>>>The most powerful weapons in an investor’s arsenal are time and patience. <<<
You are a walking encyclopedia of stock market platitudes. Not a criticism, just an observation. Let's see, when I was approaching my 38th birthday in the spring of 1985 I was unemployed and had around $2200-$2300 in my account. I actually had a negative net worth if you take into consideration credit card debt, etc. Taking your beloved index approach with my account coupled with "time and patience" would put me about where almost 30 years later? Not in a very secure financial situation that's for sure.
Edit: Stock market platitudes aren't all that bad. For instance, I think the best wealth creation tool out there is the tax free compounding of your capital over time (but please no patience as that leads to subpar returns) You talk to some of the traders on the trading forums and tax free accounts ala IRAs etc are foreign concepts to them.

Thanks Joe
You said it well-much better than I did.
Actually I have to wonder if someone in 100% equities actually did better long term than someone with some bonds in their portfolio. Bonds have had an amazing run over several years -up until now.

David and Crash
I don't necessarily disagree with you but when I started investing as a young man I went to reading Bogle and he has influenced my decision making and it has worked for me. I am glad that I did because I didn't know much about investing at that time.My first experience with a financial advisor was a disaster. I guess I should be frequenting the Bogleheads forum instead of here . But, I don't completely but into everything Bogle says about investing and he has been wrong at times as has just about everybody else. You probably know what you are doing. The average joe doesn't and Bogle's fundamental philosophies has worked for me amazingly well. As I have gained sophistication I have strayed a little from Bogle's advice with no ill effects because I am a bit smarter than I used to be.
Super aggressive portfolios however have never worked for me because it could never predict the right time to buy or sell and usually left me with disastrous results and that was under the wings of a Certified Financial Advisor!
I guess right now Bogle sounds lame but should we have another major correction that takes many years to recover from, Bogle's advice will sound so correct.
Take care
Guido

Hello Bob C,
Nicely written.
Since I am now retired I have dialed my risk downward within my own portfolio from where it was five, or so, years ago. This was because five years ago I felt there was better value to be had in the markets and I was willing to dail my risk upward and carry a heavier allocation in equities. Presently, I feel there is less value to be had in the markets and with this I have reduced by allocation to equities plus my age factor and now being retired.
I always enjoy reading your comments.
My best to you.
Old_Skeet

A lot of stress would be relieved if investors just did one thing to be less stupid in their investing...don't be greedy. And perhaps one more thing would be to create an allocation that is appropriate for their financial and emotional situation and then turn off the TV. As MJG so eloquently said, there is no one-size-fits-all answer. Each person must do this for himself, or hire a fee-only planner/advisor to assist. My plan is to continue working until I am 70 (6+ years) at which point I will turn my portfolio over to one of my current associates. Frankly I do not want to spend time on this when I am retired, and I find that most people think the same. One thing I do know is that I will be less willing to accept the kind of risk I have in my portfolio now.

I have been in this business long enough (30 years) to have heard it all, from the perennial bears (like Gary Shilling) who are always calling for a market crash, to the polyannas (too numerous to name), who were bullish even during late 2007 and early 2008. There are advocates for just about every P/E calculation and market valuation process. Most folks can point to these and say "See, this was right!" at some point in history. Most folks are not old enough to remember Elaine Gazzarelli, who "called" the 1987 market crash. Unfortunately, she missed just about everything after that. The same goes for Meredith Whitney who scared muni bond investors to death in late 2010 with her prediction there would be billions in muni defaults. This, of course, did not happen, but she continues to get press and speaking engagements nevertheless.
Frankly, I don't spend a lot of time delving into Shiller and the other calculations. Remember that averages are just that...averages. Seldom are prices at AVERAGE prices. They are almost always above or below the averages.
Perhaps a logical response to all of this 'over-priced' and 'under-priced' concern would be to have a portfolio allocation with some built-in safety valves, including some hedging and bonds and cash and truly low-valuation equities, that will cushion any initial selloff and provide time to make rational, not emotional, decisions. We own some funds run by managers who are extremely cautious right now. They are lagging, some by big margins, but that is ok. We expect they will buffer any effects of a correction. And remember that pricing alone seldom results in a selloff. There are always other triggers, political, economic, monetary policy, global events, that are usually the flash points.

Some may, and will, argue. But my take is that all of this New Neutral is a re-constituted version of a lot of PIMCO's New Normal from a few years ago. Back then, the view from PIMCO was that stocks would return fairly low single digits, which is what this pseudo-new view suggests. And bonds will do slightly less than stocks, with less volatility, which just happens to play into PIMCO's hands as the world bond gurus. I do not necessarily disagree with the premise, nor the reasoning behind it. But I suspect that, just as New Normal had umpteen revisions and editions, New Neutral will evolve, too. Then again, PIMCO's leader may change the company's outlook and come up with a NEW 'new' next year. So nothing really new here. We have all been wondering what will happen when the Fed takes away the punch bowl. The scenarios have been all over the place. Mr. Gross' take is pretty benign, but it assumes the Fed follows his newest NEW economic analysis.
Other well-respected folks think the Fed has already waited too long and will be forced to raise rates much faster than anticipated, perhaps as much as 50-100 bps at a time. Now THAT would certainly step on Mr. Gross' tail! Since my economic crystal ball is in the shop, and since I am not prescient enough to be able to foretell the future, my take is to remain nimble, flexible, and to not be greedy, either with bond yields or with stock allocations. Most of our clients are more fearful of losing principal than they are of missing out on more stock market gains. There are always a few who want to join the part when the majority of people have started to exit, but that is just the nature of personalities. Is the party over? Probably not, but it seems unlikely the good times can last long, once the Fed removes the punch bowl.

@Charles, I know you are a big Meb Faber fan, who in his book Global Value places a great deal of importance on the Shiller CAPE. Meb Faber obviously thinks the Shiller CAPE should play a big role in our investing decisions. The referenced chart shows the Shiller P/E to have averaged 25.1 for the past 25 years. How then do you think investors should use the Shiller P/E in their investing decisions?

This is extremely interesting to me since Shiller CAPE has become such a meme:
>> If you avoided equities while they were above their historical CAPE measurement, you just missed 24 years of equity gains.

Hear, hear.

This is extremely interesting to me since Shiller CAPE has become such a meme:
>> If you avoided equities while they were above their historical CAPE measurement, you just missed 24 years of equity gains.

As to the first law noted above: "First Law of Financial Conferences"....hell, from my expericences and observations, this is how human beings function in many cases....period.
I can only confirm that after my 60 plus years on this planet, that I am fully assured that my intuition (the summation of all my experiences combined with my original DNA) provides for reasonal investment returns that in most cases, year after year outperforms at least 5 percent of the active fund managers and the majority of hedge funds.
And of course, I am much ahead of the 99% of folks who don't care or don't know about investing.
What more could a person ask for; in spite of the original expression of this thread.
What a lucky fellow I am.
End of story.
Signed: Smart Ass
NOTE: perhaps an equity buying chance coming our way near term; after some of the selloff smoke clears.........well, at least if the machines don't jump back into the game too soon.
Regards,
Catch

@davidrmoran I find myself skeptical, but by taking some time to investigate alternate/opposing viewpoints I learn of questions I hadn't even thought to ask. Often they are not worth a lot, but it helps my understand my position and its consequences better. I also would suggest that there are a bunch of people here who have made decisions and stick to them. Even those making changes are often doing it around the edges. Myself I came here to get a sense of what questions to ask and how to monitor. I don't expect to make many changes in the next 5-10 years except maybe some minor allocation adjustments, and possibly adding real estate or adjusting at a 10 month sma signal. But otherwise I learn.

If you are going to invest in stocks now the place to be is International and not domestic stock. Great time to dollar cost average into all areas of international.Despite bonds being in a bad place keep them. I still follow John Bogle's advice of having your age in bonds. Follow his advice has serve me well in all markets. I am 59 years old and have a healthy growing portfolio despite ups and downs. And I sleep at night.

>> “If you want to become less stupid at investing, one of the best things to do is surround yourself with people who disagree with you….”.
Well, jeez, within limits. See below.
>> goal to diminish investment innumeracy, especially in the statistical domain.
oh, hear, hear!
>> People think they go to conferences to learn something, but most often they go to have their beliefs confirmed and reinforced by others.” Unfortunately, I suspect more than a few MFO members populate and interact on this fine website for the same dubious purpose. To steal a famous Charles Ellis quote and book title, that’s a “loser’s game”. That’s a primary contributor as to why individual investors consistently don’t realize marketlike returns.
I dunno; I think it's chiefly cuz they don't stick with their plan ('investor returns'), and research bears this out. In other words the kind of people who have stuck with it over the years do not poke around the web and do not post here or anywhere. They enjoy life and do not obsess over investments. We are a forum it seems of aggressive changers and surely frequent traders in some percentage or other. How many times do you read here 'I am going to give it another few months ...' and 'I am thinking of swapping X for Y' and the like?
>> There is a common human tendency to summarily reject new data or new findings that contradict a previously established position. In the academic community, this tendency has a name; it’s called the “Semmelweis Reflex”. In the end, this Reflex erodes investment performance.
This is an extremely hot new journalism meme for sure, without question, esp in politics and finance. Knowing a fair amount about psychology, I call bullshit on it in a great many instances. Confirmation bias, please. I and most others do need to immerse ourselves in creationism, climate-change denial, audio tweakism, supply-side / constant government-denigrating rightwingism, gold advocacy or any other contrary views just to, what, realign or make a good dent in our friggin bias?
If you had been in smallcaps since say 1980 despite the warnings and conference talks about how they were going to something or other, you would have done well. If you had been in largecaps, the same, ignoring those who disagreed and told you to go to smallcaps, you woulda done fine. Indeed if you had stuck with high-yield, or invest-grade bond, or growth, SP500, value, or balanced --- any one of those and only that --- you woulda done just fine.
If you are looking for certainty before 1980, well, sticktoitiveness is no worse than anything else.
>> I suppose one of the lessons from this body of research is that we should all seek and be tolerant of divergent market perspectives and investment opportunities. I believe most MFO participants are in this cohort.
depends
>> Recent academic studies once again conclude that about 75% of active fund managers have long term performance records that roughly hover near the zero Alpha benchmark. Of the residual 25%, about 24% produce negative Alpha. That means that only 1% generate measurable positive Alpha over an extended timeframe. That’s the sad odds when establishing an actively managed portfolio.
Right, concur, roger --- except when it is not. They say, oh how they say, how they repeat, how they admonish, that past performance does not etc etc etc.
Jeez, then what good IS it?
If you had picked long ago (35y) a category above, within a fund family, much less a given manager or group, that was highly regarded back then by some metric or other, guess what? You woulda done fine. That's what my backtesting shows me, cuz I did it --- or failed to. I chased outperformance, stupidly. From 1982 reading I coulda stuck with Fulkerson (CENSX), Fidelity Trend (my father), Janus, much less LOMMX, PENNX, DODBX, Contrafund .... but I woulda second-guessed when they slumped or changed managers or whatever, and woulda bailed. I am positive that this is what most do.
If the triumph of passive investing is that people stick with it, then that's a real and indeed revolutionary triumph. It is NOT a reason not to actively invest or seek superior managers. SPX performance is the least of all of those above, btw. So, I say, make a few seemingly sound decisions based on past performance (go ahead) and leave it the hell alone for a decade.
Easy to preach about this.
I don't know where to turn to find disagreeing viewpoints that are worth spit. I guess that sounds awfully vain. But I am kind of tired of hearing about confirmation bias and its ills, for anyone who is the least bit self-skeptical, investigative but not OCD about it, and tries to monitor his or her own prejudices.

Hi Old Joe and rjb112,
Thank you guys for your pity observations.
It doesn’t get too much older then this, but Publilius Syrus in the 1st century BC said: “It is a bad plan that admits of no modifications”. That ancient wisdom applies today and everyday, especially in spades, for investment matters. All investment decisions, both bad and good, are transient and require constant monitoring and hopefully infrequent changes.
I took the mutual fund Alpha performance data from a 2010 report that I failed to reference. Sorry about that. The title of the study is “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas”. The three authors are Barras, Scaillet, and Wermers. For completeness, here is a Link to that study:
http://www.rhsmith.umd.edu/faculty/rwermers/FDR_published.pdf
The paper is rather dense. I only reviewed the Introduction and Conclusions sections.
For brevity in my initial post, I omitted some other findings and observations by these researchers that might interest you. For example, the authors discovered that the overall positive Alphas generated by active fund managers have significantly eroded over time. They report that positive Alpha funds have decreased from a roughly 15% level to the present 1% level in the last 20 years.
Are fund managers getting dumber? My answer is NO. My interpretation is that active fund managers have proliferated and the field had gotten stronger with increased competition that lowers opportunities to outperform.
Another intriguing aspect of the study is the rather long-term survival of the underperforming funds. The authors included the following statement in their Conclusions section: “Still, it is puzzling why investors seem to increasingly tolerate the existence of a large minority of funds that produce negative alphas, when an increasing array of passively managed funds have become available (such as ETFs).”
I suppose, many of us are slow learners and/or are reluctant to omit a mistake. Another dimension to this misguided loyalty is that we often fail to make relevant benchmark comparisons. I attribute this failure, at least partially, to our limited understanding and trust in statistics.
As Zig Ziglar said:” The first step in solving a problem is to recognize that it does exist”. I believe successful investing requires testing outcomes against some pertinent (designed for your specific purposes) benchmark standard. I suspect that some (perhaps most) individual investors don’t do this simple task to their end financial detriment.
Thanks again guys for keeping this discussion fresh.
Best Wishes.

Yup, stuff/info that some of us have been chewing upon here and (FundAlarm) for the past 5 years.
Wait til the 30 mortgage moves above the 5% rate and watch what happens to everything related to existing and new home sales.
Do continue to believe the "rock and the hard place" for rates will be here for some time to come.
And the longer the clock runs with folks comfortable with low rates, the harder it will become for the central banks to attempt to reverse the direction.
Fun times ahead for all things investments will continue.
Sadly the clock of investment time and inflation will continue to destroy the savings accts of many Americans; especially the senior citizens who want nothing to do with the Wall St. scene.
Hoping everyone's magic 8-ball is in proper working condition.
Regards,
Catch

Corn, Wheat Futures Hit Nearly 4-Year Low
Ted,not so funny as those storms rolled through Chicago Land, but as these lower commodity prices wind through the food and energy consumer cost factors, we may all benefit.
Copy and Paste from Dow Jones W S J
By TONY C. DREIBUS
Updated July 7, 2014 5:24 p.m. ET
CHICAGO—Corn and wheat futures tumbled to their lowest prices in nearly four years as favorable weather over the July Fourth holiday weekend upgraded prospects for U.S. crops.
Soybeans fell, too, closing at their lowest level in more than four months.
In the past week, up to six times the normal amount of precipitation fell in parts of Iowa and Illinois, the biggest U.S. growers of corn and soybeans, further improving growing conditions. About three-fourths of the nation's corn and soybean crops were in good or excellent condition as of Sunday, according to the U.S. Agriculture Department.
Continued balmy, rainy weather will help lift corn and soybean yields that the USDA has estimated will reach record levels this year, analysts said. The USDA has estimated this autumn's corn harvest will total 13.935 billion bushels, surpassing last year's record crop, while soybean output also will set a record.

Ted: We are investing in several funds mentioned above. They have done very well in last several years.

They ain't seen nothing yet. There's going to be steady increases in the number of exchange traded funds. In a few years, the combined number of mutual funds and exchange traded funds is going to be...........well, more than there are today. The number of "smart beta" offerings is going to rise substantially.

Howdy @rjb112
The stockcharts is accurate from what I have found over the years.
The "day" slider may be moved left and/or right with the pc cusror, as well as moving either the left or right end of the slider for a shorter or longer time frame. It is a bit difficult to get the exact dates to align. But, you will likely be able to get to within a day or two of your actual begin and end dates choices.
For me, this is close enough for a quick and dirty look at a funds performance.
An example is that for an older fund, you can move the left "hash marks" on the slider to the left position and will find that you may travel the timeline backwards by about 3,900 days (10.7 years) using FAGIX as an example.
Note that generally when you first open this site page, that the graph is set to the line mode and the "days" at 200. But, as you have found; one can alter these as needed.
ALSO, the use of the charting/performance is not limited to mutual fund ticker symbols only.
And importantly, is that some tickers will not be found by the site system; if they are relatively new. I do not know how "old" a fund must be to be found within the site's list. An example is DSENX, which is about 9 months old and will not display (can not be found).
Take care,
Catch