The following guest post is courtesy of South Florida Local Chapter member Lazy Nihilist.
We had our South Florida Bogleheads Chapter meeting on Sunday from noon to two p.m. at the Stirling Road Branch, Broward County.
This meeting had a fair amount of new Bogleheads. We had at least three of them drive in from Orlando and one from Germany (though not just for the meetup). During the initial meet and greet with attendees, we had lunch. There were plenty of sandwiches and desserts.
The three fund portfolio
Once everyone settled in the conference room, we had the initial introduction for the first timer Bogleheads at the meetup. The agenda for the day was the Three Fund Portfolio.
This meetup had a special gift to each attendee: Taylor Larimores’ new book, The Bogleheads Guide to the Three Fund Portfolio. It has just been published. Already I am impressed by the many warm and positive reviews.
Wiley’s executive editor, Bill Fallon, generously donated Taylor’s new book to each Boglehead in attendance. Chapter president Miriam2 explained that Bill’s gift was for “Taylor’s wartime service and for the Boglehead’s great success in improving the financial literacy of Americans.” Thank you, Bill.
All proceeds from his book sales go to The Bogle Center for Financial Literacy.
Taylor also donated a book to the Stirling Road Branch Library where we hold our meetings.
Questions and answers
Miriam2 had drawn up some initial questions and then we went around the room for anyone who had any questions about the three fund portfolio.
Here are some of the questions and Taylor’s responses to those questions. (I’m paraphrasing both the questions and answers to the best of my recollection. Attendees, please feel free to add/correct if something is not accurately stated. In addition to Taylor’s responses, many Bogleheads also chipped in with their experiences to provide answers, which I’m combining with Taylor’s main response.)
1. Why did Taylor’s recommendation go from four funds to three funds?
Taylor: The fourth fund was initially a money market fund. But as long as there is an emergency fund, the money market fund portion of the portfolio can be substituted by the Total Bond Market Fund.
2. How to unwind from other equities and move to the three fund portfolio?
Taylor: There are a lot of different strategies to unwind from equities. But each situation is different. If there are lot of capital gains, depending on one’s age, sometimes it is best to leave it as it is. Talk to a Vanguard representative. Try to offset any gains by selling loses or those with least gains. Also, this is a reason one should put tax efficient funds in a taxable account.
3. Is consolidating 401k’s recommended?
Taylor: Almost always yes. Also depends on 401k choices. 401k’s also have better protection against creditors than IRA’s do. But if choices in 401k are not good, rollover IRA might be a better option.
4. What if 401k’s don’t have total market funds, but have S&P 500?
Taylor: Use index funds that are available. There is no need to exactly match total market funds. An S&P 500 fund for example is almost as good as a total market fund. A look at the growth chart of total market and S&P 500 index fund on morningstar shows almost no discernible difference. Try and keep things simple. Simplicity is the key.
5. Discussion of international bonds.
Taylor: Bonds are for safety. It is important to have a stock bond split according to one’s asset allocation. The international bond portion isn’t going to have that much of an effect.
6. Slice and dicing. Factor investing.
Taylor: We try to make things complicated. Including Taylor. It’s better to keep things simple. Slice and dice is adding risk, but if small cap value underperforms for long periods (like twelve years) will investors have the stomach to still stick to it?
Taylor: Get only Single Premium Immediate Annuities and get them only when you are 75+. The later the better. Once you have an annuity, it is an income stream and you can then use your portfolio to do other things, such as provide to children or donate to charities, without the risk of running out of money.
Vanguard provides assess to some of the best variable annuities compared to any other provider, with significantly low cost.
8. Vanguard reps. providing conflicting information.
Taylor: Using just the three fund portfolio will make contacting reps. very rare.
There was discussion about reps providing conflicting information during the transition to brokerage accounts. Taylor’s advice was to get an answer in writing if it is a significant issue. Because Vanguard is a large organization with many reps. phone conversations might sometimes not be very accurate. But when someone needs to reply in writing (mail or email, etc.) the person replying usually checks twice if they are not sure.
9. Choosing funds.
Taylor: No one knows if a fund will perform better or worse in the future, but the first thing to look at is the expense ratio of a fund, which almost always is a very good indicator.
10. More Questions.
Taylor: If the book doesn’t answer the questions, please post the question on the bogleheads.org forum, which usually gets very good responses. Also, multiple replies usually give a different perspective.
There were quite a few new faces. Among them were many from academic circles and Miriam2 talked about getting them into a group, to discuss the options available for better investing for Boglehead academics.
We had at least two pilots, Bill and John, in attendance and when they were asked if pilots have very risky asset allocation because they view the world differently and are on top of the world most of the time, the response from Bill was that flying is all about mitigating risk and choosing safe options.
There were quite a few of Taylor’s sailing friends in this meetup. Among them, Burley, a long time friend of Taylor who was a Korean war veteran and who saved over 16,000 refugees in their ship. Recently he was honored by the South Korean government.
Also, there was brief mention of “yours truly” and my adventures of moving from Connecticut to Miami and how I met Taylor and Taffy and was introduced to sailing and my sailing adventures. Taylor and the sailors meet every Saturday morning at nine a.m. for breakfast, and Bogleheads visiting Miami are invited to join us.
To Michael: for the delicious sandwiches. In addition to the sandwiches, coffee was provided by Black Cat, another Boglehead, and cookies and desserts by Miriam2. I had a full stomach and Michael had a lighter portfolio.
To the Stirling Rd. Branch Library: for providing the great location and conference room and helping with setting up the audio equipment.
To Bill Fallon: for generously donating Taylor’s new book to each and every Boglehead attendee. Thank you again.
To Taffy: for providing everyone with name tags to make it easier to recognize everyone, and providing feedback on Taylor’s book and her experience as a beginner investor who didn’t know much about investing. and how this book made it easy to understand and make one’s portfolio simpler.
To Miriam2: thanks to our wonderful Local Chapter president, who did a great job putting together this meeting. The organization was fantastic and as the above posters indicated, she was a great master of ceremonies too. Couldn’t have asked for a better president.
To Taylor: thank you for sharing your knowledge and for making investing advice simple in the footsteps of your hero Jack Bogle. A lesson I learned from you is to ‘be kind’.
And finally, to all the Bogleheads at the meeting, you make it worthwhile. It is so interesting to meet people from different walks of life and discuss finance and investing. Hope to see you all again soon.