All I'm noticing is that when you make identical posts on the Diehards Forum and Petrocelli's anti-Boglehead Blog, it forces someone elses conversation down the list of Morningstar's All Posts pages, with probably less chance of being noticed or responded to.

-dale 

Petrocelli,

 I agree that there is performance-chasing.   10 years ago it was "all TSM all the time".   Then came the slice-and-dice - after the TSM collapsed.  Then came REIT investing - after REITs went up.  Then came international investing - after intl stocks beat the TSM for a few years.  Then came precious metals investing - after gold and silver stocks beat TSM for about 3-4 years.   And so on.

Thanx!

It's not a Diehard thing - it's an everybody thing. Rationalization works on everyone. They know not to performance chase, so when they salivate at those 28% REIT returns they can rationalize by pointing to a study or expert who says it is a great diversifier. I've been one of the lone dissenters on REITs and now it is nice to be "right". I don't think it will ever go away - we have access to too much information.

It would seem that market weighted indices are definitive performance chasers.  I have always said that buying an index is a way to buy yesterday's winners, and eventually tomorrow's losers. 

The only virtue of these, is they keep you from doing it in a frenzied manner, getting hammered most every time.  And that is ok.  Being consistent, and buying companies in overall above average health (S&P 500 index) is not a bad approach. 

I would submit the fact that the Vanguard Diehards forum is by far the busiest of all the forums on Morningstar, as proof that most Boggleheads do not really...truely believe in indexing.  How on earth can there be that many posts on indexing?!  The answer is that surprisingly few are on indexing, with many more discussing one attempt or another to justify some "back-door" active portfolio management. 

I guess the biggest problem I have with some Boggleheads is their fundamentalist approach to an ever changing area; investing.  Folks, The Face of God is not reflected in the S&P 500, or any other investment vehicle.  All of them are just gimmicks put together by a bunch of bankers, to enable the sale of more products.  Our goal is to find when some of these are very reasonably priced, and ride that wave.  Be open to new possibilities, that is how you get the best deals.

If you are a true Bogglehead, pick your darn indexe(s), BUY them, ignore them, and go play catch with your kids for God's sake!.  Just check back once a year to make sure the broker has not stolen you money, or when you need to make a withdrawl.  

What's more, a true indexer should agree with (and doing ) every thing I have said, as to what indexing is all about.  If you don't, congratulations!  You are a truely active investor, just like most everyone else. 

Being a senior and reading these boards for 15 years, it

seems that investors keep trying to re-invent the wheel. 

Backin 68 it was all about stocks.

In the 70's mutualfunds came of age

The nineties gave Us Index funds to make investing simple .

Now it's all about ETF"S.

It comes down to staying informed and keep investing.

   Jim
 

You've taken much of the Boglehead method out of context.  The index fund or ETF is simply a tool for implementing an asset allocation methodology in investing.  To me, its a joke that Morningstar and others are creating ETF / index fund rating services, as if they are mutual funds.  Asset allocation with ETFs and index funds allows the investor to intelligently and precisely diversify amongst many types of assets without large fees.

Swensen, Bogle, Bernstein -- all say to buy at least 6 asset classes that don't correlate, pick asset allocation targets that reflect one's risk profile, time horizon, etc., and then rebalance, i.e. trim the winners and buy more of the losers.  You'd have been selling REITs in 2006, buying them back in 2007, trimming them now.  The core of the method, is that you never know what will work and what won't during a given market cycle as shown by the graph at the bottom here:

www.marketriders.com/truth1 

 

Petrocelli:

I don't know how often you (or I) will check this blog but... 

I think the point you make is very legitimate and very important.  This kind of "closet" performance chasing is very prevalent and not particularly helpful to investors, including Diehards.

The root problem, it seems to me, is that MPT in fact offers very little guidance on asset allocation.  Sure there's a lot of lip-service paid to mean-variance optimization, but that technique is terrible in practice.  Also, CAPM assumes but never proves that the market portfolio is "efficient", giving a theoretical argument for cap-weighting (in addition to the no-turnover benefit), but the CAPM theory has been, in my opinion at least, completely discredited.

So once you strip away all the bad theory, all that's left is a kind of consensus opinion, which as you so correctly point out is liable to performance chasing.

No easy answers.