In most instances I believe that the ability to manage ones own portfolio boils down to time available to spend on the task relative to the type of holdings used. A portfolio of 45 stocks will take much more time than a portfolio of four or five broad based funds. I also think a huge part of the equation in terms of making things a easier is understanding some of the behavioral quirks that can impede progress or in some instances blow people up.
In this week's posts we've delved into the behavioral aspects thanks to some of the comments in the Seeking Alpha syndicated versions of these posts. Some of the comments have shown very little regard for risk which I find to be very shocking given how recently the stock market cut in half.
Just as yesterday's post was inspired by reader comments, today's post in inspired by this comment;
The only black swan negatives on mid-stream MLPs (outside of exploding interest rates which will kill everything else as well) would be tax policy changes and a secular decline in nat gas use.
That the reader is using the term black swan incorrectly is not a big deal of course but I do think the comment reveals something interesting about perceived risks. In the last 12+ years the market has cut in half two times and I believe (not an original thought) that in both cases the market was done in by things that very few people saw...by things very few people could see coming.
As a matter of philosophy I believe the ultimate result that people achieve, that is having enough when they need it, comes down to savings rate and how they fared during downturns and what sort of self-destructive they did or did not succumb to over the years. There are countless other professionals who think this as well and plenty of research out there to back it up but ultimately it is just a school of thought for you to buy into or dismiss.
4 comments:
Good post today, Roger, thank you. The most major threat out there to everything is gov't. The comment mentioned tax policy for MLPs, but I think regulation is a bigger threat to MLPs (and really everything). What happens if the environmentalists get there way and outlaw fracking? Those MLPs will take a hit. Remember Obama's comment about being "more flexible" after the election. That additional flexibility he will have is not limited to foreign policy. Food for thought.
Additional comment from 9:09. For disclosure purposes; my portfolio is about 8%-9% MLPs. Nice tax deferred distributions, but with inherent risks.
Looong time anonymous reader and sometimes commenter here. Today's post dovetails nicely with the writings of Howard Marks.
I recently came across a book called "The Most Important Thing" written by Howard Marks who is founder and chairman of Oaktree Capital Management. The book is a fascinating read from one of the most successful investors of our time. Even though Mr. Marks' specialty is in distressed debt, his views regarding "investments" apply across asset classes. Although Mr. Marks has a bottom up philosophy, that is value investing based on fundamental analysis, he shares many of the same points of view regard risk and the cyclical nature of markets. Roger, I think you and your regular readers will find much of interest with what he has to say.
Follow this link
http://bit.ly/DSxPq
to a treasure trove of letters to his investors dating back to 1991. It is fascintating reading and any serious student of markets, investor psychology etc. will learn something here.
Great post. I just wanted to thank you for continuing to offer thoughtful, ideology-free ruminations on the investing climate and ways to frame the problem that are productive and grounded.
The majority of financial opinions and advice I find on the net are written with a fixed perspective: bearish, bullish, gold's day in the sun is just around the corner, strategy Y beats X 72.3% of the time, bonds "can't" keep working, etc. Your blog is more focused on learning how to ask the right questions than providing simple answers, and I know my personal approach to retirement planning has greatly benefitted from taking a "how much do I need when I need it" approach.
Rick in Brainbridge Island, WA
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