respond to?

2.  You are not really interested in having a discusion.

If your point is to say that 75% (maybe more) of advisors are lazy and "pretend” to manage money, then I agree. I hear all kinds of stories about this guy putting some dry powder to work in Brazil or that guy found an opportunity because investors are throwing the baby out with the bath water in financials. It gets mind numbing sometimes. I want to stick my pointer and middle figure down my throat and puke in their lying bullshitting face but I know it is just playing the game. I think that many advisors are just simply playing the game. They are good at BSing and know it. The thing about it though is unless you just constantly pick crap, you will still get decent returns if you are invested in SOMETHING. A clock is right twice a day, and as our market sees the increased volatility it has over the last 10-15 years, you have to be a moron to consistently loose money if you are invested in something and it is tailored to the clients goals, time frame, risk tolerance etc.

If you want to continue discussing this topic lets stay on point or let me know a little more about what you are asking or telling us.

[quote=N.D.]

If your point is to say that 75% (maybe more) of advisors are lazy and "pretend” to manage money, then I agree. I hear all kinds of stories about this guy putting some dry powder to work in Brazil or that guy found an opportunity because investors are throwing the baby out with the bath water in financials. It gets mind numbing sometimes. I want to stick my pointer and middle figure down my throat and puke in their lying bullshitting face but I know it is just playing the game. I think that many advisors are just simply playing the game. They are good at BSing and know it. The thing about it though is unless you just constantly pick crap, you will still get decent returns if you are invested in SOMETHING. A clock is right twice a day, and as our market sees the increased volatility it has over the last 10-15 years, you have to be a moron to consistently loose money if you are invested in something and it is tailored to the clients goals, time frame, risk tolerance etc.

If you want to continue discussing this topic lets stay on point or let me know a little more about what you are asking or telling us.

[/quote]

Right. I am interested in tactical allocation around core portfolio mixes 30-40, 40-60, 50-70, and so on. Since intuition or research is in play, there may not be much more for me to say without hearing from someone else who is specifcally relating to my concerns about portfolio construction, geopolitics, interest rates, debt, aging Americans and socialism, and  so on.

I guess this is more crystal ball speculation. I know what I think and I'm looking for ideas, but I'm not going to continue building a straw man here for other purposes. 

I don't care how other advisors get paid. I'm not sure this forum is a good use of my time, but I appreciate your thoughtful posts.

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[quote=navet]

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[/quote]

The world has nearly 7 billion souls, now. The geopolitical assumptions have to change. God forbid, some idiot will explode some nuclear material in a third world country, and the fallout will shut down most of the dairies the the Northern Hemishphere for a while. This is what I'm gettting at - that changes the "model" allocation, risk discussion, everything. And it can't be tactical, not when you have the "market" melting down.

Yet it probably should somewhat tactical, because of the new reality, if only to try to squeeze out a little extra return from the "normal" economic cycle.

That sounds like increasing market timing risk, to make up for bad times. Look around the industry, I'm amazed. I'm amazed at myself, but I see my method as more touching clients and personalizing the risk tolerance, with respect to trying to be a little contrarian and educating clients. Whatver.

I think Chuck calls it "Core and Explore". Any strategy you choose will only be as good as you are willing to put in the time and effort. I use a similar strategy and break it down like this...

A client's life is a football season.

Each year is a football game.

Each qtr is well a qtr.

I use predetermined and quarterly screened models for the core and then try to determine possible catalysts to buy into or hedge against that qtr for the satellites.

Maybe it works maybe it doesn't. What I do know is that after 2008, clients want to know I am not a buy and forget guy. I am systemizing the accounts and we will start block trading in discretionary accounts soon. This will make my strategy more efficient. Every sense 2008, my office has been putting in the extra hours so clients that want to be more involved can be. If the ship sinks again, we will go down together. None of this "I can't believe you did nothing while my accounts went down" crap.

Exactly. You got it.

[quote=Milyunair]

 I am going to try to set aside my own feelings for you as being a pompous liberal, and try to dissect your meaning in hopes of learning something.

Thank you for chiming in on que! Two points for you!

Thanks, dad.

What's interesting is that you don't see the corollary. Ignoring a once in a lifetime horrific event, making like it didn't happen. Let's just pretend it's all OK and it won't happen again. Problem is it did happen. And i'm not talking about the plane crash. The market did crash in 2008. Yeah, it was a really unusual event. Then again so was 2001-2003 and so was 1987. But, rather than learn from it, defense against it, let's make like 2008 didn't happen. That's what every fee grabbing wire house broker is doing. The fee'em up independants as well.

Risk is something for the managers to handle. If they eff up, well, not our fault, it's the managers fault. Just pick a new set of managers and keep on collecting the fees. And therein lies the problem. Clients are left on the tracks without any plan to deal with risk.

So I don't assume anything, what is the corollary? How is the fact that I don't see it interesting? When you say not our fault, are you excluding yourself as an advisor?

60/40, collect the fee,let the chips fall where they may, about sums it up.

What are you really trying to say? Is this a vague attack on wrap accounts and support for transaction trading, or what?

It seems like you have some ideas, and are also attacking others. It seems like you assume people are just supposed to know what you are thinking or assuming.

If you're trying to talk about a new reality of geopolitical turmoil and market volatility, and are justifying or sharing your own brand of active management, and talk about risk and fees, then perhaps you and I can get this discussion back on track.

Pardon me for trying to generalize your communications up until now as being support for concern about liberals trying to use the status quo to drive a social agenda, and I wish I could say I was surprised or that this is a good use my time, but I asking you to use your intellect  and experience to contribute, or at least don't get on my thread and attack my credibility with your BS, lefty.

Take some time and try to thoughtfully articulate your ideas, and receive some meaningful feedback. Why waste your time and other people's time here. No one is going to invest time here if you just satisfy your own need for emotional and political BS that reinforces your idea of the world.

Read this and think about it:

Buy and hold?

It's now called buy and hope.

Try to keep up with the times.

Don't just condescend and attack and try to win little emotional points. The reason I edit my posts is to make them better. Try waiting a few minutes and thinking a little before you respond, lefty.

[/quote]

You're not responding to my post to learn anything. You're responding because i've gotten under your skin and you feel a need to defend yourself.

You edit your posts because you speak before you think.

Oh, and speaking of speaking before you think, the comment on the other thread about Porsches being the cars of the left, wrong again! Big surprise there! Average Porsche buyer is a 46 year old male biz exec or business owner with an income of $384K.  Not exactly the left's demographic.

Do yourself a favor and don't respond.

[quote=navet]

My question is much simpler. We had a bellweather event. That event skewed the data out of proportion, at least in the short term. That single event made 10 year investment returns look dismal. Now, since that event won't likely repeat itself, are we overreacting by completely changing a strategy that has worked for decades? I am not offering a solution, nor am I questioning strategy. I am simply suggesting that focusing on our most recent past problem may not equip us with the optimal future strategy.

[/quote]

Navet, do you have kids? If so, are they vacinated? Are you vacinated? If so, why? It is highly unlikely that you or your children would contract any of the dreaded illnesses you've vacinated against. You have a better chance of winning the Powerball lottery than contracting any of those diseases. Yet, do you still chose to protect yourself and those you love. And, if so, why?

You say the event won't likely repeat itself. What event? I ask because if you're talking about a mortgage backed house of cards bring down the market i probably agree. But, if you are talking about what really collapsed the market, a breakdown of trust, well, we've got a bit of that right now in the markets. And guess what? Same thing! Not as deep this time but still there. A breakdown of trust could easily cause another crash. But, the truth is another crash could come from anywhere. And, just like 2008 the circumstances that cause it will be unimaginable.

You also claim a strategy that has worked for decades. Worked for who? Did it work for those who rolled over their life savings in August of 2001? Or those who were set to retire in 2003? How about the poor people who had pension plans of 100% company stock and retired in November of 1987? How'd they do? I think of the prospect i met with 500K of Lucent stock and was building a house to retire to. I couldn't talk him out of that stock at 67 a share. How'd the strategy work out for him?

Navet, your chart works only for those with time to recover from a Black Swan event. Right now there is an entire generation, your prime prospects, who are out of time.

You can't ignore what happened in 2008, as convenient as it would be.

So, what are you doing to vacinate your clients? If you say tactical allocation - Did that work in 2008? I don't think so. It's reactive on the risk scale. Clients were still left on the tracks. Well diversified tracks, but tracks all the same.

But there is an answer. A way to protect your clients while giving them exposure to the wealth building power of the stock market. But to do it you're going to really have to start earning your fees. It's called technical analysis. You need to become an expert in technical analysis.

Tech analysis is kinda like predicting the weather. it's not always right but it's right enough, and it called this last move down as well as 08.

Learn it and apply it. It will set you apart. And, it sure beats keeping your fingers crossed.

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

Thank god.  I thought 2000-2002 actually HAPPENED (-40% S&P).  I guess it was just a massive nightmare.  And I guess since I was just a kid in 1973-74 (-40% S&P), that was probably just a sugar high.

Actually, 1982-1999 is really the norm.  Those days will be here soon enough....

[quote=B24]

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

Thank god.  I thought 2000-2002 actually HAPPENED (-40% S&P).  I guess it was just a massive nightmare.  And I guess since I was just a kid in 1973-74 (-40% S&P), that was probably just a sugar high.

Actually, 1982-1999 is really the norm.  Those days will be here soon enough....

[/quote]

B24, thanks for posting this. For a while there i thought i was in the twilight zone of alternative reality.

The old saying about those who fail to learn from history comes to mind when i think about the Tech Wreck of the late nineties. We went through exactly the same thing in the early seventies with the Nifty Fifty. The old rules no longer applied. Revenues, earnings, P/E ratios no longer mattered. Those who drank that kool aide found out that not only did these things matter, but they did so with a vengence. I did everything i could to warn cleints about the coming wreck. I even sent them letters describing the nify fifty. Most listened, some didn't . Most were fine, some no so much.

There is nothing wrong with investing clients in stocks. There is something very wrong with doing so without plan to deal with the risk of the market. Sailing on a cruise ship without lifeboats is foolharty at best.

Unfortunately, sailing on that ship describes most of Wall Street right now. The wires have trained legions of advisors to be asset gatherers. These people don't get paid to protect assets, only to gather them. Many, if not most, are clueless as to how to invest money, They've never been trained on how to invest and in my experience, most have spent scant little time educating themselves. Many of these people can't spell S-T-O-C-K  let alone complete the reasearch necessary to competently invest in one. They are ill equipped to protect investors who have entrusted their life's savings to them. And, their bosses are fine with this. Nothing interupts the fee machine. They do this by laying off responsbility to the managers and by convincing their clients that "It won't happen again."

The problem is it will happen again.

I think those who invest clients money without a plan to deal with these Black Swan events should rename their practices "Titanic Investments." At least then, prospects would know what kind of thinking is at the helm.

BG. I was posing a question, not making a statement. We experienced a once in a lifetine(OK hopefully!) event where there was no safe harbor. Using that event as a standard leaves us with little choice for where to invest. The question is, how to develope an investment strategy that deals with a future unlikely to look much like the recent past. And in my case, to do so in a Jones model that doesn't incluse hedges. Personally, I believe that we are going to be in a stock pickers market for some time(and bond pickers, but I'll leave that question yo you who seems to really have that expertise). And this site, as thin as it has become has provided a wealth of good information as compared to much that I have recieved from Jones. As to my kids innoculations, yes they were, as has been my grandchild. However, disease is constant, waterfall financial events are rare and the same innoculation doesn't cover each event. This is a good conversation and I would like to keep it going.

Navet, go back and reference my rowing vs. sailing analogy.  It's not really about sophisticated hedging strategies.  It's really about common sense. 

I'm not sure if I can make this clear in writing.....but here goes.....

Buy and Hold works real well during a secular bull market (reference 82-99).  Any fukcnut with 2 bucks and a broker could have made money on stocks during that time period.  But remember that 82-99, though a long period, was a bit of an anomoly, since it WAS the greatest bull market run, EVER.  If you go back throughout history and look at the various secular periods, and even rolling 10-year periods, it becomes clear that today's boomers and Greatest Generationers (how's that for a name) accumulated a LOT of smack in the 80's and 90's (I guess actually, the 70+'ers retired nicely on that bull run).  But there have been a LOT of periods throughout history where wealth was PERMANENTLY destroyed.  And because we all have the luxury of recent hindsight, all the buy-and-hopers sit around saying "yeah, but what are the chances of THAT happeneing again?" (referring to the last DECADE).  If you think 2000-02 and 2007-09 are anomolies and Black Swans, think again.  Or maybe they ARE Black Swans, and Black Swans just aren't THAT uncommon.

During most other periods of time, allocating assets properly is of the utmost importance.  And as I explained above, every economic era cannot be navigated with the same boat.  There are times (like now, when, if you have much uncertainty about teh direction of the market) complete diversification is critical.  Split your money 12 ways and allocate among 12 different asset classes.  THAT'S how the average investor can "hedge".  Or maybe it means just being ultra conservative, since no matter which direction the market turns, you'll still guarantee yourself 3 or 4 percent.  Maybe tax-free.  Maybe after your potrfolio runs up significantly, you take some off the table.  Or a LOT off the table.  Be happy for what you made.  Are you still achieving your goals?  Don't be a hog (Cuz hogs get slaughtered!). 

But you gotta step back sometimes and look at the big picture and use your head.

Good points B24. One small issue I have is that you put 2000-02 in the same sentence with '07-09. Two completely different issues. I would never suiggest "buy and hold(forget)" and I have been outspoken with other FA's when I say that a 20% non US equity allocation is too little. I think that 40% may be too little, but I don't want to start a fire storm. With China adding 300 million people to their middle class in the next 10 years(conservative estimate on both numbers and timeframe), investment in said region is a no brainer, but what to invest in becomes a brainer.  And the issue I'm getting in my own practise is that people want low cost investments because that's what the public talking heads propose, and that means no-load index funds, and that means buy the market, and that means the opposite of the stock pickers market. How's that for a run-on sentence(Sister Mary Therese would beat my a-s).But, continuing the catholic metaphor and being the devils advocate, after the big bull market, buy and hold became the popular strategy and ended in the lost generation. Conversely, after a lost generation is it possible that returning to buy and hold may be successful because a return to the mean? Just raising the question.

First off, you CAN put 00-02 (-49%) in the same sentence, just like 56-57 (-21%), 61-62 (-28%), 66(-22%), 68-70 (-36%), 72-73( -48%), 80-82 (-27%), and 90(-20%).  This does not even INCLUDE the depression era meltdowns.

Again, you THINK 2007-09 was an anomoly, and ignore 2000-2002.  But look at the facts.  Simply because 2008 was the WORST does not mean that major meltdowns don't happen...and OFTEN.  If you don't consider nine 20%+ corrections in 60 years as "often", then I'm not sure what would qualify.

Would a return to buy and hold work now?  I have no idea.  The bull market ran 17 years and WAAAAAY overshot the mean to the upside.  It's possible that we underperform the mean to the downside for many years also.  And FWIW, by most metrics, we are still above historical mean (P/E, Q ratio, etc.).

Here's a simple chart that you might find interesting.

http://dshort.com/charts/SP-Composite-secular-bull-bear-markets.html?SP-Composite-secular-trends-with-regression

I keep hearing every seg 3 Jones guy say that '08 was a correction. Nonsense! The difference between '01 and '02 and '07-'09 is that there was a complete international financial meltdown with no safe harbor in the later period.  If you just add '07-'09 to the list of regular corrections you are missing a very significant difference. It's a waste of time to rehash this point. If we can't discern the momentous from the common, we shouldn't be recommendig strategies to our clients.

I have always been tactical at heart. Sometimes its hurt me on the way up. But it has helped me immensely on the way down. There is nothing that requires being intellectual in this. Its just a fact that all the crap spewed by the wires about 25 year average returns on the S&P and never a 15 year rolling period where markets were down at the end of the 15 years (used to be 10) is nonsense. Yes they may be giving us facts, but its just raw data that means nothing in the real world.

When a client is down 15% in a year, he doesnt care about 15 year returns. And he cares even less, if you had a buy and hold strategy. Bond Guy is 100% correct. Our clients pay us to keep them out of deep sh*t. And if we do what we did when we were 17 years old, find em, feel em furck em and forget em, then we are not earning our fee. Period.

One more point. All this talk about the optimum 60/40 allocation is crap too. It is stated with the benefit of hindsight. Tell me how well served your clients will be over the next 5 years owning 40% bonds. Sure, that will really dampen their volatility. Yeah, right.

I left a wire to go indie a year ago last month. After the greatest shitstorm clients ever saw in their lifetimes. And i took well over 90% of my clients with me, and 100% of my A and B clients. Trust me when i tell you, that wouldn't have happened if i was walking around with a pie chart up my arse, every time i called them.

I have always been tactical at heart. Sometimes its hurt me on the way up. But it has helped me immensely on the way down. There is nothing that requires being intellectual in this. Its just a fact that all the crap spewed by the wires about 25 year average returns on the S&P and never a 15 year rolling period where markets were down at the end of the 15 years (used to be 10) is nonsense. Yes they may be giving us facts, but its just raw data that means nothing in the real world.

When a client is down 15% in a year, he doesnt care about 15 year returns. And he cares even less, if you had a buy and hold strategy. Bond Guy is 100% correct. Our clients pay us to keep them out of deep sh*t. And if we do what we did when we were 17 years old, find em, feel em furck em and forget em, then we are not earning our fee. Period.

One more point. All this talk about the optimum 60/40 allocation is crap too. It is stated with the benefit of hindsight. Tell me how well served your clients will be over the next 5 years owning 40% bonds. Sure, that will really dampen their volatility. Yeah, right.

I left a wire to go indie a year ago last month. After the greatest shitstorm clients ever saw in their lifetimes. And i took well over 90% of my clients with me, and 100% of my A and B clients. Trust me when i tell you, that wouldn't have happened if i was walking around with a pie chart up my arse, every time i called them.

Navet, B24 and SFB bring some solid thinking to the discusion. I will add that you don't need to hedge. In 08 there were no hedges. I gave you the answer- technical analysis. It's not voodoo. It's the answer.

 And you don't have to be the be-all end -all expert. Just learn some point and figure stick charting so you can spot over bought- oversold market conditions and deteriorating trading patterns. This could be applied to C share mutual funds or a wrapped ETF program where the ETFs hit your tactical allocation requirements. Best used in descretionary accounts but it could work non descretionary as well. It's not like you'll be in a panic sell or buy situation.

Just having a way to get your clients off the tracks will put you miles ahead of any of your competition.

And lastly and again 2008 was not a unique one off situation.

BG - What do you use for Tech Analysis - do you use DWA, or just the Moving Averages, or other indicators?

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

You aren't actually this stupid are you... "Well my strategy works if you don't count 2008,2002,2001,2000,1977,1974,1969 etc"...

So your argument is that from 80-99 your strategy worked...No kidding, it's called a bull market...Buy and hold always works in a bull market... but now you are either even for the last 10 years or underwater...how did that help your clients.. Buy and hold is not a strategy, it is a wish..

How about from1966-82 when the market didn't do anything.

1929-53 again flat...

1905-1923 negative...

So your argument is...

1982-1999 and 1954-65..notice how your markets don't last as long...

Buy and Hold (forget) is for brokerage firms and advisors that are too lazy to do their own research, and too trustful of the firms that keeping getting us in the sh1t.

I am not advocating buy and hold. I am discussing it. My point is that I am not willing to dismiss buy and hold due to the market meltdown in '08, which WAS a unique event and should not be considered routine under any circumstances. Warren Buffet is a buy and hold advocate and I haven't seen anyone beat his record. However, I am simply trying to focus on and clarify my position on this investment strategy and its alternatives. I don't see much difference in managing an investment in 12 different sectors,  or buying a few good mutual funds etc, which seem to be buy and hold strategies to me, with the caveat that I don't buy and hold forever. For example, I have been transferring clients out of Bond Fund of America because of it's overweighting in Fed bonds. I tell my clients that a long term hold is a period of 4-7 years. All points for discussion.

I am tired of people comparing an investing philosophy to Warren Buffet.  Yes, he's a sage, but when your investment horizon is infinite, it's pretty easy to be a buy-and-holder.  Most people cannot wait forever for their portfolios to recover from collapse.  Buffett's holdings and financial circumstances (at BRK) are much more complex than an individual in retirement.

Most people aren't billionairre's either.  Add four or five zeros to the back of our client's bottom line and buy and hold becomes much easier. 

I know you've all been waiting for my input, so here goes...

I have to disagree with those saying that 2008 was just like "2002,2001,2000,1977,1974,1969 etc"..."  It was absolutely different.  Go back and look at bond returns during those down years.  In 2008 all asset classes (except treasuries & gold) blew up.  There was no safe haven in reality for brokerage clients.  In the previous examples bonds not only kicked out their interest, but also appreciated as interest rates were slashed to stimulate growth and the perverbial flight to safety.  I can remember seeeing a Putnam, yes putnam, portfolio that showed a positive return with close to that 60/40 allocation during 2000-02.  For those brokers building portfolios based on 2007-2009, I have sympathy for your 50-60 year old clients.  At some point in the very near future the S&P rallies well past 1500. 

My definition of buy & hold, yes I said hold, not hope, is finding a comfortable allocation (maybe even 60/40 gasp!) and maintaining that allocation.  Equities run up, sell off back to the original allocation.  Equities run down, buy back up to the orgiinal allocation. 

If by that definition you think I'm an idiiot, drone, salesman, asset gatherer etc. I'm fine with that.  I will continue to buy & hold and collect my fees.  My clients will continue to live within their means and as long as they stick with me, they'll meet their individually defined goals.

Like I say, there is narrative BS, and then there are the "facts".

http://www.fpajournal.org/CurrentIssue/TableofContents/ASimpleStrategyforPortfoliosTakingWithdrawals/

I don't get much out of this article below, other than the (increasing) importance of diversification and some big swinging d*** narrative claims of the virtues of tactical, without the dropping of trow. ( Proof of the benefits of tactical, or market timing, technical, if you want to call it that.)

http://www.fpajournal.org/CurrentIssue/Supplements/2010TrendsinInvesting/TheEmergingTrendofTacticalAssetAllocation/

I remember watching a young man in the training room back in the early 80's, pitching technical analysis on the telephone. He was a believer at age 22. His conviction and determination were absolute. Unfortuntately, his divining of the charts worked against his success during that particular time period.  

With respect to Buffett, he wasn't a billionaire to start with. He started small and became a billionaire through his investments. The difficulty with emulating Buffett is that he is smarter than we are(at least in regards to finance) and we may not be able to mimic his strategy. Nevertheless, buying quality investments and holding on to them as long as they are quality investments just sounds like common sense to me. Modeling strategy in response to the '08 meltdaon seems counterintuitive.

[quote=Sportsfreakbob]

BG - What do you use for Tech Analysis - do you use DWA, or just the Moving Averages, or other indicators?

[/quote]

DWA

But again, I'm not a big stock guy, so this isn't a large component of my business. I know enough to move in and out and that get's communicated. My post here, about this, is what Navet should do, is directed to those with big equity businesses.

Let's see, how did millionaire put it, that's right, i peddle bonds. A simple business that keeps producing income for those I peddle to. If they're happy i'm happy.  No market timing, just income generation.

I use DWA but honestly if i never read another analyst report on an individual stock i will be thrilled.

I use DWA primarily with ETF's. I have 7 clients in discretionary accounts that want no part of ETF's of MF's they want stocks. At some point they will get the "my way or the highway" speech, but I'm not there yet.

I love that there are FA's making the case for Buy and Hold. It makes my value proposition so much easier to sell and prospecting so much easier

That's funny, because my new clients are mostly burned-out market timers. What a great business.

I wonder how bonds will perform relative to stocks and inflation over the NEXT ten year period?

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=VP1003marestocks

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/research/article?File=IWE_InvResTwoSidedCoin

I'm sure you guys have nothing to prove, anyway. But that's how I know you're just a  blowhard, lefty. You pitch bonds to a bunch of old ladies, or whatever,  and have a little fun with the in and out on the equity side over the economic cycle. And then, like the  blowhard that you are, you attack other people for  implementing sound investment practices for different risk profile cases.

No way you're holding a CFP license, getting on here and spouting your BS to the public.

I'm sorry to say, you give me a better idea of the liberal mind. Maybe you're not as smart as you think. Or maybe you're brilliant, and you're just toying with us. But I doubt it.

I know you weren't directing that towards me, but you are very sensitive

Sorry, I'm annoyed with know-it-all liberals and self righteous blowhards. I need to conserve my energy better.

Milly, your investment strategy has failed. Putting client's assets into equities,and then leaving them on the tracks to get run over by down markets time and time again isn't a sound investment strategy. I've asked you to prove otherwise and instead you attack me with your political babble. Typical of those with nothing to say-attack the messenger, not the messege.

Prove your strategy works or sit down and shut up. Numbers please!

[quote=Milyunair]

That's funny, because my new clients are mostly burned-out market timers. What a great business.

I wonder how bonds will perform relative to stocks and inflation over the NEXT ten year period?

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=VP1003marestocks

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/research/article?File=IWE_InvResTwoSidedCoin

I'm sure you guys have nothing to prove, anyway. But that's how I know you're just a  blowhard, lefty. You pitch bonds to a bunch of old ladies, or whatever,  and have a little fun with the in and out on the equity side over the economic cycle. And then, like the  blowhard that you are, you attack other people for  implementing sound investment practices for different risk profile cases.

No way you're holding a CFP license, getting on here and spouting your BS to the public.

I'm sorry to say, you give me a better idea of the liberal mind. Maybe you're not as smart as you think. Or maybe you're brilliant, and you're just toying with us. But I doubt it.

[/quote]

Huh?  Mily, I have to say, selling muni's is not a "little old lady" investment.  They won't make you rich, but they will certainly KEEP you rich.  And since most good bond buyers aren't market timing their individual bonds, it doesn't really matter where interest rates go.  Right now, I am trying to convince one of my friends to stop wasting time, energy, and money with the stock market, and just start buying muni's.  He's 39, has liquid net worth of about $2.5mm, no debt at all (not even a mortgage), and makes about $500K-1mm per year (he sells a niche service to fortune 500 companies and large law firms, his income varies a lot).  He has another $1mm in private company stock (which will soon have a liquidity event), and owns some various real estate and a few small companies in partnership).  All-in, he is worth close to $5mm.  And all he wants is stock tips.  I tell him time after time after time....WTF would you want stocks??  Even if we just collect a 4% coupon, TAX FREE (Fed&State), that's close to 8% taxable, with a fraction of the risk.  He just can't let go of the "excitement" of stocks.   And he is not quite an "old lady".

B-24, Good point! That Milly pegs Munis as an "old lady" investment is quite telling. Anyone who thinks that way obviously doesn't understand the Muni market and definately hasn't had exposure to real money.

24, I think your client is obsessed with stocks in the way my client is obsessed with gold. All the while, comfortably sitting on a diversified portfolio of stocks, munis, corporates, governments, real estate, and more. Recreation comes to mind.

That Milly pegs Munis as an "old lady" investment is quite telling. Anyone who thinks that way obviously doesn't understand the Muni market and definately hasn't had exposure to real money.

To point out the obvious, saying I don't favor munis as a core investment holding for the wealthy is a huge leap. Go back and carefully read my post. Better yet, don't.

Lefty, your leap and rapid conclusion leads me to conject that that lefty's mind seeks first to be  understood.

Anyone who thinks that way obviously doesn't understand the Muni market and definately hasn't had exposure to real money.

Uh huh, Lefty.  

Milly, numbers please!

Instead of attacking me with you inane political comments how about backing up that big mouth?

You're a big believer in the magic of buy and hold as well as tactical assest allocation. You show a rather basic lack of understanding of Munis, as well as technical analysis. Hmm?

Ok, fair enough, show us why. Show us why we are wrong and you are right. It should be simple. You do this everyday. Show us what you're showing your clients and prospects. Why your way is better. Numbers please!

When you start thoughtfully reading and responding, okay. Until then, no straw men for Lefty. Let's see your marketing timing performance numbers. Oh, I forgot, not gonna happen.

That's what i thought, you're all talk!  You've got nothing!

Time for you sit down and shut up!

For any of the big dogs out there who believe as " Milly the pup" does, same challenge- show us why you are doing this?

( After a sound rolled-up newspaper whacking by the Irish progressive, puppy retreats to his corner and listens attentively.)

It's too bad that civil discourse is dead in our culture. It seems like we are all too willing(yes, me included) to jump on each other's case. We get some satisfaction out of insulting each other, for whatever reason. The real point in this thread is that there are good questions being asked about the "best" way to invest customers assets. The example of B24's wealthy client is a great talikng point. So far, what I have gleaned from this thread is that buy and hold isn't dead, but buy and forget was never a good idea. Bonds have their place. You can hedge without using options. And each client is unique, one size doesn't fit all. I've learned that calling out someone's political views doesn't enhance your argument, it just makes you look foolish. Insulting someone on an anonomous site is futile. In general, this thread is a shining example of what is good, and bad, with this blog.

[quote=navet]

It's too bad that civil discourse is dead in our culture. It seems like we are all too willing(yes, me included) to jump on each other's case. We get some satisfaction out of insulting each other, for whatever reason. The real point in this thread is that there are good questions being asked about the "best" way to invest customers assets. The example of B24's wealthy client is a great talikng point. So far, what I have gleaned from this thread is that buy and hold isn't dead, but buy and forget was never a good idea. Bonds have their place. You can hedge without using options. And each client is unique, one size doesn't fit all. I've learned that calling out someone's political views doesn't enhance your argument, it just makes you look foolish. Insulting someone on an anonomous site is futile. In general, this thread is a shining example of what is good, and bad, with this blog.

[/quote]

Well summarized.  Although I could sum it up a bit quicker.....Continuously chanting "I know you are but what am I?" sounds pretty childish. 

I just don't quite get Mily's argument(s).  The "Lefty" thing is sort of, well, sophomoric, and it has definitely run its course.  And to be quite honest, I have never met or heard of a any good advisor that would argue the merits of municipal bonds for the right clients.

Navet, you've gleaned that buy and hold isn't dead? Why do you believe buy and hold is still a valid investment strategy?

Mily, I have to say, selling muni's is not a "little old lady" investment. 

For the record, I never said that - here is my meaning: BG apparently market times equities in and out of mainly debt portfolios. That sounds like conservative portfolios, in which case, market timing may be a luxury, compared to moderate or aggressive portfolios.

He goes on to recommend that another advisor market time those less conservative portfolios. That's what I'm calling BS on, not the use of muni bonds or even apparently being righteous about mainly serving old ladies or young ladies with debt obligations.

He believes in market timing for others, but his timing risk is smaller because he deals mainly in bonds, so he doesn't even have a track record of failure or success.

BG, if you have bothered to earn your CFP license, and you still believe in the type of marketing timing, or whatever, that you recommend, go for it. If you don't have your CFP, or CFA, or some other formal education, consider making the investment.

The only reason I jumped in here was to point out that market timing can be dangerous, and to express annoyance at apparently didactic economic liberals, who if you follow the thread, jump in with righteous badgering. I just think that is what is wrong with America, and also why it is hard to check in a few ideas on this forum.

I'm sorry for calling you Lefty, I don't really know anything about you, but it does seem like there are a lot of economic progressives on this forum, which is interesting, but also annoying.

I can't quote you audited returns, but how about he fact that I'm still in business after nearly a decade with the major indices lower than when I started.  If I lost everyone money, wouldn't everyone leave me?  My overall book is better than 50% fixed with the better part of that in Muni's.  If only I had started in 1982....

For any "V" fans out there, I'm going to change their catch phrase from John May lives, to Buy & Hold lives.

Those early V episodes were a comic relief. A giant screen flashes buy and hold lives.

BG, I can't jst walk away from the buy and hold strategy. I don't claim to be the worlds greatest trader, it just makes too much sense to me to buy quality investments with the idea of holding on to them for as long as they are attractive. I don't know of an effective way to maximize profit by moving into and out of the market, aka market timing. I also believe that good dividend paying stocks look like great investments right now, and with a bond-like dividend I am happy to hold onto them for the long run. Now mutual funds can perform this function, but I am frustrated with American Funds and am moving clients away from them, I have the FSPENDS to prove it. And I am frustrated with the cost of trading stocks at Jones. Anyway, I have been interupted several times already(busy day) and this is becoming a bit of a ramble. Buy and hold isn't a panacea, nor is it a failed system. Like all financial products and strategies, it has its place.

1. I really cannot fathom why Milly continues to bring what he believes are BG's political persuasions into the investment discussion. What does one thing have to do one iota with the other

2. Righteous progressives may be annoying to you but may be gratifying to someone else. (I'm not saying they are or are not annoying to me, its irrelevant). I find your assumption arrogant, at the very least.

3. What makes you think that having a CFP would make BG or anyone else better at what they do, especially investing, for which in my opinion experience is the best teacher (assuming you have a mind) (disclosure: i have the CFP)

4. See the link: Looks to me like it can work, even if you are too lazy to put the work in on DWA:

http://dshort.com/charts/SP500-market-timing.html?SP500-monthly-10MA-since-1995

Buy and hold, show me the numbers! The numbers I see don't support the buy and hold argument.

Survey sez the average fund manager doesn't outperform the S&P 500 index. And the numbers over the past decade for the S&P 500 index are bleak. Maybe dismal would be a better word. Or, if you're an investor, depressing fits. And, actually, it's more than just the past decade.

Now if we take the decade apart the are times when that index was  absolutely flying. Remember how good we all felt around Christmas time 2003? The worst was behind us. Except the worst wasn't behind us. The worst was still about 4 and a half years ahead of us.

This point is this: If those invested in this index had a way to tell when things were going south, a way to get off the tracks before fate took them out, how much better would the performace be?  In all likelihood it would be better. It couldn't be much worse. The same goes for all indexes, including bond indexes.  

For core holdings I never advocated jumping in and out of the market. I do advocate simple moves. The market deteriorates after a five year run up, ah, time to head for the sidelines. The market starts to show a big fade after a one year 50% move up, again, time to head for the sideleines. OK, maybe you miss some of the top and some of the move off the bottom, but you also miss getting crushed.

Be proactive and take ownership of the performance in your client's accounts. After-all, it you invested the money, you own the returns or lack there of.

Wall Street has become a fee generating machine that fails to take responsibility for the lack of returns it delivers or the damage it does. Instead of owning up advisors are taught to refocus client's attention. "Take the long term view", "or one of my favorites "it's not about returns, it's about your personal strategy to reach your goals" To which i say "What an effin crock!"

And to top it off Wall Street delivers one hell of a crappy product! A mediocre off the rack investment wrap service for which it charges a premium price. And, it's built around MPT and buy and hold.

Let's talk individual stocks for a minute. Same thing goes. Hold forever? I don't think so!  I sold the 60,000 share position I held in XOM last fall at 74. Anyone here want to tell me I made a mistake? How much did i save my clients? How about BP? What's that saying "Never waste a good crisis?" Anyone here taking advantage of the price movement? Yes/no? No balls? Opinions? Will BP go bankrupt? 10% divivdend? tempting? On a personal note i shorted BP when i heard about the rig explosion. I covered late last week. Nice pick up for a month's hold. I should have sold the calls or bought the puts, i'm just not that smart. Woulda made Xtimes  the profit for the dollars at risk. Reminds me of my IBM short pitch days! Made money on that one too. Texaco bankrupt, same thing. Union Carbide kills a bunch of innocent people, cried all the way to the bank, Yeah, heartless! Cry me a river!

Anyone pick up Ford off the bottom? Chart said buy, we bought. What about poor old GE? Same thing. Sometimes ya gotta pick the low hanging fruit.  

Moving on anyone here do MBS? Show of hands? Yes/no? How about this; buy your client a B or C rated private label mortgage? Even with a 10% principal loss(unlikely), the combination of subordinated protection plus the discount would let your client walk away from the mortgage on payoff with a better than 12% capital gain plus the coupon payments. All-in a better than 35% gain for a four to six year hold with 75% of principal returned in three years or under. Cut the princ loss in half and the client walks with over 45%. And what an income machine for the clients! Whoo! Anyone?

Step-up notes? Barclays has a good rating and killer yields right now. yes/no?

Ah ,munis! Go back on this forum to September 08 to June 09. Look at my words. Words like pound the table buy. Remember those words? Anyone here do that? I know a few did.  There were a few others pounding the table as well. Did you help your clients take advantage of the disfunctional muni market? Or, was it "Gee what about when rates go up? Then you're screwed with those munis!" Except we no longer own them because we sold them for a 30 to 60% profit just outside a year.

BABs bonds were big last year. hell, they're still big! Anyone do that favor for their book?

California bonds? Anyone? Huge profits there. I mean BIG!!! Mostly coupons to big to let go of, but sometimes ya just gotta swap!

High yield paper? Yes/no anyone? Or just not part of the tactical allocation on the pie chart? What a shame.

It's about making money any way you can. That's what we get paid for. It's about seeing the wave before that wave gets rolling. Taking advantage of what the world gives us, on the up side or the down side. It's not about sitting there like a boob while your clients get massacred and then telling them it's going to be ok because you read it in some book!

Buy and hold does not work. It did for 20 years or so, but not now.

Get off your hands and do what your clients are paying you to do-make them money!

Because i promise you this: If i call your clients they will listen. And there is a legion of guys just like me out there. Market experts and even better salesman just looking for a way to eat your lunch. Don't help them by being a me-to advisor!

[quote=navet]

With respect to Buffett, he wasn't a billionaire to start with. He started small and became a billionaire through his investments. The difficulty with emulating Buffett is that he is smarter than we are(at least in regards to finance) and we may not be able to mimic his strategy. Nevertheless, buying quality investments and holding on to them as long as they are quality investments just sounds like common sense to me. Modeling strategy in response to the '08 meltdaon seems counterintuitive.

[/quote]

Ok Warren isn't a god..

Bio

Worked for Benjamin Graham(possibly a god) from 54-56(Graham closed it and Buffet had $174K)

Started Limited Partnerships, valued at $7MM in early 60s with $1MM being buffets eventhough he only invested .

He then started doing what he continues doing today(but on a larger scale).. He bought out smaller companies or enough to get on a board and change things(Sanborn Map Company, Berkshire)..

He eventually purchased Berkshire Hathaway in 1965 and closed his partnership and paid out to the partners, majority of his wealth being wrapped up in Berkshire..

Only took $50,000 salary..His wealth lies in the increase of Berkshire shares, started at  $14.86 and by end of 1979 was worth $1,300/share.

He is essentialy a nice corporate raider, he buys enough stock to have a controlling interest then moves the company the way he wants(not much different then Gekko)>.

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

If it is the once in 60 year event, we have a few more bad years in front of us.  Go check out 1929-1934

[quote=BondGuy]

Buy and hold, show me the numbers! The numbers I see don't support the buy and hold argument.

Survey sez the average fund manager doesn't outperform the S&P 500 index. And the numbers over the past decade for the S&P 500 index are bleak. Maybe dismal would be a better word. Or, if you're an investor, depressing fits. And, actually, it's more than just the past decade.

Now if we take the decade apart the are times when that index was  absolutely flying. Remember how good we all felt around Christmas time 2003? The worst was behind us. Except the worst wasn't behind us. The worst was still about 4 and a half years ahead of us.

This point is this: If those invested in this index had a way to tell when things were going south, a way to get off the tracks before fate took them out, how much better would the performace be?  In all likelihood it would be better. It couldn't be much worse. The same goes for all indexes, including bond indexes.  

For core holdings I never advocated jumping in and out of the market. I do advocate simple moves. The market deteriorates after a five year run up, ah, time to head for the sidelines. The market starts to show a big fade after a one year 50% move up, again, time to head for the sideleines. OK, maybe you miss some of the top and some of the move off the bottom, but you also miss getting crushed.

Be proactive and take ownership of the performance in your client's accounts. After-all, it you invested the money, you own the returns or lack there of.

Wall Street has become a fee generating machine that fails to take responsibility for the lack of returns it delivers or the damage it does. Instead of owning up advisors are taught to refocus client's attention. "Take the long term view", "or one of my favorites "it's not about returns, it's about your personal strategy to reach your goals" To which i say "What an effin crock!"

And to top it off Wall Street delivers one hell of a crappy product! A mediocre off the rack investment wrap service for which it charges a premium price. And, it's built around MPT and buy and hold.

Let's talk individual stocks for a minute. Same thing goes. Hold forever? I don't think so!  I sold the 60,000 share position I held in XOM last fall at 74. Anyone here want to tell me I made a mistake? How much did i save my clients? How about BP? What's that saying "Never waste a good crisis?" Anyone here taking advantage of the price movement? Yes/no? No balls? Opinions? Will BP go bankrupt? 10% divivdend? tempting? On a personal note i shorted BP when i heard about the rig explosion. I covered late last week. Nice pick up for a month's hold. I should have sold the calls or bought the puts, i'm just not that smart. Woulda made Xtimes  the profit for the dollars at risk. Reminds me of my IBM short pitch days! Made money on that one too. Texaco bankrupt, same thing. Union Carbide kills a bunch of innocent people, cried all the way to the bank, Yeah, heartless! Cry me a river!

Anyone pick up Ford off the bottom? Chart said buy, we bought. What about poor old GE? Same thing. Sometimes ya gotta pick the low hanging fruit.  

I had clients buy F bonds off the bottom instead of the stock.  Collecting 33% yield.  Clients called wanting to buy F stock and I asked them did they think that the stock would go up 33% every year?  So buy F.A

Moving on anyone here do MBS? Show of hands? Yes/no? How about this; buy your client a B or C rated private label mortgage? Even with a 10% principal loss(unlikely), the combination of subordinated protection plus the discount would let your client walk away from the mortgage on payoff with a better than 12% capital gain plus the coupon payments. All-in a better than 35% gain for a four to six year hold with 75% of principal returned in three years or under. Cut the princ loss in half and the client walks with over 45%. And what an income machine for the clients! Whoo! Anyone?

Step-up notes? Barclays has a good rating and killer yields right now. yes/no?

Ah ,munis! Go back on this forum to September 08 to June 09. Look at my words. Words like pound the table buy. Remember those words? Anyone here do that? I know a few did.  There were a few others pounding the table as well. Did you help your clients take advantage of the disfunctional muni market? Or, was it "Gee what about when rates go up? Then you're screwed with those munis!" Except we no longer own them because we sold them for a 30 to 60% profit just outside a year.

Yes--backed up the truck and loaded up!!  Even had some clients buy HY muni funds in IRA's

BABs bonds were big last year. hell, they're still big! Anyone do that favor for their book?

Yes--Loaded up.  The Eaton Vance BAB open ended fund is up over 10% YTD

California bonds? Anyone? Huge profits there. I mean BIG!!! Mostly coupons to big to let go of, but sometimes ya just gotta swap!

High yield paper? Yes/no anyone? Or just not part of the tactical allocation on the pie chart? What a shame.

Loaded up, but backing off of this now

It's about making money any way you can. That's what we get paid for. It's about seeing the wave before that wave gets rolling. Taking advantage of what the world gives us, on the up side or the down side. It's not about sitting there like a boob while your clients get massacred and then telling them it's going to be ok because you read it in some book!

Buy and hold does not work. It did for 20 years or so, but not now.

Get off your hands and do what your clients are paying you to do-make them money!

Because i promise you this: If i call your clients they will listen. And there is a legion of guys just like me out there. Market experts and even better salesman just looking for a way to eat your lunch. Don't help them by being a me-to advisor!

[/quote]

All this is fine, again, this looks more like the story tellers sales model than modern asset management. Do tell about your losers. Not.

I'm ready for this industry require a minimum professional license, like CFP or CFA, and lose the whole sales shtick.

http://www.thefreedictionary.com/shtick

Modern asset management? LOL !!!!!!!!!!!!!!!!!!!!!

Actually, in a way, we agree. That is: a generation ago Wall Street was turning out fully independant advisors. Members of this group were investment specialist as well as master sales people. Buttt, about 15 years ago the industry embraced the scalable fee platform. Going this direction required a new type of advisor. The new advisor's job was simply that of asset gatherer. The firms could lose the investment expertise part of the program and replace it with a course in statistical market history. Which of course is what they did. Because the new advisor is positioned between the investment experts and the client, their task has been reduced to a pure sales task. All they do is bring in the money and hand it over to someone else to manage.

Wall street also changed the pitch. But a pitch it is none the less. Instead of selling a product they now perform a service. Of course the service is the product. The wires, and now everyone else who trains advisors, arms its sales force with pie charts and questionaires. Questionaires to gain the trust and pie charts to pitch the product.

To get around the abysmal track record of this program Wall Street has trained its salesforce in the fine art of misdirection. "For example, in the face of steep loses, telling a client " it's not about performance, it's about attaining your goals." or "My job isn't to outperform the market, it's to help you retire."  And on and on it goes. This kind of thinking is akin to a head coach of an NFL team saying "My job isn't to win games it's to get to the Superbowl." It just doesn't make sense. Yet, the new advisor has to be a master salesperson to deliver this skewed logic and make it believable.

So, in that sense we agree. i think the deception is beyond unethical.

Regardless, you're not going to get your wish. The future is more sales not less.

Wow, you are really cynical.

Clients hire me to be here for them. Period. They're getting a good deal, a bargain.

I have a great career that allows me to study, think and act in a proactive manner on their behalf, in a consultative manner.

It's still tough to make a career in this industry, but I believe it is due to special interests allowing this to business to be more about selling products, like cars, instead of the professionals getting the upper hand in regulation.

It's not at all about products, or sales. I respect you and your right to make a living, though.

Just so we're clear.

Looking at the current regulatory environment, I think you're the one that is dreaming. Ironically, regulation will be wrought by your nanny state. Perhaps a silver lining, we'll see. I'm not at all afraid.

Look what the FPA is doing. It is time to stop chasing the general public, and settle down and serve in a professional manner, like dentists, doctors and other licensed professionals.

The discussion between Bg and mily is interesting, politics aside. The IRA and 401k have put middle America into the investor marketplace. There's so much money there that naturally the marketplace is trying to find ways to get paid to "manage" it. Yet, as the discussion on this thread shows, there is no clearcut optimal way to do so. The problem is that the marketplace doesn't reward the person best capable of guiding the investor . The market rewards the person who brings in the most money. And it is(in my opinion) an unwarranted assumption to say that the best investment guide brings in the most money, therefore the system is self regulating. The question I am asking myself right now is: Is this an ethical business, or is it a money chasing business that gives attention to ethics just enough to stay out of trouble, while maximizing AUM?

Think I'm wrong on my take of the current state of the biz? Fair enough, show me the numbers? Your numbers?

But of course you won't do that becaue your numbers indict your process, expose it as the scam it really is.

You're not doing anyone any favors with your pie chart. Gaining a CFP  isn't going to change that.

The world is not a fair place. if it was we'd live in the same town and i'd have your client list. Of course, after calling everyone on the list i'd have to find something to do for the next 364 days of the year. Still, i'd be doing everyone on that list the biggest favor of their financial lives.

Milly, i'm not going to follow your lead with the disingenuous comments about respect. I don't respect your right to make a living in this profession because you are what's wrong with this profession right now. You show up with a hand shake and a pie chart and then proceed to destroy those who trust you. I see this with every prospect appointment. People destroyed by the wires, regionals, independants, and RIAs. And always the same story, Managed money, modern portfolio management, put whatever name you'd like on it, same result. You don't have clients, you have victims.

Prove me wrong, show me the numbers.

[quote=BondGuy]

Think I'm wrong on my take of the current state of the biz? Fair enough, show me the numbers? Your numbers?

But of course you won't do that becaue your numbers indict your process, expose it as the scam it really is.

First of all, I don't have anything to prove to anyone. You won't be sharing your numbers, and I won't be sharing mine, for confidentiality reasons. No one is going to be sharing any real information on the internet.

You're not doing anyone any favors with your pie chart. Gaining a CFP  isn't going to change that.

Second, I've made money over the past decade, and so has anyone running "moderate" porfolios. The market has been relatively flat, but stocks and bonds have yielded dividends, and bonds have done well. That money has compounded nicely.  Don't try to BS me, or build a straw man that you can attack.

The world is not a fair place. if it was we'd live in the same town and i'd have your client list. Of course, after calling everyone on the list i'd have to find something to do for the next 364 days of the year. Still, i'd be doing everyone on that list the biggest favor of their financial lives.

Huh? A lot of folks don't like to be cold called about their money. What's your problem? Do you get cold calls from any professional, ever?

Milly, i'm not going to follow your lead with the disingenuous comments about respect. I don't respect your right to make a living in this profession because you are what's wrong with this profession right now. You show up with a hand shake and a pie chart and then proceed to destroy those who trust you. I see this with every prospect appointment. People destroyed by the wires, regionals, independants, and RIAs. And always the same story, Managed money, modern portfolio management, put whatever name you'd like on it, same result. You don't have clients, you have victims.

I retract the olive branch. You don't know Jack about me or my clients. If all the people I have helped are victims, I guess they are victims of goodness.

Prove me wrong, show me the numbers.

Stop. That won't help you save face. Don't attack things like education and the CFP. Stop being reactionary, change is here, look what the CFP board is doing in Congress. Trying to stop aggressive BS'ers like you. I hope your progressive friends are successful, like I say, it seems like they have found some friends in your Congress. Maybe my dues will finally amount to something.

The American public deserves better.

[/quote]

Milly, you've got nothing!

I'm not asking for your personal numbers, though that would be entertaining to see. Here's what i'm saying: Get your pie chart out, the same one you use when trying to convince new prospects the markets are a better place for their money than their mattress. Point out on that chart or charts, if you need more than one, how your system has benefitted clients. And i really want to see how those compound dividends have outweighted getting run down by not one, but two trains in less than a decade. pretend i'm a client, show me?

Milly, this isn't academic. This is real life. I'm out there everyday. I've seen what you pie chart guys have done to people. You've ruined them. Not in every case, but in most. And then you fail to take responsibility for what you've done. And, here's the wosrt part, "It won't happen again!" That's your answer to how do we protect client's assets from another meltdown. On this very thread there are posters saying exactly that. I'm not here to have a debate with you and take cheap shots. I'm honestly disgusted with people like you.

I don't care what designations you have behind your name, if you are doing this clients you need to thrown out of the business.

And a word about education. Education is a wonderful thing, but don't get too far ahead of yourself on that front. If you think the saying "People don't care how much you know until they know how much you care" is a catchy sales slogan you are living in a world of dilusional thinking. Success in this business is more closely tied to the meaning behind that phrase than it is to any designation. I take accounts from CFPs who don't know their ass from their elbow on a regular basis. Why is that?

The biggest probelm here is that guys like you are so brainwashed you don't realize it. You've bought into Tully's marketing plan hook line and sinker. I mean, your drinking the Kool Aide and not only do you not realize it's Kool Aide, you are so unaware you don't realize you are drinking anything. And, i know what you're thinking right now, who's Tully and what's he got to do with this?

Do you think the fee platform, what you call MPM, was rolled out because it's better?

Lastly, you keep misusing the term "straw man." Big surprise there! I'm not creating or attacking false positions. I wish i was! Quite the opposite. You guys really believe this stuff. I've simply asked you to prove and defend  your position. You steadfastly refuse to do so. Since when is asking someone to back up what they are saying creating a Straw man? No straw man here. That you attack me personally with all the BSer crap and policitcal diatribe shows me you've got nothing. if you did, as pissed as you are at me, you'd put me down faster than a lame mule. And what better way to do that than with the facts.  but?

[quote=navet]

The discussion between Bg and mily is interesting, politics aside. The IRA and 401k have put middle America into the investor marketplace. There's so much money there that naturally the marketplace is trying to find ways to get paid to "manage" it. Yet, as the discussion on this thread shows, there is no clearcut optimal way to do so. The problem is that the marketplace doesn't reward the person best capable of guiding the investor . The market rewards the person who brings in the most money. And it is(in my opinion) an unwarranted assumption to say that the best investment guide brings in the most money, therefore the system is self regulating. The question I am asking myself right now is: Is this an ethical business, or is it a money chasing business that gives attention to ethics just enough to stay out of trouble, while maximizing AUM?

[/quote]

Navet a couple of things:

there really isn't a discussion going on here

If you don't know the answer to that question my question for you: Are you an advisor? i'm not trying to insult you, just that though the answer may not be obvious to you, it's blatantly obvious to the people who run this industry.

One other thing. Think about all that 401k money. Now look at your charts. I direct your attention to the years 1982 through 1999. See the big run up in stock prices? Kinda hard to miss,huh? That big run up, unprecedented in the history of stocks, skews all the numbers to the positive. But that's not really what i want you to think about. Do you think we'll ever see that type of run up again? Before you answer, look at all that money sitting in 401ks and more importantly, who owns that money. The owners of that money are moving from the accumulation phase to the liquidation phase. And the generation behind them doesn't have near the fire power of the generation in front. If you are selling from the chart this is something that has to enter your analysis. What drove that market?

Who the heck uses pie charts?

You attribute a lot of things to my work that apparently reside in your mind. Then you attack. That is your straw man.

First you attack, then you ask for facts. You should know that you don't get to close the deal if you don't build trust, first.

If you have a hard-on about wrap accounts, why don' you just say so?

" NASD cites the 1995 "Tully Report" in NtM 03-68 that described fee-based programs as a best practice because they tend to reduce the likelihood of abusive sales practices. But the Tully Report also acknowledged that customer accounts with low trading activity might be better suited for a commission-based arrangement. NASD staff's view is that firms must take those steps necessary to assess whether a fee-based account is appropriate for a particular customer and to periodically update this assessment. " - FINRA

I see wrap accounts as another way to do business. The intuitive portfolio construction that you apparently boast about - has not been substantiated or quantified in your own case by yourself. Show us your numbers, don't just give a narrative about your trading successes.

You make vague claims of superiority and demand that others present facts that can be used to make you look good. Who bears the burden of proof here. What are BG's numbers, isn't that the baseline from which he brags?

Please don't use Nick Murray's "places in the heart" to lecture me about how I suck and and am ripping clients off.

Can't you see how progressive you have become in your logic and discourse? Come back to the center, man. Don't be reactionary and defend your status quo - that is the real purpose of your attack on the straw man facts which you attribute and demand of my business.

" I'm not here to have a debate with you and take cheap shots. I'm honestly disgusted with people like you.

I don't care what designations you have behind your name, if you are doing this clients you need to thrown out of the business. "

As long as we're being honest, and since you rejected my olive branch: I think aggressive blowhard progressive such as yourself should be considered for deportation. I hear Ireland is beautiful, but they may not let you get off the boat. I challenge you to earn your CFP and come back to this debate with your numbers.

What makes you say that event isn't likely to repeat.  It will, in fact, repeat again.  Buy and hold is predicated on the idea that clients can control their emotions.  They can't.  In fact, many advisors can't.  Dismissing 2008 as a one-off event is naive. 

Also, someone pointed out risk management as part of portfolio management.  The problem is that there is no definable way to quantify risk.  Not to mention that risk tolerance is dynamic and changes with perceptions and situations.  Quite often more than four times a year. 

Just because Buy and Hold worked for a couple of decades doesn't mean it always works.  The financial markets are constantly changing.  It is best to adapt and change strategies as needed.  Otherwise, there is absolutely no need for advisors. 

For the life of me, i can never understand why these debates, especially one's like this, which can be (and are) so useful and constructive and health, become so personal. But i guess i should mind my own business.

That aside, Milly, you are arguing two different things. 1. Buy and hold vs 2. business model. The CFP has nothing to do with managing money. I hold the CFP, and it seemed to me that they taught a whole lot about MPT, and just a little about Technical Analysis. Pick your poison. Or use both but emphasize one. Whatever. The beautiful thing about this business is that it is a business of opinions, not a business of right and wrong.

I for one choose not to go down the path of "asset allocation, buy and hold, invest for the long term" Myclients, and my target market, are in their 50's. For those of you who haven't been there, when you are in your 50's and need more money to retire, long term is a day and a half.

As far as a business model, the only comment i would make is that if i was a pie chart guy and used SMA's with very little active management, my business would probably have grown faster than it has. On the other hand, I would have lost an awful lot of clients over the last 2 years. So i guess for me, by being tactical, I've lowered the standard deviation of my practice.

I tell people that investments are at the core of what i do. But i add that there is no point in making investment decisions without developing a Financial Plan first, so we know what we want to accomplish.

News Flash: You can be a CFP and still be very tactical and throw away the pie charts.

JMHO

SFB and Magician- Good points!

My beef is with the invest'em and forget'em crowd of which buy and hold is their mantra. This group holds stead fastly to to their asset allocation models based on historical data. Thus the pie chart reference.

And for those who don't know, Tully was the head of ML. His comments as head of the Tully Commission were self serving as it was a well known fact that ML was embracing the fee platform. A marketing direction that they had then recently undertaken. It was  also well documented that at the time Tully was a broker hater. He didn't hate them because of any professional reason. He resented how much money they made and was actively looking for ways to reduce their share of the revenue. He shared this dislike of brokers with  the person who appointed him to head the commission, SEC chairman Arthur levitt. Levitt was a former head of Shearson and also resented the money brokers made calling it obscene. The Tully Commission, informally known as the Rogue broker survey, was designed to study the rogue broker problem supposedly plaguing the industry during the early nineties. And what better way to root out the scum then to put two broker haters on the case? A rogue broker was defined as any broker with five or more complaints who worked for at least three different firms. The theory was that said bad apples were jumping from firm to firm to stay ahead of and away from the regulators thus enabling them to continue on with their cheating ways.

The study only included RRs of which at the time there were roughly 90,000. The problem was the commission ended up with egg on its face. Instead of uncovering a vast underground network of rogue brokers ripping off clients as they moved from firm to firm they found the opposite. Less than 300 brokers fit their definition of bad guys. Roughly 1/3 of one percent. The unexpected finding left the broker haters scrambling. They had to come up with something. So they decided to go the self serving route to save face. Raise professional standards etc and as no surprise take commissions, the brokers income, off the table and find another way to compensate them. The rise of the fee platform, reduced income for FAs, and that we all need to take continuing ed can be owed to the Tully Commission. The broker haters got what they wanted.

BG made a very good point, but I don't think he went quite far enough.  Remember those returns from 82-99?  Do you know when Revenue Act of 1978 went into effect, allowing Rule 401(k) to be implemented?  January 1, 1980.  Do you know when most of the big industrial companies rolled out their first 401(k) plans?  January 1, 1982.  Do you know how old the first Baby Boomers were in 1982?......37. 

What does this all mean?  It means that the largest population wave in history entered their prime earning years at the exact same time as the first employer-sponsored employee savings & investing plan was implemented.  On top of that, we entered one of the greatest periods of economic expansion, technological change, and employee efficiency in history. 

All great stuff, but let's be honest, the internet will never be invented again, 401K's will not be rolled out again, and we've got some serious economic headwinds to deal with.  It is sad that many advisors still look at the Great Bull Market as easily repeatable anytime soon. 

I haven't seen bondguy's numbers posted yet.  I am trying to figure out the manner in which you want numbers posted.  If you want incredibly generic numbers that support buy & hold (at least holding actively managed funds anyway) look at the American Funds piece, "Why this was not a lost decade".  Everyone on this board loves to rag on AFS, and if they're so bad, then obviouisly there are funds that can be shown with even better performance.  Take any (gasp!) 60/40 split - you choose the 60% in equities and take 5% for the average yield on individual bonds.  The average return on their equity funds is around 4.5% (my math, not theirs).  So your client has averaged 5ish% over the last decade.  Is it the 15% brokers were selling in 98-99? No.  Is it the more reasonable 7-8% I tend to gravitate towards? No.  But, a client with a reasonable withdrawal rate has been fine, not great, but fine.  Now when the S&P runs back over 1500, we'll be in great shape. :)

An interesting - and important -debate:

MPT/Asset Allocation/Buy-n-hold/"Our best days are ahead of us"  vs. Technical Analysis/"Throw out the pie charts"/Fast money/"We will never see another '82 - '99 bull market."

These are the extremes, but the truth is very few advisors find themselves at those extremes. Most find themselves somewhere in the middle. I, for example, am a tactical/core&satellite guy and will use technical tools, fundamental analysis and good 'ol common sense to determine a core portfolio allocation and then set about finding opportunistic satellite positions that tend to be short term in nature. Works for me, works for my clients.

No I don't have "proof" or numbers to show that my way is categorically better than anyone else's. But then who does? The modern capital markets are only 50 years old. How much statistical relevance can we draw from any observable events over such a short period?

How do I know that buy and hold is dead? For all I know we are on the verge of another '82-'99 bull market. So few believe this, therefore I ascribe a high probability it may happen.

Or we could have another 10 years of extreme volatility and go nowhere. The only way to make money will be to follow Dorsey Wright and his merry x and o's.

I simply don't know. And neither do any of you. The best we can do, it seems to me, is to find our "religion" and do our best. With the understanding that constant adaptation is needed since much of what we assume to be true today will be disproven in a decade.

A final observation - Bill Good ( whose system I use and love) is promoting the Dorsey Wright money management approach under the tagline "No More Pie Charts." Now I love Bill, but he's never run a dime of client money. Kind of reminds me of when my dry cleaner was recommending internet stocks in '99.

That aside, Milly, you are arguing two different things. 1. Buy and hold vs 2. business model. The CFP has nothing to do with managing money. I hold the CFP, and it seemed to me that they taught a whole lot about MPT, and just a little about Technical Analysis. Pick your poison. Or use both but emphasize one. Whatever. The beautiful thing about this business is that it is a business of opinions, not a business of right and wrong.

Amen. My point about the CFP, or a college education for that matter, is that hopefully you learn to first seek to understand, then be understood.

I can give s### as well as the next guy, and I'm not taking it from BG.

I'd still like to see BG's numbers, not gonna happen. The reason I started this thread is to get some feedback on my mildly tactical allocation approach. I still don't see any solid evidence or discussion about how anyone has been killing the market. It basically comes down to selling some level of volatility and keeping your clients invested.

I meant the title of this thread to be a little more abstract. Of course buy and hold is not dead. You don't market time the buying and selling of your house every quarter, and you know that eventually the cost of lumber and cement and labor will go up in a relative way from inflation. There are owners, and there are lenders.

If you are soliciting a buy or a sell, you better have a good reason. Otherwise, I would argue that even though inflation is not strictly good for stocks, the main purpose of holding equity is to keep up with the growth and inflation in the economy, and collect dividends.

How you handle the volatility that is delegated to you by your clients is more "art".

I don't see any tactical guys here making calls about recent market conditions, or what might happen over the next twelve months.

Most clients likely would have been lucky if their advisor had just kept them in a balanced portfolio over the past decade. That's not necessarily the best way, or even the way I allocated portfolios, but if you are going to tell stories or attack other people's ideas, you better be ready to show the meat.

With regards to the state of the industry and financial advisors, in my opinion, you better be ready to sell more than performance. Of course, we all provide more than just investments and performance.

B.G., get over your attitude about wrap accounts or RIA fees. Your commission or 12b1 world is just another way to get paid. Nice history lesson, I think your analysis is a little cynical.

For most, there is no such thing as fast money. You go to the casino with $1000 and turn it into $5000 and cash out. Now what? You could walk, but you only have 5k. You double down and trade against yourself until you regress to the mean. If you're lucky, you walk out with $1000. You forgot to subtact the price of drinks and the nookie's drinks.

The next day, you tell big stories about your exploits at the casino. You forget to mention your losses. Your golf buddies smile and and enjoy your stories anyway. It's not so easy to BS them on  your golf score, which turns out to be average. Everyone is a winner, because they had fun and got some exercise. As it turns out, and they don't even really want to know for sure, everybody's d**k is about average size.

But there is a bigger picture here. In a post-industrial America, where the pie is growing slowly or even shrinking, there is a battle going on that mirrors this discussion. The free markets are shackled by regulations, taxes, central planning and destruction of competition.

For portfolios, costs and (tactical) allocation mistakes are still the biggest threat.

If you are cold calling people and making big claims about how you are going to add value and outperform the market and attack those who would provide consistent if not average results, you better have the goods.

Ironically, Congress is taking a closer look at this kind of story telling, and getting closer to restricting your freedom to call yourself a financial planner. If the nanny state is going to bail out Wall Street for its mistakes, maybe it should regulate planners better.

My point about anecdotal asset allocation, or tactical allocation, and regulations, is - once you start going down that road, sitting on your high horse and making a virtue out of your approach - it justs gets farther away from the center. Whether all of this is "good" or "bad", we'll see, I'm optimistic the markets will prevail.

[quote=Milyunair]

I don't see any tactical guys here making calls about recent market conditions, or what might happen over the next twelve months.

[/quote]

S&P hits 1200 & if it hits 1225 it runs on to 1300.

But the action part is secret.

So it annoys some that I keep pointing out that you have some avowed progressives attacking things like MPMT, asset allocation, index funds, wrap accounts.

In a market that is distorted by political economic policy, you have folks who claim to add value for their clients through their understanding of the markets. ( Alpha to asset allocation, through technical analysis, market timing, security selection, bond rotation, whatever.)

Saying advisors should be kicked out of the industry, are cheating their clients by not adding value, and so on.

Does anyone else see the built-in conflict of interest here? That's why I'm so shocked to see aggressive progressives here.

Kind of like accountants, lobbying for a complex tax code that only they can navigate, and then saying others are incompetent because they don't know how to practice voodoo.

With regards to tactical allocation, I think you have a new kind of risk: economic ignorance. Because whether your economics are conservative or progressive, you can be politically correct and come together on the need to take some action, even in a distorted market. So now you have boutique RIA firms trumpeting their newfound tactical approach - but in the face of increasing economic ignorance ( market distortion caused by government planning and regulation) - voodoo and stories become more important than showing your numbers.

The wealthy don't care anyway, they have delegated the money management task and the portfolio managers are mainly selling risk management, not performance, and do a good job for their clients.

So now we have: security risk, interest rate risk, market risk, inflation risk, ignorance risk ...

But in the spirit of Nick Murray, and that core belief in markets, and equities for the long haul, and so on, everything we're doing could be an investment. The markets will redistribute the wealth, even away from government.

Our flirtation with affordable housing for all, increasing regulation of the financial industry and brokers, bailouts, affordable medical care - all of this will bear fruit for long-term investors - because the market will respond.

In that sense, I still see no evidence to seriously consider shorter term tactical allocation very seriously.

Even the economic cycle seems to be skewed - now is the time (recovery) when small business should be creating jobs and small caps outperform. You talk about the need to cut payroll taxes so small business can create jobs, and people look at you like you're crazy - they think job creation comes from big corporations and government. And some of them are out giving financial advice. Crazy world.

If you can get your mind around this, you'll feel good about your job security, whatever your take on tactical versus static:

http://www.financial-planning.com/fp_issues/2010_6/looking-for-the-source-2667031-1.html

Fifty percent of the variance in returns among balancd funds is due to tactical asset allocation mix, 50% due to skill in stock and bond picking.

What percentage of fund managers outperform their index? Much of the variance must come from failure to perform at index.

How relatively important is tactical alloation? Probably enough to justify making a living.

For the those with a reading comprehension problem I'm not asking for anyone's personal numbers. Simply show the numbers that support buy and hold. You guys say it works. OK, you've got me I'll listen. Why do you believe that? What's the proof?

The reason no one has come back with the numbers, and i'll get to that American Funds piece in a minute, is because you don't have anything to support your viewpoint.

As for my numbers, the numbers that support my argument is the S&P 500 index.

And everyone of you ignored my comments about the bull market's run from 82 to to 99 and B-24's excellent detailed explaination of that market. As well, the foreboding truth that the demographic wave that drove those returns is fading and how do we deal with that? What does it mean?

The American funds piece is interesting. Sure took them long enough to come out with it. I don't have it in front of me but how has the recent downturn effected the numbers? I ask, because that piece, just like all Hypos is really just lying with statistics. Few, if any people got those returns. Those who invested outside the time frame listed, if even by a day, didn't get those returns. And more telling, is that on March 10th 2009 noone on that chart was in positive territory.  Let's see that chart, or the one for Sept 30th 2008. That said, i like American Funds and really like their Capital Income Builder Fund. But in almost 25 years of buying their funds i have yet to have a single client do as well as one of their promotional pieces.

Mily, on the gambling thing, if you don't know the difference between gambling and taking advantage of opportunity well, there isn't enough bandwidth here to explain it to you. Then again, you believe muni buyers are old ladies. But, here's a news flash for you, the people you give your client's money to, to invest, are by your definition gamblers. Look at their T/O ratios. They aren't buy and hold. They take advantage of the opportunies the markets give them. That's what you are paying them to do.

On the tech analysis thing with Bill Good. I love Bill and think he's on to something. We think alike in that investing money in these times without a way to protect against the black swan is foolish and reckless. I don't like the x's and o's but it sure beats sitting on your hands while the client book pays the price. And it's a world away from "It won't happen again." It's one answer. I've got a team member on it everyday with DWA.

[quote=BondGuy]

For the those with a reading comprehension problem...

Why do you believe that? What's the proof?

As for my numbers, the numbers that support my argument is the S&P 500 index. [/quote]

Wow, you just keep going on and on like you are the greatest thing since sliced bread. How long after October of 2007 did you wait to form this thesis referencing the S&P 500?

Let me offer some thoughts about B&H since your request for numbers can only reflect past performances anyway and everyone knows the past doesn't mean squat going forward.

Anyone can take any strategy and find a time it worked and can find a time it doesn't work. Gold right now?Oil in June 2008? The truth of the matter is B&H is only as good or bad as you make it. If you start "Buying" whatever set of diversified securities you want and "Hold" them from the time you enter the work force until you need to sell them for income in retirement it will benefit ANYONE compared to what they "typically" would do for themselves. The thing with B&H today is that everyone knows that strategy and at least uses it. Does it make it obsolete? Does it make your strategy better? Only time will tell. But one thing for sure is as bad as B&H looks right now, it is better than a savings account and CDs.

The good thing about B&H is it is easy to explain, implement and track. The bad thing about B&H is it should be a starting point. Once the client is educated and understands or trusts their advisor enough, it should benefit them to explore other possible avenues for investments. The only way to set you apart from the pack is to be an innovator not an imitator. If someone simply uses B&H in a B&Forget strategy then I feel they may be overcharging for their service. But, depending on the situation and the client’s results 30 years from now, doing nothing, if that B&H guy were to not cold call or DK them, would be worse.

If you base the quality of investment strategies to return only there will be a time when you are right and there will be a time you are wrong. In your opinion B&H is dead. In my opinion B&H is a good place to start. So be glad that advisors are selling B&H because if it were not for them and this simplistic strategy, clients would never reach our minimums.

Disclaimer: I use a boring core model surrounded by a certain amount of cash equivalents ready to take advantage of oversold markets to increase alpha while also reducing risk of the entire portfolio when needed. Sometimes it seems like the efforts and returns do not justify the endless hours but in the end I do what i love and my clients love what I do.

[quote=N.D.]

[quote=BondGuy]

For the those with a reading comprehension problem...

Why do you believe that? What's the proof?

As for my numbers, the numbers that support my argument is the S&P 500 index. [/quote]

Wow, you just keep going on and on like you are the greatest thing since sliced bread. How long after October of 2007 did you wait to form this thesis referencing the S&P 500?

Let me offer some thoughts about B&H since your request for numbers can only reflect past performances anyway and everyone knows the past doesn't mean squat going forward.

Anyone can take any strategy and find a time it worked and can find a time it doesn't work. Gold right now?Oil in June 2008? The truth of the matter is B&H is only as good or bad as you make it. If you start "Buying" whatever set of diversified securities you want and "Hold" them from the time you enter the work force until you need to sell them for income in retirement it will benefit ANYONE compared to what they "typically" would do for themselves. The thing with B&H today is that everyone knows that strategy and at least uses it. Does it make it obsolete? Does it make your strategy better? Only time will tell. But one thing for sure is as bad as B&H looks right now, it is better than a savings account and CDs.

The good thing about B&H is it is easy to explain, implement and track. The bad thing about B&H is it should be a starting point. Once the client is educated and understands or trusts their advisor enough, it should benefit them to explore other possible avenues for investments. The only way to set you apart from the pack is to be an innovator not an imitator. If someone simply uses B&H in a B&Forget strategy then I feel they may be overcharging for their service. But, depending on the situation and the client’s results 30 years from now, doing nothing, if that B&H guy were to not cold call or DK them, would be worse.

If you base the quality of investment strategies to return only there will be a time when you are right and there will be a time you are wrong. In your opinion B&H is dead. In my opinion B&H is a good place to start. So be glad that advisors are selling B&H because if it were not for them and this simplistic strategy, clients would never reach our minimums.

Disclaimer: I use a boring core model surrounded by a certain amount of cash equivalents ready to take advantage of oversold markets to increase alpha while also reducing risk of the entire portfolio when needed. Sometimes it seems like the efforts and returns do not justify the endless hours but in the end I do what i love and my clients love what I do.

[/quote]

N.D. , sounds like you are taking things written here personally.

I ask for proof, and i get attacked personally, time and time again. And still no numbers. I'm not asking for your numbers, because, likely, if you are like most advisors, myself included, you don't have audited numbers to give. You have a hodge podge of numbers from client to client based upon when they invested and just how much of your advice they took. Not a problem, and thus why i'm not asking for those numbers. You can't give them, Milly can't give them, and neither can I.

The numbers i want are the stats that back up Buy and Hold as the best strategy for our times. This time, today!

Buy and hold worked from the 82-99 time period on a very consistant basis. But it hasn't worked since. This leaves the group of people who need it most in a sad situation. For Buy and Hold to work, even in the best of times, you need time. The boomers are out of time.

My request is no different than reading someone saying that the Phillies are still the best offensive team in baseball, despite their current slump. OK, prove it? Show me the numbers that back up that statement.

It's that simple, yet a group of you have now gotten your short and curlies all twisted in a knot over it.

And so you know, my thesis, as you put it, was formed in 1987. Living through that hell was a cruel lesson.

Then there's the protection issue.

Oh, and as for being the greatest thing since sliced bread, well let's see:

I've been in the business for 27 years, thousands of clients, a mountain of money under management, a .62 ROA, a solid seven figure production range, and not one complaint, ever! Since the 08 debacle 3, count'em three clients have acated out. Meanwhile over the past two years I've added over 30 million in new assets.  My managers love me. My well paid team loves me, the charites I give my time and money to love me, or at least my money. The area's car dealers love me and most importantly my family loves me. In fact i'm meeting my sons in SC next week where we're picking up our newest toy, a 49 foot Beneteau. Then we're sailing it to my home in Florida. Actually, because of biz committments I'll only be on board for the three days to get to FL and then they'll take it the rest of the way to the west coast. Right now we're still checking bridge clearences to see if we can make it through the locks. But i digress. 

So do i think I'm the greatest thing since sliced bread? No, but looking at where I'am and considering where I started, I'm one lucky mother f#cker!  And, I know this business inside out.

Buy and hold begins with Security Analysis by Benjamin Graham and the sort of due diligence of Warren Buffet; and to that ends it begins with the same value investing that Bond Guy does. It becomes hard to leave the most brilliant minds in our industry - but in actuality following what BG says is the same thing.

His separation: take gains. Is that so different from what you do, Mily? Or anyone here?

[Edit] as a side note, the urge to "fill the boxes" when rolling investments over wipes out value investing. I can only speak for myself here and know that I am guilty of this as well. I had a rollover in April, and dutifully filled out the international box. Was that the value purchase? Guilty as charged.

If BG saw those statements, he'd have every reason to gloat. If you've bought low, it's ok to buy and hold. But buying to fill out the box, not so much.

BG - So let me get this right... It's ok for you to bash other strategies just because you have a new toy? WTF ever. I personally do not care because I know why I am here every morning FIRST and why I leave every evening LAST. And if someone starting in this business chooses to use B&H as their strategy, who are you to criticize them?

A B&H strategy from an ethical advisor is way better then the churning crap advisors that pretend to be portfolio managers. Just because they do not get paid commission doesn't mean they can't churn a client’s account. In actuality I see more churning in fee based accounts just because it gives the client the FEELING that their account is better MANAGED.

I do not see problems with strategies; I see problems with their implementation. Like I said in a previous post, B&H in some cases will be better for the client. But I stress to not let B&H become B&Forget.

All though your claims of success on this board and a dollar will only get you a McChicken sandwich, I will still offer my congratulations to your success. Many on this board speak highly of you and the respect you have earned from our peers here means far more then the words of material accomplishments you added in your second post.

I don't think that we get paid for our investment strategy. For most of us, we probably don't have a personal strategy, and even if we did it would be pure luck if we outperformed the various benchmarks. Our value to most clients is similar to that of a doctor to his patients. Most doctors are going to examine, diagnose and treat patients about the same way. In fact, they put their license at risk to do otherwise. What patients pay for is a level of expertise in medicine in general. That general understanding is beyond the pale of most patients. The doctor is knowlegable of the variety of tests and proceedures to employ a treatment plan to meet that particular patient's need. As investment advisors(or FA's etc) we build a financial plan to take careof that clients' needs to the best of our ability. Since when is beating a benchmark rellevent? What benchmark measures our ability to help the client meet his retirement, education, shorter term savings, life insurance, disability, LTC, mortgage financing, debt consolidation etc  etc  etc needs? Do clients have the capability to effectively do this for themselves?

McChicken sandwich - that was funny. 

This thread is exactly the reason there are so many ACATs floating around out there.  Every advisor does things just a little bit differently.  People, clients that is, are constantly chasing what they believe as a better mousetrap. 

Good posts.

Yeah, I was a little put off by the bragging.

Buy and hold:

http://advisorperspectives.com/newsletters10/pdfs/Asset_Allocation_Matters-But_Not_as_Much_as_You_Think.pdf

Wow , I certainly spent the last 40 minutes reading through this thing and after skipping most of mr milynair....

What I find interesting in the debate is just how we define things like bull market, bear market, flat market.

Between 1966 and 1982 we had a flat market... Right...

However if you were an advisor or investor the market was anything but flat.

66-70 (-29.3)

70-72 41.4% up

72-74 (-42.3)

74-76 73.3% up

76-78 (-24.8%)

78-82 up 32.9%

At the end of all of this who is better off? The client who bought the S&P index in 1966 or the client who used a benchmark of say 15% profit and took money off the table each time?

Serioulsy? It seems obvious to me that the real strategy is much like BG said. Take profits when they seem obvious and buy when it seems obvious. The real question is when it will seem obvious.

Dropping to 10,000 in 2008 seemed like an obvious opportunity to me at that point in time.  40% broad market drop equals a buying opportunity right?

Seriously? You're going to add value by timing the market.

You read the BS about Brinson revisited, and then at the end of the FP article:

" In other words, even if Brinson's original 90% number has been misinterpreted, this misinterpretation is still useful and holds deeper truths about what planners should be focusing on. Says Siegel, "A high-risk hedge fund may find 100% of returns come from security selection, but for most investors the key lies in finding the right asset allocation mix." "

Being a blowhard about the value you are adding, when you're not, is part of what prevents planners from being taken seriously by the public.

A few years ago, financial advisors were view more positively than they are today.

The problem is we are playing while handcuffed. When you have a financial crisis engineered by easy money and easy politics, and then you have bailouts with borrowed money, the next thing you will have is increased taxes, devaluation of the dollar and debt, and so on.

If anyone here has any real ba$$$, they will be strongly advocating more equity ownership for the long haul. Market timing is just more politics and gambling and dishonesty, which is for p*****s. Read the research.

PE 10 has been shown to have better results than simply buying and holding.

Faber has shown you can at least prevent drawdown (which is the biggest impetus for client removal from equities) by using the 200 SMA.

Just because it isn't "common thought" or hivemind mentality of the FPA, doesn't mean it doesn't work.  There has been endless propaganda on buy and hold and how no one can beat the market.  My grandpa beat the market like a son of a gun. 

A schoolteacher retired after ten years of teaching because he picked stocks out of the newspaper that he liked and sold them when he decided they were out of their rapid growth stage.

I think that the arrogance of all-knowing, this is the way it needs to be done and the only way it can be done is limiting and is not what this country was founded on.

http://www.fpajournal.org/CurrentIssue/TableofContents/ASimpleStrategyforPortfoliosTakingWithdrawals/

Magician, the study I posted earlier shows a "safe" 30 year withdrawal rate for a 60/40 portfolio to be 4.03% (1927-2008, annual 30 rolling), versus 4.37% for the "tactical" portfolio.

My point is, how much risk does the "average" advisor have to take to get how much potential increase in the withdrawal rate? Hence, the conclusion of the Brinson article above.

There has been endless propaganda on buy and hold and how no one can beat the market.  My grandpa beat the market like a son of a gun. 

A schoolteacher retired after ten years of teaching because he picked stocks out of the newspaper that he liked and sold them when he decided they were out of their rapid growth stage.

I think that the arrogance of all-knowing, this is the way it needs to be done and the only way it can be done is limiting and is not what this country was founded on.

Now we are getting to the point. Actually, no one has proved they can beat the market here. BG held up the S&P index as his acid test, which doesn't even make logical sense, since he was claiming to beat it. A non-sequitar.

I think you misrepresent your granddaddy.

What this country was not founded upon, is hiding behind BS. Having undereducated sales people call up the general public, and make big claims, and then have those big corporations legally steal money from people, and then have the government bail it out - and then try to protect the status quo, that is unAmerican.

In other words, good advisors don't sell performance, and they probably work for themselves, or small companies. They are not the blowhard wire guys who are telling performance stories and not delivering results.

If you are going to make a claim that you can beat the index, you have to prove it. So far, this entire thread, not one shred of proof, even from the journal articles. Huh.

I am not claiming to be all-knowing, I am an advocate for bringing more young people into this business, so they can help the general public, not big corporations by serving a bunch of BS or bragging about how much money they made.

Good post mily. I disagree on one point. I believe it is very American to bail out big business. Big business and government have been in bed together since Hamilton convinced congress to nationalize the revolutions war debt. Wasn't it TR who had JP Morgan bail out Wall Street after the panic of '97? I don't mean to be cynical, just give an honest appraisal of our history. In the USA the Golden Rule means the one with all the gold makes the rules. And when the guys with the gold become too corrupt, the people revolt and pressure government to act.

Thanks, Navet.

We agree. And, in a larger sense, by bringing historical perspective, maybe it calms some of the hysteria right  now on the political right. ( And the left.)

Without liquidity or stability, you just go into deep, dark recession. 

Here is a quote on the tactical question:

" To prove that active management makes sense for portfolio managers, you would need to analyze a universe of institutional managers who can own any asset class and are completely unconstrained to make asset allocation changes in pursuit of value opportunities. Then you would need to come up with an acceptable benchmark for the universe of asset classes. Since I don't believe there is such a universe of institutional managers available to study, and I don't believe investors would agree on the proper benchmark for comparison purposes, I don't believe there can be a valid study to prove or disprove the benefits of active portfolio management.

When generations of planners have been taught that active management is an unprofessional, high-risk portfolio strategy, it may be difficult for them to analyze different investment approaches objectively. Without a study to "prove" that active portfolio managers can outperform, it may be impossible to persuade the naysayers that active management is a valid choice as a money management philosophy."

http://www.financial-planning.com/fp_issues/2010_5/asset_allocation_tactics-2666636-1.html?pg=3

Most of these articles go on to say you better have some pretty solid research and methodology if you are going to try to add value.

I like selling, I'm just tired of people not trusting advisors. Most advisors will do best to focus on other than performance, and not take on market timing and certain other risks.

Also, MPT is based on research and science. Obviously, if everyone follow it, market opportunities would exist outside of what the herd was doing.

Part of my point is that the thundering herd seems to be gravitating toward market timing.

I do not agree with the author that constraints and benchmarks preclude a study to prove outperformance. You have cases where a Buffet takes actual ownership - otherwise, you have portfolios that strive to track various benchmarks in a relatively unconstrained manner. These are called managed funds, of which over the past five years 44% of large company managers have beaten their indexes.

I don't care about that. What I care about is that some advisors are trying to provide other value to clients for a fair fee, and then you have sales people mucking up the waters for the rest of us. A little more education and licensing as to who calls themself an advisor is in order.

So, if I, say, sell life insurance to business owners and do complex succession and estate planning, but do no investments, I can't call myself an advisor?  But if I throw a wrap fee around a bucket of stocks and 'manage' them for a fee, I can?

Update: Well the planned boat trip didn't come off as planned. Seems the boat failed it's shakedown cruise. So, I'm back up north , but will be in FLA on Friday to close a biz deal. The combo of getting the boat ready to go, the shrinking weather and time window just made the trip undoable. Just like my old helicopter flying days, all dressed up and no where to go.

The Beneteau Oceanis 50 is advertised as a Bluewater boat. Sailing World mag even did a story and pronounced it so. But in truth, not so much. It's a comfortable fast cruiser that will serve it's main task of Island hopping well. But the thought of doing the 1200 mile slog  from Lauderdale to Tortola on this boat sends shivers down my spine. And going the Thorn route, yeah right, that ain't happenin' even if i did have the time. Of course i already knew all this which why we're basing the boat in Florida to start. In August it's going to Georgia for a makeover, of sorts,  to get some beefing up so it can handle some offshore work without scaring the living daylights out of it's skipper. BTY, did i mention that my experience resume also includes some serious Bluewater sailing? I love it out there. Just you and nature. When the wind blows hard and the sea builds into mountains of water you are in it now! There is no place to hide! Scared shitless, but living every minute! Whew ,what a feeling! I'm getting excited just writing about it! I can't wait to get back out there! And, it sure beats the desk i get to drive on my day job!

 As anyone who has owned boats can tell you, not only are they big holes in the water into which you pour money, they are also compromises. The boats that come off the assembly line ready made to face the toughest sea don't have the room, creature comforts, or performance of this boat. Think station wagon versus Corvette. And the truth is, most of the time this boat won't be more than a dozen miles off shore. An average day in the life will be spent at anchor in some cay. So, really, just how much boat do you need to do that? But, it has to be able to navigate vast expanses of unfriendly ocean to get to these sailing grounds and thus the beef up makeover.

Now, I'm really sorry that some of you guys don't like it when I speak of my success. And to tell you the truth, I feel pretty guilty about pissing some of you off, or making you unhappy, so, next winter i'm going to go and feel guilty on some beaches in the Berry's.  In fact to deal with my deep feeling of angst i'm going to go on a 12 step program. I'm going to step from Lauderdale to Bimini, and then step from Bimini to Chub Cay and then from Chub Cay to Green Turtle Cay and so on until i finish my rehab. And you can hit the ignore button if you don't like it!

Back on topic- Milly, you have a serious reading comprehension problem. Please show me where i said I outperformed the S&P 500? Feel free to parse and snip.  To those who are interested what i said it was that the S&P 500, the most widely held basket of stocks,  is an example buy and hold not working. i'm not bashing anyone's strategy, or slamming a way of life, i'm pointing out a fact.  I again ask you to prove to me that buy and hold does work. You said it does work. back that up! Apparently you can't.

Navet, interesting post!  The enitire "My job isn't to beat an index it's to help you achieive your financial goals" line of thinking was created by Wall Street's biggest firms as a defense against poor performance. This was done to stem the exodus to the DIY side and to protect the fee model. It would be hard to build a scalable business if you had old money walking out the back door faster than you were bringing new money in the front. Thus a marketing campaign was created to counteract the drumbeat of performance pushed by the competition. It isn't surprising that the unsophisticated investing public fell for this line, but apparently they have company. And, think about it, not having to outperform? What a great deal!!!! Who hires that guy? That entire line of thinking get's Wall Street off the hook for not being able to deliver the goods.

Magician, Real World - good stuff!!!

[quote=deekay]

So, if I, say, sell life insurance to business owners and do complex succession and estate planning, but do no investments, I can't call myself an advisor?  But if I throw a wrap fee around a bucket of stocks and 'manage' them for a fee, I can?

[/quote]

I think you need to be able to do both to be an advisor.  Otherwise you are a life insurance agent rather than an advisor.  (not that there is anything wrong with that)  I have found that the life insurance companies give better training on estate planning than the brokerages.

[quote=I am legend]

[quote=deekay]

So, if I, say, sell life insurance to business owners and do complex succession and estate planning, but do no investments, I can't call myself an advisor?  But if I throw a wrap fee around a bucket of stocks and 'manage' them for a fee, I can?

[/quote]

I think you need to be able to do both to be an advisor.  Otherwise you are a life insurance agent rather than an advisor.  (not that there is anything wrong with that)  I have found that the life insurance companies give better training on estate planning than the brokerages.

[/quote]

And if all you do is manage investments, you're an investment advisor, not necessarily a financial advisor.  Yet all the reps that are making a big stink about the advisor vs. salesperson debate are 99.9% investment-driven.  A miniscule amount know about insurance/asset protection.  Kinda ridiculous if you ask me.

If you bother to get your CLU, you hold a license that distinguishes you as an insurance expert.

CFA, investments.

CFP, generalist.

If I was doing buy-sells for my business, I'd work with my CPA and CLU and JD.

Series 7 is probably more of a basic intelligence test and compliance license. Same with state insurance.

Experience and honesty are huge. At least if you hold any license, it can be taken away for abuse of ethics, and so on.

Saying that it is ridiculous to distinguish between holding advanced designations in your chosen profession and dealing with someone who didn't bother - is ridiculous.

Anyway, its an education problem, not a boasting contest.

BG, I'm sure we all measure success in different ways. Enjoy.

So you are saying that MPT is based on science, but not acknowledging the flaws?

Keep in mind that Ibbotson is using the exact same flawed methods.  What this article is pointing out is that the "93%" argument is flawed, because it is not distinguishing between asset allocation and market movement.

MPT is predicated on a normal distribution, when it is factual that investment returns do not follow a normal distribution.  Economists using parametric methods to deal with non-parametric statistics is going to show flaws.

You think there isn't science behind Faber's study, or any of Ibbotson's?  Ibbotson teaches at Yale.  He's not a dumb guy.

Then there is the issue of equating volatility with risk.  Not all volatility is bad.  How risk averse is a client who just saw their portfolio double in a year?  Not very, yet that portfolio is twice as volatile as the market.

As for my grandfather.  My grandfather every year would set aside a portion of money and simply buy stocks that he thought would do well based on his own brand of research (he was a petroleum engineer) of companies he either knew about through work or worked with.  He would buy four or five small companies.  Some would fizzle, some would grow slowly, and some would grow astronomically.

He recognized that he could put $1000 in a stock and if it tanked, he would only lose $1000.  If it quadrupled, it would make up for any other losses.  If it was a real gem, he would make tons more.  This is how he invested.  He was frugal, and never spent it, and in retirement relied on his pension and even started a business (which failed).  After his death in 2004, he was able to provide six good years of living for his widow and still leave a portfolio that blows past anything American Funds or Franklin Templeton has done.

His method of investing worked better than any asset allocation model you MPT guys use today.  There are countless tales of investing like this.

Another guy who says buy one quality company and then take the rest of your money and invest it in some potential growth companies. 

Continue to follow the path of the passive advisor if that is your choice.  But don't think that just because that is seen by large brokerages and the FPA as a way to justify losses in a down market, that it makes you better than people who also use science that has been tested, tried and true to prevent drawdown, which is the real portfolio killer.

By the way BondGuy - some of us admire your success and are glad that you have shared your approximate lifestyle with us.  Part of doing this job and dealing with the stress involved is to reward yourself.  Kudos to you. 

I follow you until you talk about justifying losses in a down market. Losses, compared to what? By definition, if your time period is longer, your definition of losses and gains changes - that's the whole point.

When I was a kid, there were half as many people in the world. Everyone needs to figure out things like geopolitical risk, or even, in your grandfather's case, individual security risk.

You could be a pensioner in the UK holding BP stock, and could have hedged that risk of owning a concentrated holding - or you could have just owned the energy or large cap index. I don't really care about the individual strategy, not saying one is better than the other. But when you are managing other people's money, you better be aware of th risks and have a plan ( investment policy statement). Basic stuff, I'm pretty certain this debate is tapped out.

Of course there are flaws in MPT, it is just a guideline. From the research, I'd say it is still a pretty good guideline. For professionals, and with regards to OPM,  it's probably safe to say you should consider learning the rules before you "break" them.  Being accountable to things like having an investment statement and not being manipulated in understanding or being sold on narrative stories or criticism of the competition could help the public trust "financial advisors" better. You don't have dentists calling up prospects and bragging about their work or saying their d*** is bigger than guy on the other side of the wall.

I follow you until you talk about justifying losses in a down market. Losses, compared to what? By definition, if your time period is longer, your definition of losses and gains changes - that's the whole point.

When I was a kid, there were half as many people in the world. Everyone needs to figure out things like geopolitical risk, or even, in your grandfather's case, individual security risk. Everyone knows about the black swan - in the case of a "flash crash", the hedging mechanisms themselves may be at risk. This is why I go back to basics, like having the right proportion of equity ownership for the long haul, and capital preservation. There is always a cost associated with (shorter term) transactions, concentrations, or just plain risk mitigation, which often turns out to be feeling better about the short term - sleeping better at night.   

You could be a pensioner in the UK holding BP stock, and could have hedged that risk of owning a concentrated holding - or you could have just owned the energy or large cap index. I don't really care about the individual strategy, not saying one is better than the other. But when you are managing other people's money, you better be aware of th risks and have a plan ( investment policy statement). Basic stuff, I'm pretty certain this debate is tapped out.

Of course there are flaws in MPT, it is just a guideline. From the research, I'd say it is still a pretty good guideline. For professionals, and with regards to OPM,  it's probably safe to say you should consider learning the rules before you "break" them.  Being accountable to things like having an investment statement and not being manipulated in understanding or being sold on narrative stories or criticism of the competition could help the public trust "financial advisors" better. You don't have dentists calling up prospects and bragging about their work or saying their d*** is bigger than the dentist with the new leather chairs on the other side of the wall.

You could probably do well just trading between cash and international small caps indexes. A lot of time for fishing and sleeping. Sometimes you're beating the "index" and other times you're lagging, but in the end you come out all right. Doesn't mean you're the greatest thing sinced sliced bread, or that the risk and excitement and sleep and fishing makes your way better. First, do no harm, to your clients OR your colleagues.

Magician, great post!  Nice to see someone else who gets it. Sounds like your grand father and i would have gotten along just fine. i love people like that and i love hearing the stories of success. You never know when you're going to learn something or who you'll learn it from.

 As i was reading some of the posts here, some of which are excuses for poor performance, I was trying to figure out what's wrong with buying a basket of well researched stocks, and then including a 20% stop loss on each? Basic risk management founded on the fact that if you buy an equity that then goes down in price you bought it wrong. Using a simple example, take the equity portion of the allocation, buy five stocks using a 20% stop loss limits your exposure to any one mistake to 4%. Four percent is a loss we can come back from. This simple concept is lost in this conversation, but to me this is Risk Management  101.

And thanks for the kind words regarding my outside interest. I know it's a bore to listen to someone drone on about their stuff, but I'm pumped! I gave up  Flying because of unpredictable migraine headaches. So i took up sailing to try to get my yah yahs. As my kids came along I gave up bluewater sailing because it didn't fit with being a Dad, little league coach, soccer cheerleader ,and chauffer. So, now with most of chicks out of the nest, it's now or never. Like I always say " Growing old is mandatory ; growing up is optional !"

I believe you on the growing up comment.

Add value by doing research to discover value, then buy equities.

If the rest of the market tanks (relative to your individual security holdings), or if the market rejects the value you added with your research, automatically sell out - at a 4% loss. And then ...   

Viewed from a different angle (MPT), your loss is potentially not limited to 4% ( you sold out your equity allocation at 20% loss). Your stop loss order  "manages" or addresses a narrow range of risk or opportunity (like, individual security risk or market risk).

Because there are other things going on besides market fluctuation, or because short term market perception of your researched holding may not equate to realistic long term valuation, at the very least, either your research or your strategy are likely to subtract value, not to mention your trading costs or potential taxes.

Limiting loss is a huge component of risk management. Limiting potential gain or even gambling with the equity portion of the portfolio over longer timeframes is another risk - to the entire portfolio, and the client's goals. You add value ( and charge) for research in stock selection, you probably need to justify profit (or loss) taking with research. Most of the tactical stuff seems to focus on profit taking, not loss selling coupled with value research. But the fact is, in reading the industry articles recently, tactical people are mostly BSing. Really.

Your idea points out a need for a basic level of education, if planners want respect as professionals. At the very least, you need to have a plan on where to go from here, which would be interesting to hear and test.

You talk about excuses for poor performance, I'll bet you know plenty of them.

[quote=Milyunair]

I believe you on the growing up comment.

Add value by doing research to discover value, then buy equities.

If the rest of the market tanks, automatically sell out - at a 4% loss. And then ...   You are really a blowhard.

 [/quote]

Question: Is math also a challenge for you or is your incorrect math in  this post a result of the reading problem? Just curious?

If the entire market tanked the loss would be 20%, not 4%.

The premise is that the future is unknowable. Certainly, the market could tank 20%, and then bounce right back. The immediate bounce back is unlikely and without precedent. But it could happen. As for 20%, that would be a gift to those buy and hold advocates/victims who suffered thru 01-02 and who again suffered in 07-09. As well as 29-32 and 87.

The reality of the stop loss and it's correct use is to limit loss. It's use recognises the undeniable fact that the future is unknowable. Setting a 20% gap, in most cases, takes it beyond normal market movement caused by day to day trading. IOW, if a stock is down 20% something is wrong; either with the stock or the market. The research that dictated buy is no longer valid and the best place to be is out.

BP is a good example. BP is a high quality company, had a strong dividend. A strong argument for purchase could have been made in April 09 at 40. The stock topped at about 60. A trailing 20% stop loss would have taken investors out at 48. A solid 20% gain not counting the div. What's wrong with that? It sure beats being down the 20% the buy and hold crowd now finds themselves in, in the same scenerio. By a show of hands, which client would you rather be, up 20% or down 20%?

Likewise the investor who bought BP two months ago at 60. They would have been out at 48. Since math isn't a strong suit here I'll do it for you. A 12 point  20% loss is better than a 28 point  47% loss. See how simple that is?

But wait, there's more! The buy and hold crowd is without options. Down 40% plus what can they do now? They are stuck with thier lousy investment and need an 88% gain just to get even. Ouch!!!! And now, no dividend. Ouch again!!!! 

Meanwhile over at the stop loss table they are  counting their profit and considering a repurchase. Buy at 32 with a SL set at about 26. They've got options. They can buy BP or walk away. Again, by a show of hands, which group would you rather be part of?

As far as the math, in a stock and bond portfolio, obviously the stock decline can be viewed as pure stocks, or what the stocks do to the value of the whole portfolio, in terms of volatility - the fluctuation seen on the client statement. Duh.

If the buy and hold crowd is invested in half stocks and half bonds, and the stock market tanks 20%, how low does the portfolio value go and what percent upward fluctuation brings you back to even?

About 15 years ago, I practiced your little idea here and moved on to something better. A big part of that is spending valuable time on what really matters.

Reading comprehension: since I run indexes, I don't care about individual security risk. Leave BP at the door.

I don't really care how you run your money or how you patronize with your babble.

The mental image of Ted Kennedy on his sailboat with his minions is priceless.

[quote=deekay]

[quote=I am legend]

[quote=deekay]

So, if I, say, sell life insurance to business owners and do complex succession and estate planning, but do no investments, I can't call myself an advisor?  But if I throw a wrap fee around a bucket of stocks and 'manage' them for a fee, I can?

[/quote]

I think you need to be able to do both to be an advisor.  Otherwise you are a life insurance agent rather than an advisor.  (not that there is anything wrong with that)  I have found that the life insurance companies give better training on estate planning than the brokerages.

[/quote]

And if all you do is manage investments, you're an investment advisor, not necessarily a financial advisor.  Yet all the reps that are making a big stink about the advisor vs. salesperson debate are 99.9% investment-driven.  A miniscule amount know about insurance/asset protection.  Kinda ridiculous if you ask me.

[/quote]

I get what you are saying here and mostly agree.  Just the ability to do it because you have the licenses doesn't mean you are doing a full planning job for clients.  We should be doing both in order to be called a planner or advisor.