The Investment World According to Harold Evensky

msf

A report of "Harold Evensky’s final presentation on investing."
https://www.advisorperspectives.com/articles/2018/09/26/the-investment-world-according-to-harold-evensky

Very straightforward, nothing earth shattering, though several points I've seen elsewhere are included here:

"Evensky cited the Shiller CAPE ratio, which is 31.1 versus its historical average of 16.2. 'It’s a very expensive market,' he said."

Maybe not as expensive as three months ago when this presentation was made, but still far from cheap.

"If a manager cuts turnover from 100% to 50%, the marginal reduction in taxes is negligible, Evensky said. Managers need to be closer to 10% turnover to be thought of as tax-efficient."

Which is why I may fret about Dick Strong-type churning, but don't obsess over "moderate" turnover. Though turning over an entire portfolio within a year still isn't "moderate" from other perspectives.

“'Our clients don’t need cash flow,' Evensky said. 'They need real income.' The problem with dividends is that they are not consistent; interest is also volatile, as bonds are subject to interest rate movements. 'Our clients need reasonably consistent income,' he said".

Hence a focus on total return.

“'we tend, particularly in planning, to focus on the probability but ignore the consequences. That can be really dangerous in planning.' If you know the probably of success is 95%, the consequences of failure still matter, he said. We need to plan, for example, for additional longevity of our clients."

Which is why I continue to be concerned about simulations showing 95% success that don't also tell me how bad the results are in those other 5% (miss by just a little, or spend golden years of poverty?)

Evensky has changed his outlook about annuities, which he once derided as an inappropriate vehicle for his clients. Single-premium immediate annuities (SPIAs) and deferred-income annuities (DIAs) will be the single most important tool in the coming decade, he said, mostly because their fees have come down

hank

”there is no such thing as a conservative investment.” I think he’s playing with semantics here.

“He asked whether those in the audience thought they were better planners that others in the room. Almost everyone raised their hands, illustrating the “Lake Wobegon” paradox that everyone cannot be above average. This paradox gets investors intro trouble when, for example, they believe they have superior stock-picking ability.”

Funny (and accurate)