June 12, 2021

Bogleheads® Chapter Series – Framing Financial Decisions

Allan Roth and Mel Lindauer discuss framing financial decisions and the Bogleheads investment philosophy.

Hosted by the Minnesota Bogleheads chapter. Recorded on June 12, 2021.

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Bogleheads® Chapter Series – Framing Financial Decisions


Jeff: Welcome to the Bogleheads Chapter Series. This episode was hosted by the Minnesota Bogleheads and recorded June 12,2021. It features Allan Roth and Mel Lindauer. The topic is framing financial decisions and Boglehead's philosophy. Bogleheads are investors who follow John Bogle's investing philosophy for attaining financial independence. This recording is for informational purposes only and should not be construed as investment advice. 

Allan Roth and Mel Lindauer. So Alan, he's the founder of Wealth Logic. He's been working in the investment world for 25 years. In corporate finance, he served as a corporate finance officer of two multi-billion dollar companies and consulted with many others. Allan has decades of experience in portfolio construction and performance benchmarking. He's appeared on numerous tv and radio shows, which I can attest to. Allan's everywhere. I think you turn on a show and hey there's Allan.

 He takes pride in being mocked on a semi-regular basis by some financial professionals for his hourly fee model. And his obvious inability to make himself rich, kind of like Jack Bogle. He is also the author of How a Second Grader Beats Wall Street. He writes for the AARP, Wall Street Journal and others. He started investments in behavioral finance at the University of Denver. Despite many of his credentials, CFP, CPA, MBA,  that he has earned, he claims he can still keep investing simple. His professional goal is to never be confused with Jim Cramer, So that's Allan.

And before we move on to Allan's thing. Mel Lindauer. I called him the first Boglehead, the first Vanguard Diehard. Why is that? I think we have some questions where we'll dig into that history. For many of you that don't know, Mel was a marine. He's spent a lot of time in the Marine Corps in a station out of Philadelphia. That's where he remained after his discharge.

At Jack Bogle's request, Mel founded and served  as president of the John C. Bogle Center for Financial Literacy from its founding way back in 2010 until his resignation in 2019. Mel and his friend and co-author Taylor Larimore arranged the first get together with Jack Bogle and about 20 folks down in Miami in 2000, 21 years ago. That was to be the first of the annual Bogleheads Conferences. Mel also co-authored the two best-selling Bogleheads books on investing. A former columnist for forbes.com, he was a moderator and contributor at Morningstar Diehard forum and now continues as moderator and contributor at the bogleheads.org forum. Money Magazine honored Mel as one of the Money heroes for his work in investor education over the years.

 Wow! So these two guys, I'm going to  shut up here.so we can hear from these guys. So Allan take it away, please.

Allan Roth:  Great, thank you. Well first of all thank you for having me, and you know to all of you out there, you do so much on the Bogleheads forum to help so many people everywhere, and that's a wonderful thing. So as a licensed financial planner I've got to give a couple of disclosures, legal disclosures. Number one, I despise coming after Mike Piper. The guy is so darn good and gives away all of his brilliance without any incentive to to make profit. Makes me look very bad. He used to live out here, so I miss him. And Mel, way to go, because I think you're the guy that discovered him and brought him into the Bogleheads. 

Second of all, as a licensed financial planner I can exaggerate. So I owe my life to Jeff, who saved my life about a dozen years ago when I wrote a column for Money Magazine called The Mole. It was kind of the hidden secrets, it was an anonymous column of the hidden secrets of the financial services industry. And I made a post that allowed people to track who I was and Jeff protected my identity from the insurance world. So thank you, a little exaggeration.

So I'm going to talk. A lot has changed since the mole. Expenses have gone way down, there's now more money in US stock index funds than active funds. I mean Jack Bogle and all of you

really have succeeded. So I'm going to talk a little bit about how my industry tends to frame things that may not be good for you. And I'm going to two of the largest pet peeves that I have now, are munis and mortgage. I'm going to start with the mortgage.

So number one. Asset allocation. And here's an example. Let's say we have a person that has a half a million dollars in stocks, a half a million dollars in bonds and a four hundred thousand dollar house with a two hundred thousand dollar mortgage. So the common framing, the way my industry would like it to be framed, is you have a million dollar portfolio. It's 50% stocks, 50% bonds and two hundred thousand home equity.

And I say baloney. This person has an $800,000 portfolio that has $500,000 in stocks and $300, 000 in bonds and a $400,000 home. Of course ,both have the same net worth. And the reason why is that the mortgage is just the opposite of a bond. When you buy a bond or a bond fund you're lending money. When you take a mortgage out you're paying a bank principal and interest. So how you finance a house has no impact on the price you ultimately sell it for. And it turns out that borrowing money at 2.5% and lending it out at 1.25%, it's not a great strategy. Especially the new tax law makes it even less great where people aren't getting much if any of a tax deduction for.

But the fixed income bond fund is typically taxable. And most of my industry wants you to compare that 2.5% mortgage to the overall return of the portfolio. If you think about it, planners that charge assets under management or commission, and banks, of course, they all make money from this. And whenever I write about this I get lots of nasty emails. And my favorite one was, only a baboon would do what I recommended. So I went back to him. I said, “You know here's a deal. I'll lend you money at-- are you lend me money at 1%--I'll lend it back to you at 2.5%.You can invest in the market and pocket the difference.” So it really is that simple. There's only one reason not to pay off your mortgage if you have high quality fixed income paying less after taxes, and that's because you need it for liquidity, to be able to sleep at night.

Back to a cap weighted index fund. The argument is sure, what Jack created was great but there's far more opportunities now. If you buy a cap weighted index fund you're guaranteed to underperform the market by the fees. You know you're just buying more of those overvalued large cap growth companies and look since 1928 the data is compelling that small cap value has trounced a cap weighted portfolio. That's what many in my industry want you to believe. But a cap weighted index fund must beat the average dollar invested in the market. It has to happen that way, Bill Sharpe's arithmetic of active investing shows that. It's second grader math. 

Picking parts of the market, or weighting differently, is active investing. And then finally I love it when I hear data since 1928 etc. Well no one that I know has been investing in small cap values since 1928 and, by the way, it would have been outrageously expensive. So  a lot of this smart beta is just trying to beat the market, what Jack Bogle created. A cap weighted index mutual fund is brilliant.

Now when I teach behavioral finance I ask people to find patterns out of this, and people are pretty good at saying, hey the right hemisphere is far more filled in, the bottom right is completely filled in, you know column c is blank, column d is all filled in etc. And we're really good at finding patterns. This was just a random number generator, where each cell had a 50% chance of being filled in. So you know how incredibly unusual would it be to find patterns over decades and decades, with thousands of stocks etc. 

So we now have more than 600 investing factors and all of these worked brilliantly in the past, which would be a great strategy if any of us had a time machine. Mine doesn't work. So the term smart beta, finding some of these factors, and it turns out dumb beta wasn't so dumb. About six seven years ago I'd be at a conference, smart beta factor tilting, free lunch etc. And you can see how small cap  value drastically underperformed the market and especially large cap growth. And the total dollar return is pretty amazing. It will take years and years and years for small cap value to catch up.

Why?  You know things change. If we look at what were the 10 most valuable companies in the United States in 1980 and compare them to 40 years later, it's a different world. And we go back to 1900 the majority of the value of the US stock market was in the railroad industry. So things change, and finding patterns of what worked in the past is not the ticket to work going forward. And by the way in 1981 I went to work for Exxon, number three, which later bought Mobil, number seven, and today isn't in the top 25 combined.

And then drivers of stock market returns. Why does cap market cap indexing work? If we look at what the total stock market did last year, so it's the total return of the Vanguard Total Stock Market including dividend reinvestments, and compare it to the same smart value tilting of the same companies, that smart beta got less than half of the total return. Why? Because every year there's a handful of companies that really drive the return of the total stock market. Last year it was Apple, Amazon, Microsoft etc .And again, if I knew what next year's would be I would be having my own rocket ship company and going into space before Jeff Bezos.

And we have an addiction to prediction. It's a human trait that we hate randomness. So we all have to get forecasts of what's going to outperform next year. And my friend Christine Benz does a great job of getting some of these forecasts together, and all of them, especially when you read the logic, are very, very compelling. And even Vanguard's estimate of future returns, and at least they do it better, they give a range, and they do it over a 10-year period. But if you look at what they are saying, US equity and you compare it to international equity, two bars above they're saying international will outperform, or is likely to outperform, which by the way, I happen to agree with, not by the magnitude they're showing. But where I disagree is if you look at the bar you know that unless they're showing it has less downside risk, and again if I knew how to get a greater return with less downside risk I  would be a billionaire.

And then it's absolutely amazing to me when we look at these predictions that very, very few people go back and look at what their predictions were years earlier. And Jeremy Grantham, he paints a really compelling picture and it's going to be pretty ugly for stocks, especially US stocks, but that's exactly what he said about seven years ago. 

So it's very difficult to accept that we don't know. But if you think about it, look at what happened last year. We had a pandemic, we had surging unemployment, we had plunging GDP, we had racial unrest, we had political discourse like I've never seen before. And the US stock market gained 21.03%. It really is hard to predict what's going to happen.

Interest rates. I'll admit that I don't like interest rates right now. But they've been far worse. You know the common framing is  they're an all-time low, they have to go up. It was once so easy to get income from bonds and we've got to avoid bonds except for things like the ultra short or floating rates, and there are better alternatives. This is how my industry likes to frame it.

The ultra short bond fund, which by the way, Schwab had an ultra short bond fund that completely blew up in 2009, during the financial crisis.  Vanguard has one now that is yielding I think four, five percent and is in barely investment grade, high-yield bonds aka junk, or floating rates. All floating rate bonds are junk bonds because guess what, credit quality companies don't need to issue variable debt. 

Dividend stocks, Reits. I love that I keep hearing this commercial. NRIA [National Realty Investment Advisors],  a safe 10% return. If it were so safe don't you think pension plans would pour money in. Why would they be doing a zillion different advertisements for it, spending a lot of marketing money.

Master Limited Partnerships, most annuities, individual bonds rather than bond funds. And these are things that I think are dangerous. The way I tend to look at bonds and interest rates is first of all they've been far worse. Go back to 1981. And I tell clients this, and I said, do you remember when you could earn, if they're this old, a 12% return on a CD or a treasury, and they smile. But then I say, Think about it. You put a hundred thousand dollars and you get twelve thousand dollars interest. A third of it went to the state and federal government in taxes. You are left with eight thousand or an 8% return and inflation was about  14% so you lost 6% of your spending power.

The purpose of fixed income has never been income. The top economists have called the direction of interest rates correctly, meaning up or down, 30% of the time over the last 50 years. So in other words they've been wrong 70% even though they had a 50% chance of getting it right. And I could explain why that happens. I mean it's absurd. If we all knew that interest rates were going to go up then when the treasury has its auction next week we would bid less to get a greater return and rates already would have gone up.

Now there are some better ways to earn more. a lot of 401k, 403b plans had negotiated contracts with insurance companies that never dreamed rates would be this low. That are still paying pretty high. TIAA  on their annuity contract, and a lot of these 403b's, you've got to read all the fine print, but they have a minimum guaranteed 3%. The thrift savings plan, the G fund yielding about 1.63%. I wish I had access to that. Direct CDs can pay more. Insured savings account, you know I still have, believe it or not, a savings account that's yielding 1% and NCUA insured, versus what Vanguard or Fidelity or any brokerage paying 0.01%.

And then finally, like I said, paying down the mortgage, because the mortgage is the inverse of a bond.

Next insurance and inertia. You probably heard the saying, in fact it was in my book and probably wrong that Albert Einstein said the power of compounding is the most powerful force in the universe. Jason Zweig has educated me. We don't know for sure, but he probably would never have said that. So yeah, I call inertia the most powerful force in the universe.

So when it comes to insurance  the industry likes to say protect yourself and your family. No matter what, buy as much insurance as you want. I love this one. If you love your family you're going to buy permanent insurance rather than temporary term insurance because 99% of term policies will never pay out a dime. And of course you insure your house, why not insure your portfolio? Variable annuity, universal life etc.

Now I say baloney. Number one, insurance companies are for profit, even not for profit insurance company mutuals have to make profit. So you insure yourself for only what you cannot afford to lose. So as wealth grows most insurance needs dissipate. I have no insurance on my car, I'm sorry, collision or comprehensive. I have liability and umbrella.

And then permanent insurance. It's an indirect investment if you think about it. If you buy a whole life policy from Northwestern Life., look up Northwestern Life, what their balance sheet is in. And you're going to see that they're roughly 85% to 90% in fixed income. So you're going to get the return that you could have gotten had you invested it directly, minus the commissions, expenses and profits.

The economics of term versus disability. Both are very important but if you think about it, if you buy a 30-year term policy you get the best deal over the last few years of that policy because your likelihood of passing away increases as we age. Disability is just the opposite, we would typically buy it when we're younger and it pays out to age 65, so every year that you have it your potential benefit from it gets less and less. I'll have doctors at 63 sometimes 64 years old they're still paying the premium which has not gone down. And of course, yes you insure your house, but you don't insure your house for a decline in value.

All right I said I  have two main pet peeves. We talked about mortgages. The other are munis, and by the way I own some of the Vanguard Intermediate Muni Bond Fund, so I'm not totally against munis. But I'm against putting a whole lot in munis and I'm absolutely against the way my industry, even Vanguard, I hate to say it will show the return of a muni bond.

So the common frame is that munis provide a safe tax free return. During the Great Depression the loss of muni bonds was only 0.5%. Munis are an inefficient market, where we're buying the bonds themselves, yields more than twice what you could get on the Vanguard muni bond fund. And then a recent portfolio was yielding over 5% federally tax-free. What's wrong with all that?

Just about everything. Number one, munis depending upon the type of calculation, whether you want to assume la la land returns of these pensions, or more realistic returns. They have about two to six trillion dollars worth of unfunded pension and health care liabilities. Most companies got rid of defined benefit plans in favor of defined contribution 401k or a 403b type of plan. But not so for state and local governments. 

So munis could have a new correlation to stocks, so that if stocks don't do very well over the next 10 years as the baby boomers have retired, and those payments are going out, there could be a lot of stress on those communities. It's possible the government bails them out, but that's a lot of money. 

And then finally when it comes to looking at the amount of people that have retired. There weren't these baby boomers that had retired back during the Great Depression, and then framing the return on principle. It should be completely illegal. So here's the way the trick works. And I've actually met with the executive director and all of her senior staff on this, who are really nice people, but I think what's going on is just tricking people.

So I buy a bond. I sell you a bond. It has a five dollar coupon and we buy it for $112 a piece so the yield is 4.46%.  Now this bond is going to mature or be called in three years at $100. So roughly that twelve dollars divided by the three years, roughly four dollars of that five dollars is just return of your own principal. Your statement is going to show that as income so the actual yield is 0.89%.  And of course, me as your advisor who's building this bond portfolio, I may charge you 0.5% or 1% of that, so your actual nominal yield may be negative.

Am I exaggerating?  I just looked at a portfolio that had an average coupon of little over 5%. The yield to worst, which is really the best case scenario-the yield to worst is a calculation of if the bond is called--and why it's a best-case scenario is that if interest rates do go up those bonds aren't going to be called, and you're going to be stuck earning a lower than market rate. So the manager fee was 0.35%, so the net yield of this client was 0.05%. In addition spreads can easily be over 1%  on munis.

So the stocks, there are national markets and such where they trade, but not so in the bond market, and munis can have that 1% spread. The largest spread I've ever seen, which you can't actually see until the bond is closed, the client came to me had a 10.25% spread on a bond he had bought. And by the way that client was a very senior attorney with the Securities and Exchange Commission had no clue this was going on. 

What to do with the expensive bond fund. I'm not going to go through the expensive dog fund. You have to do a calculation of what the tax consequences are to getting out versus what the tax consequences are to staying in. Because they may be doing a lot of trading and the like.  You have to look at what the life expectancy of the person is. Will the step-up basis still be there?

But it's a fairly complex analysis and usually when I look at a portfolio it's not a let's get out of everything, it's a what to get out of, what to stay in. And when you have an expensive dog fund, for gosh sakes don't let dividend reinvestments keep going. You're just buying more of that same fund.

Financial advisor. I'm a certified financial planner. You should stick with me because I'm a fiduciary. I’m legally obligated to put your interests ahead of mine. The CFP board enforces a higher standard. I’m thoroughly vetted and look for advisors who have been publicly recognized. That's the pitch.

The reality is the fiduciary standard isn't enforced. It isn't enforced by the SEC, state regulators, and the CFP board. For many years I've given data to Kevin Keller, who is the CEO  of the CFP board, showing that the only actions that they take come after that of other clients, other regulators. I once helped the client file a complaint on a double dipping, where  the CFP with fiduciary duty could make up his mind whether to charge a commission or percentage of assets going on, so he did both. The total fees were 5.29%. CFP board, first they lost the complaint and then they ultimately found no wrongdoing.

Jason Zweig, I don't know if you read some of his columns a couple of years ago exposing the hypocrisy of people that have had CFPs that have had huge finings by Finra and the like, but have completely clean records on the Let's Make a Plan CFP website. And some of these prestigious awards I thought were for sale for any person, but it turns out you don't have to be a person. So in my office is a beautiful plaque of one of America's top financial planners. The Consumer's Research Council of America's prestigious address is Pennsylvania Avenue in Washington DC. Only I got it for my dog, Maxi tailwagger. And you know he also sent in an application for him to be one of America's top financial planners for doctors, which he was also approved for and I was too cheap to spend the money on that. I deeply regret that decision. Poor Maxi passed away about a month ago. 

All right next, Social Security, and by the way, I presented this slide at the White Coat Investor last month,  or last March with Mike Piper standing just a few feet from me. He's actually okay with this. Let me explain why I took Social Security at age 62, which Mike Piper and most people would say that was a wrong thing to do. But I only did it in my mind. So mentally  I'm receiving $2,400 a month and what I'm really doing is buying an inflation adjusted deferred annuity at a 40% discount over what you could have bought it from an insurance company a few years ago.

But now the insurance companies aren't even offering that inflation-adjusted annuity. Why? Because the actuaries are way too afraid of inflation, and there's no way to hedge that. But what I tell clients, that it's okay to spend that money if they needed it, take it out of their own portfolio, because what they're really doing is buying that inflation-adjusted government protected annuity. 

So the best Social Security calculator by far comes from that guy that makes me look bad, Mike Piper. You know it's absolutely brilliant, having worked-- you've been an officer for a couple of insurance companies--he doesn't just assume that we're going to die in a certain year, that a 63 year old male is going to live 26 years, whatever. He's doing what an actuary would do, looking at the probabilities of passing away each year. And he gives this away. It's just absolutely, it's a brilliant calculator. 

Tax strategies when you retire. Again it's ironic that a very young guy, Mike Piper, really is the world's leading expert on some of this. But there's tax gain harvesting. You can take capital gains at a zero percent tax bracket when your income is low and you're delaying Social Security before the RMD  and that's just tax gain harvesting. And you don't have to wait 31 days, by the way only for tax, there's a tax loss wash sale, not a tax gain wash sale.

Partial Roth conversions. Certainly if you're in a low tax bracket, I think, in general, try to use up that 12% marginal federal tax bracket. Tax deferred withdrawals, managing to marginal tax rates again that 12%. 

Roth conversions, yes I invented the Roth. And if anyone believes that I've got some motion from property in Minnesota, well you do have 10,000 likes

But anyways I'm a believer in tax diversification. You can never predict what congress is going to do. That's harder than predicting the market.  So a  Roth conversion for tax diversification. You know, what's the size of your Roth money compared to your tax deferred and taxable money.

Is the current marginal tax bracket low? The higher your income in retirement the less attractive it is to do the Roth conversions, the more burdensome the RMDs, the greater the argument to do a Roth.

And then you really should have some after-tax money to pay the taxes on the conversion.  Before 59 and a half you'd actually be hit up with a penalty if you paid for it with the IRA money

You've got to look at whether your state has a tax exemption for very wealthy people. There can be some estate tax planning benefits to do the conversion. Now one of the things I don't have to consider is what we think congress is going to do because that's unpredictable in my opinion.

Financial wealth. The common framing is we measure net worth, at least in the US, in dollars. So someone with, if I have 10 million dollars and you only have a million dollars I would be ten times richer than you. And of course there's no quick way to get rich. And I think all of that is wrong. I would measure your net worth in years. So it's your total net worth divided by how much a year you need to support your life. So who's richer, I have 10 million dollars but I have a very wealthy lifestyle. I need five million dollars a year to support my lifestyle. I've got two years worth of financial freedom. You're only worth a million dollars but you can be happy with $50,000 a year. You have 20 years worth of financial freedom. Because we can't take it with us. you're 10 times wealthier than me and probably 100 times happier. 

By the way, if I needed 5 million a year to support my lifestyle, and you really can get rich quickly by cutting down what you're spending. Now you know all sorts of frugal strategies are out there, and things like the Starbucks factor, not buying as much pop, those are things that can cut down expenditures. 

But the gorilla in the room is really the car, and I'm going to brag I've been driving millionaire cars all my life. My last car was a Pontiac Grand Prix that I bought mostly with GM credit card points. My current car is an eight-year-old Chevy Volt getting well over 250 miles per gallon running mostly on electricity. But you know I pride myself on having the worst car in the neighborhood. The goal is not to look good. The goal of a car, in my opinion, is to be safe and get you from a to b; and my chevy volt gets me from a to b, maybe eight seconds less than the Lamborghini.

So finally money and happiness. If you think about it, as Bill Bernstein says, when you've won the game, quit playing. And it doesn't mean, he doesn't mean, get out of stocks completely. Just means take risk off the table. So if somebody is close to winning the game, if their money goes up by 70% they're going to be marginally happier. If Jeff Bezos makes another billion dollars I'm sure he'll smile, but it's not going to change his lifestyle.

But losing money causes a lot of unhappiness. And you know we take these risk profile questionnaires. I think they're worse than worthless. We've really got to think about I'm sorry the market didn't perform as we thought, you can't buy that vacation house, you can't send your kids to college at the expensive college etc.

Second grader portfolio. Again, that's the same as Taylor's Three Fund Portfolio. The aggressive is 90% stocks; moderate 60% stocks; and conservative 30% stocks. They all performed roughly the same over this period, but yet we as investors, even Bogleheads by the way, are predictably irrational. And I had several Bogleheads call me up in March of last year. This time really is different. We've never had a pandemic before. One sold millions and millions of dollars of stocks just at the wrong time. 

So you know buy and hold is good, but buy hold and rebalance is better. And our human nature is probably not likely--I'm a believer in setting that asset allocation and sticking with it no matter what--which the book Noise is brilliant. And you know a computer generated asset allocation, a roboadvisor didn't know the pandemic was going on. and did all the right things. So that's what I have for you guys.

Jeff: Wonderful. Thank you Allan. If there's questions, I did see a few come in, feel free to chat them. We are monitoring the chat. Meanwhile, I'm going to switch gears here a little bit and switch back to Mel. 

Mel, I call him the first Boglehead but I should probably call him the first or second Boglehead based on who just came into the chat room, here. So Mel, can you give us some history lessons on the diehards? How that came into being? The move to Bogleheads. How did we get 100 people here from across the country all calling yourself Bogleheads?

Mel Lindauer: Actually I'm not sure who created the phrase Bogleheads, but initially it was a derogatory term, really. There was no Diehard or Boglehead forum. Morningstar, initially back in 1998, and the posters, the Bogleheads who were posting, were considered oddballs or bad guys or whatever from the other people who were trying to figure out all the ways to beat the market and so forth. 

So the Bogleheads were asking for their own forum, and Morningstar finally relented and created--but they were afraid to use the term Bogleheads and to call the spoilers because it was used as a derogatory term--so instead they called us the Vanguard Diehards, with diehards because we wouldn't give up asking for our own forum. And they created, they put a subtitle on the forum, which Bogleheads Unite. Talk About Your Favorite Fund Company. So that was their way of calling us Bogleheads but not making it really a Boglehead's forum. 

So it was called the Vanguard Diehards  because of that and it stayed that way all the time that we were on Morningstar. They were deathly afraid that Jack would be upset by the term Bogleheads too, because again, it was used as a derogatory term, and Jack and other people used to monitor our forum from time to time, so they knew Jack would see that. So therefore that's how we became the Vanguard Diehards.

Jeff: Yeah, okay. When was that?  Was that about ‘98, ‘97. Do you remember? 

Mel Lindauer: 1998. What was that 20, 20 something years ago, yeah 23 years ago.

Jeff: Well so then the move to bogleheads.org happened probably right around the early 2000s, 2007.

Mel Lindauer: Okay again, that was a real fluke. Morningstar's software was really out of date and  we kept asking for them to update the forum software and they kept saying they were going to do it but they never did. They just dragged their feet. So one of the Bogleheads, as a joke, set up bogleheads.org,  the forum. What's now bogleheads.org. Set it up as a joke, to show Morningstar this isn't rocket science. I can do it for nothing in five minutes. So he set up this dummy forum and all of a sudden a couple Bogleheads found it. They started to post. They said, hey there's a new Bogleheads forum. So now I went over and I took a look at it and I went, Oh my God,  this is our future because we control this thing now and we're not beholden to Morningstar. Even though Morningstar was very good to us. I don't mean to downgrade that. But the guy who set it up as a joke and he was going to throw, he was just going to kill it-- he just wanted to do this to show Morningstar what could be done--and I said,  No don't let it go. We need to hang on to this. So he didn't want to host it, and I had no way of hosting it. That's not my lane. So I got  a hold of Alex and Larry to see about hosting this, and that's how we took it over. 

And then I was member number seven. And then the word got out on the Morningstar forum, hey Mel's over there. So a number of people who thought that this gave it legitimacy started coming over. But Taylor, who I understand he is on this, now Taylor was reluctant to join because he felt an allegiance to Joe Mancuso, the chairman of the Morningstar, who had been very good to us, and so did I really. So I kept trying to get Taylor to come over. He wouldn't come over. Finally I said, Taylor, we'll make a deal with you. You and I, out of respect, and for Joe, will continue to post on both forums. So Taylor agreed, and that was our deal. Taylor came over and of course then the floodgates, because now it was totally legitimate, the floodgates.

And for a number of, I remember how long it was, but for a while Alex and Larry put up a split screen which showed posts on the Morningstar forum on one side, and posts on the Diehards forum on the other side so people could go there and choose which threads they wanted to see. But what happened is after a while there was nothing on the Morningstar side and everything was on the Bogleheads side. So we stopped that and that's basically how the forum got started. It started as a joke.

Fortunately I realized that this was our future and obviously that's the case now. The number of posts we get, the number of hits we get, and the number of members we have, are all just through the roof. So it's been quite a ride and Taylor and I are still posting on there.

Jeff: Did you have in your wildest dreams the idea that you go from that fake almost protest forum back in 2007 to what it is right now. I mean when did it dawn on you that this thing is out of control in a great way. When did that dawn on you?

Mel Lindauer: It still is, for instance, it was maybe a week or so ago, a couple weeks ago, I just opened the latest chapter in Germany.  We have something like 90 chapters now, 10 of which are I think ,about 10, are in foreign countries. It's just mind-blowing when you consider that we were just a few guys on Morningstar trying to help other investors, and now we have this worldwide organization. We have best-selling books, we have  national conferences. And of course being connected to Jack Bogle was really the key to our success.

 I mean how many people have written books and can't get anybody to even look at them, and here we have a publisher calling and asking us to write books. And I would  hang up on them a number of times. I thought it was a hoax because I know that publishers just don't call you and ask you to write a book when you're an unknown. Yeah so it was writing the book and then having it come out and then becoming one of the top 10 books selected by Amazon for 2006. Of course all of that stuff just gave us more publicity 

When we had our first conference in Miami, there's a back story to this which I'd like to share. Taylor and I made a post in 2000 or 1999. I guess it was at Thanksgiving, saying Happy Thanksgiving, here's what I'm thankful for. And then everybody was chiming in and Taylor chimed in and said, I'm thankful for my wife and my kids and all that, but I’m thankful to Jack Bogle, also thankful to Jack Bogle because I live in the house Jack built. 

Well again, as I said, Jack monitored, watched our forum from time to time and he saw that and he sent a handwritten note to us asking if there was any interest in getting together with him at a non-resort place. Well for us, that was like getting an invitation to an audience with the pope or an invitation to the White House. So Taylor and I tried to figure out how we were going to pull this off. And I was a snowbird at that time. It's been the winters in Florida. Taylor knew that, and Jack was going to be the keynote speaker at the Miami Herald Making Money seminar.

So Taylor said, hey Mel, why don't we use this as an opportunity to try to get together with Jack.  So I said, well that's great we'll do that. So I got in touch with the Miami Herald people and I asked them if they could give us a room somewhere where we can get together with Jack for an hour or two for lunch. And they shooed us away like a bunch of groupies, which actually would work. And they said, no we've got Jack all tied up we don't have time, so you'll have to just go about your business.

So anyway I called Jack and said, hey they said we can't get together. And he said, well hey I'll go wherever you want me. So now we made a post, we only had about 20 something people because it was very short notice. So we decided to hold it at Taylor's 35th floor condo overlooking Biscayne Bay. And we hired a chef and a maid and had this nice thing with Jack.

But in the meantime the Miami Herald got word that we're having this event with Jack, and they don't want to cover it, so they come hat in hand and said Mel can we send a photographer, a reporter and a photographer. Well instead of being jerks like they were to us we said sure. So they send the photographer and the reporter and we end up with a front page story in the business section of Miami Herald, carried over into the inside. So all of these things just gave us a little more publicity. 

And we became a little better known the next year. Jason's wife, who's now with the Wall Street Journal, was with Money Magazine then. Jason wanted to come and cover our conference and bring a photographer. So we ended up with the eight page spread in Money Magazine, with all kinds of photos.And so here again more exposure, and then the book and it just continued to build.  And it still continues to this day. So yeah it's just mind-blowing when you think of where we started and where it is now. 

Jeff: No it's amazing, just this morning I did some metrics here, and they just had 703 people were online when I looked right before the meeting here. There's been 5,941,000  posts since that forum was created, and there's 109,000 members that have actually registered. You know it probably gets ten times the amount of traffic, and people that don't register. So there's probably over a million people, I'm sure have hit that page in the last year. So that's amazing isn't it ?

Mel Lindauer:  Yeah it is. And anytime I can see the back numbers, and anytime you see 700 people online any for members, there's usually about 10 guests for each member that's online, because they can read, people can read anytime they want. They don't have to sign up. You only sign up if you want to  make a post. So there are more and more visitors, and they're from all around the world which is amazing too. 

Jeff: You know personally I used to have to look for what's the expense ratio VTI  Boglehead, and I put that on there. Now I don't have to put Boglehead. When I look at my google results the top five links are going to be wiki or somewhere. It's just awesome.

Mel Lindauer: Yeah it's been an amazing ride. And to have all those conferences. We thought, Taylor and I thought that get together with Jack in Miami was going to be a one-time off. And then everybody's asking on the forum when's the next one, when's the next one. Oh my god, we reported it 20 years later.

Jeff: Well let me ask you a question. When is the next one?

Mel Lindauer: Well  this year is not going to be an in-person. It'll probably be virtual. I have to say in the beginning I am no longer running the conferences. I'm not on the team anymore. But from what I understand it's going to be virtual this year. Next year there will be a conference. And you know, initially we moved to conferences all around the country, but then when Jack's health started deteriorating, we stayed in Philly. There's no reason to stay in Philly now because Jack is no longer with us. So it's probably going to be moved around the country again. iIs probably going to be a lot longer.

There's a different team running the operation and I think their goal is, or their idea is to have this big deal. I tried to purposely keep it smaller so that it would be intimate and people could talk to Jack and Bill Bernstein and Rick and the other people there. So now I don't know where it's going to be. But we'll have to see when they finally figure it out because they want it to be somewhere where people can connect direct flight without having to go through a number of transfers and so forth. So that's all in the works, and I really am not privy to what's going on other than I know it's going to be a big one, and in 2022. 

Jeff: Well that sounds great. Thanks for that update.

Allan Roth: Can I just pipe in. Yeah, the goal is an October 2022 larger conference at a location yet to be determined.

Jeff: Good to know. Getting back to books Mel. So there's been three successful books. Is there any, are they keep calling, is there going to be a fourth in the series? Do you know anything about that?

Mel Lindauer: Well first of all, I have to tell you that our publisher is Wiley, and Wiley publishes the Dummies books. As you know, the Dummies, well the Dummies books, each one is written by a specialist in the topic. But Wiley figured that the Bogleheads was going to be a series, like the Dummies books, and of course, there are only a few of us writing these things. So it takes nine months to a year to write a book and it's--by the way if you see what Taylor's doing, I think he's holding up a Bullet book in Chinese.

Well we do. Our books have been converted, and I had boxes of books show up on my doorstep and I had no idea what they were. I thought somebody got the wrong shipment here and it turns out it was one of our versions, we have several versions, in Chinese. But yes, Taylor's book will probably end up, the latest book, The Three Fund Portfolio will probably end up in Chinese because our other books have. 

But over the course of time I've been kind of busy. I worked with Taylor on his book, but it was Taylor's book, that's his baby. I also worked with a couple of Boglehead doctors who have a new book coming out, it should be out any day now, and it's specifically geared towards doctors and the financing. So I’ve been busy with that. I've been busy with all this stuff.

But I keep feeling that any day we're going to get that call from Wiley saying, hey how about another book or else asking us to update, go to the third edition. And I called Michael ahead of time to ask him, Michael are you going to be up to another book because I've got a feeling  I'm going to get a call. So sure enough a day after I talked to Michael I get a call from Wiley and they said, Mel, Barnes and Noble has got to shoot, wants this huge order of your book, but they want a paperback version, and we don't have a paperback version of the second edition. So he said, Mel, we need something for the cover. and I said, well you've got Jack Bogle, he wrote the  forward, so just pull something out of there and put it on the cover. One of Jack's 50 sayings you know, the Bogleheads whatever. And so we do have a paperback coming out and they'll be available at some point at Barnes and Noble.

But I really, you know, I have a political career now. I got elected in 2016 as a city council member. 2018 got reelected, and then 2020 I became vice mayor. So I'm helping run a city, helping other people with their books, doing work on the forum. I am pretty busy and I just don't know whether I have time for another book.

Jeff: Well now I'm talking about busy, That sounds incredibly busy. Before we pivot back to Allan, Mel, you knew Jack well. Is there one thing you could tell us about him that maybe a lot of people don't know about him?

Mel Lindauer:  Well I don't know that everyone knows that Jack had a heart replacement and because of the heart replacement he had to take drugs to keep the heart, anti-rejection drugs. But the anti-rejection drugs cause all kinds of things that are minor to you and me turn into major deals when once he would get an infection. Jack used to end up in the hospital a lot, and of course our planning was nine months long for other conferences and Jack was, of course, the focal point. 

Well I would get calls. I got calls a number of times in the summer saying Jack is in the hospital and we don't think he's going to be able to make the conference, and he's not, you know, things aren't good. So we had a number of scares over the years with Jack's health. And Jack had attended. Despite being in the hospital, he would get out and he would get better and he would make the conferences. 

But it was real close to our Dallas Fort Worth conference when I got the call that Jack is not going to be able to make it. So we had to go to plan b and create a different agenda and get different speakers and so forth. Which we did. But at the conference, Kevin, who was Jack's assistant, said Jack wants to call on your cell phone from the hospital and he wants you to hold your phone up to the microphone and speak to the Bogleheads. 

So I said, well that's going to get squeals and everything else, so I quickly got a phone line and put it in the hotel, in the conference room, had it wired to the speakers in the conference room. And sure enough Jack calls at the appointed time and proceeded to speak to his Bogleheads.

And there wasn't a dry eye in the place, and we were trying to figure out how Jack even got a cell phone in intensive care. But anyway, since Jack spoke to us over the phone, we considered that his attendance and not break his perfect attendance record.

So Jack's attendance record is still intact because of that speaking to the Bogleheads from the hospital. So he loved his Bogleheads. They meant so much to him, and of course he did to us too. So he was really special.

Jeff: Yeah, all those great stories. Thanks so much for that, Mel. And now I don't know how to awkwardly pick away from those great stories back to finances, but I'm just going to  plunge into some of these questions. So for Alan or Mel, feel free to jump in here too. 

Bond portion of the portfolio, should it be total bond market or is it short-term bonds based into the environment, or a mix. And if it's a mix what ratio?  Is the question that came in.

Alan Roth: You want me to take that? 

Jeff: Yeah, yeah, maybe Allan, if you could take that, that'd be great. 

Allan Roth: Sure. You know total bond is my core bond fund. I also use some direct CDs that have an easy early withdrawal penalty. But all of my fixed income is high credit quality. The thing about a short-term bond is it's kind of like cash. You're guaranteed to underperform the inflation and lose spending power. So in general I believe in an intermediate bond fund, especially because our yield curve is positively sloped right now. I don't have the guts to go long term.

And then short term, like I said, it's practically guaranteed to underperform and  you're better off doing something like, you know, there's several savings accounts, FDIC or NCUA insured, paying between 0.5% and 0.85%. So I would argue that's better than a  Vanguard short-term bond index fund, which I'm guessing is paying somewhere around 0.45% and has some risk.

Mel Lindauer:  Well I would agree with Allan on the investment grade. I think that duration has to be considered. So for most people the intermediate is going to work. But for short-term needs I like short-term investment grade bond at Vanguard. 

But one thing that isn't mentioned, and Allan touched on inflation, and one way right now to, a one word is I -bonds. So I think there's a place in most portfolios for I-bonds. There is the purchase limit of $10,000 per person per year, but you can get one for the husband, one for the wife. You can get $5,000 back in your tax return. And if you have a trust you can also get another $10.000. So it doesn't take long to accumulate a fair amount of inflation protection with I-bonds.

Jeff: I’ve been hearing you hock the I-bonds for about 20 years now. I think Mel, they never come out of favor. 

Mel Lindauer: Yeah, well the thing is that the people who backed up the truck when I suggested they do, and are sitting on those 3%, oh 3.3%,  3.4%, 3.6%  real yield bonds that are paying 7% now. They are sitting, looking good.

Jeff: It's amazing. Today's low interest environment for the people that took your advice, I guess back in the day.

Shifting the capital gains tax. It's been possibly doubling for high earners at some future point and if that's an eventuality is there anything we could be doing now to prepare for a higher capital gains in the future. For either Alan or now Mel. Do you want to take it?

Allan Roth: I'm happy to take it. The only thing harder than predicting the market is predicting what politicians will do. 

Mel Lindauer: Yeah, in fact we don't even allow discussions of proposed regulations on the forum simply because people might make a bad decision based on something that may never happen, So yep, you have to go with the law the way it is. 

Allan Roth The current Biden proposal is for those with over a million dollars of income and the current Biden proposal has it retroactive to April 28th. Now again, I don't predict, you know everything in that proposal I think is unlikely to go through especially in our current political climate. But I mean if that were going to happen, and if you were going to sell it while you were alive, then yes you would want to tax gain harvest. But I think that would be an incredibly dangerous thing to do. So what I'm telling clients is do nothing right now.

Jeff: Okay, good. Follow-up to that. With inflation starting to perk up there's a question around any proposed changes to the portfolio. Is now a time to get more into TIPs if you haven't been historically, or with inflation perking up what do you recommend for changes to the allocation.

Allan Roth: Mel, do you want me to take it?

Mel Lindauer: Yeah, go ahead.

Allan Roth: Okay. Absolutely nothing. Inflation has perked up. Yeah, I think I mentioned that I along with the top economists in the world have a horrible track record of predicting interest rates. And those interest rates are tied to inflation, so certainly we have had some greater inflation in the last few months. Whether or not it will continue, the bond market is actually saying we don't think so. You know the way I learned economics is that more money chasing the same amount of goods and services causes a lot of inflation, but Japan has been printing more money than we have for decades and fighting deflation.

So I would resist the urge to try to predict inflation. The I-bonds are certainly better than the TIPs. I think I looked at the Vanguard Intermediate TIPs fund. It had a negative yield of something like 1.65% meaning that if we had 2% inflation then that's going to yield 0.35%. So CDs that have easy early withdrawal penalties, I-bonds, to the extent that it can be a material part of your portfolio, I think are ways to go. And again that's why I wouldn't go long term on a bond fund, a long duration.

Mel Lindauer: Yeah, I think Allan touched on the thing that's important to me and should be important to other investors is that at the current time TIPs are not attractive to me simply because they have the negative yield guaranteed to get less money back than put in.  So at this point I think the first 10, 20, 30, 35,000, whatever that you can afford to buy in I-bonds are the place to go for inflation protection. Now okay, and even with the current ones that they are selling with the zero fixed rate, you're still getting 3.54%, which is nothing to sneeze at. It's probably the most attractive rate that's out there that's risk-free. So my first 10, 20, or 30,000 would be in I-bonds. 

Jeff: Okay, good to know. and I hesitate to ask this question with a room full of Bogleheads because I think I know the answer that someone had suggested or asked what do you think of cryptocurrencies like bitcoin, dogecoin, etcetera do they have a place in asset allocation?

Mel Lindauer: Yeah in the trash. 

Jeff: (laughing) Yeah.

Alan Roth: I own a little bit of bitcoin but only because I had to write about it and I wanted to actually make sure that what I was being told on how you buy it works and you know bitcoin I'm not convinced it's going to be worth zero, I think the odds are it'll be worth zero. But it does disintermediate the financial services industry and solve something. Dogecoin, like the Bogleheads, was started as a joke, and it just absolutely amazes me that it has significant value. I don't think it's going to be as successful as Mel and Taylor, what you guys created with the Bogleheads.

Mel Lindauer: Well I have a question for somebody who might have an answer. How do you buy or sell something, not  the coin itself, but with the coin, when the value is changing dramatically every day, every hour. So you have something for sale for 10,000 and somebody is going to give you 10,000 in bitcoin and five minutes later it's worth 8,000. How do you set a price either as a buyer or a seller when the value is constantly changing. That's the question I would ask. For something to be effective you have to have stability, and right now you have no stability. And I don't know if you're ever going to have it.

Jeff: Yeah. Another question came in. I think based on a slide from your talk Allan. Can you please explain why dividend stocks would not be a good investment.

Allan Roth: Well dividends are value stocks and they may outperform, they may underperform. They have grossly underperformed. I mean there are certain really safe dividend stocks like Eastman Kodak, General Motors, more recently GE that are just blue chips, that are going to pay forever. And that's just not true. 

And if you think of dividends they're very tax inefficient, because you would rather, you know, not pay less taxes on the dividends. So I'm not totally against dividend stocks. I in fact believe in value, I believe in growth, I believe in large cap,mid cap, small cap. You know the diversified portfolio is guaranteed to beat most investors.

And you're far better off, by the way, controlling when you want to recognize the gains, by  selling the long-term capital gains rather than the dividends. So I'm against a dividend tilted portfolio. I believe in everything. Taylor's three fund portfolio is all you need.

Jeff: That's a question from down below and I think this question was asked not knowing Taylor would be here. So people are asking if you're a fan of the two fund portfolio from Jack Bogle, I think it  is VTI , everything and then total bond in the US. Or the three fund from Taylor. Or the four fund portfolio from Rick Ferri.

I guess you are a fan of that, was either the two fund, the three fund, or the four fund was a question out there. And I think you already gave your answer and you said the three fund. But is there a space or one that might you consider a two fund or a four fund.

Allan Roth: Well you know one can have a single fund, a target date portfolio or a fund of funds that Vanguard offers. And let's face it, I've been wrong, Jack Bogle has been right on international continuing to underperform.

Mel Lindauer: Yeah, again, there's a very long thread going right now on the argument either the international, yes or no and there are--I mean it's really contentious, the people are dug in one way or the other, and it might be interesting to follow--because there are a lot of good thoughts on both sides so there's not necessarily a right, there's what's right for you. And one of the things that I've posted on that thread was that I think that it's whatever you're comfortable with. If you are going to not be a buy and holder when international goes down and tanks. That you don't believe in it, that's your choice. I do believe that Jack has been proven right.

Personally, I think that for people who are a little queasy, but to do one international, I think that what Alan touched on, a Life strategy or a target date fund might be appropriate because one of the advantages of those is that you don't see the different elements going down within that portfolio. You just look at the whole and if the whole is doing okay you're going to hang in there even though it's the US that's doing great and international's not doing so good, your portfolio is still doing okay. so I think that that's a good reason to hold, for certain investors, a life strategy or a target date fund.

Allan Roth: And it harnesses the power of inertia, automatically rebalances for you. And when it comes to international yes or no, my belief is that it's more important to be consistent. Back in 2007 when international had tripled when US stocks had only doubled, I saw a lot of portfolios very heavily invested in international. Now I'm seeing portfolios very light and international, and performance chasing is alive and well. And we need to be consistent. I typically go for a third and there's some comfort between, you know, somewhere between Vanguard's 40% and Jack Bogle's zero percent.

Jeff: Yeah, sounds good. There's a question here from Adele Almati from Bahrain. So that's why I love this zoom stuff. I don't think  he'd be coming from Bahrain to Minnesota to visit us in person, but here we can communicate and zoom. And he asked, doesn't a small cap value diversify because the total stock market is so, like you said,  growth and large cap dominating now. And there's another question I'll combine with this around the Fama French 3 model tilting to small cap and value, just not even wondering about the overweight large cap growth environment, what do you think about tilting for diversification.

Alan Roth: Whenever you pick parts of the market you are not diversifying you are doing the opposite of diversifying, you are speculating. I believe in the Fama French three factor model which says that its compensation for taking on more risk that it's not a free lunch. So you know I choose to do an overall portfolio which is far more tax efficient, far lower in fees. 

So I certainly believe that in the very long run, certainly almost it's impossible for small cap value to underperform as much as it has in the last five or ten years, and I do think the odds are it's going to do better, but it's going to be a whole lot more volatile, and if you think about it, if things go wrong in our economy, it's smaller companies and value companies that are weaker and the plunge could be a whole lot worse. Have I ever mentioned the Taylor Larimore three fund portfolio is what I recommend. 

Mel Lindauer: That's right, I just like to let Jeff and everyone know that the last questioner from Bahrain was probably from what is one of the latest chapters that we opened up. But we do have a Bogleheads local chapter in Bahrain now. 

Jeff: Yeah. Wow, that's so great. It's such a small world. Here's kind of a nice standalone question  for someone. What's your recommended safe withdrawal rate for a 65 year old who just retired in today's environment?

Mel Lindauer: To me anything below, anything above 2% might be speculative. But so much depends on your family history or life expectancy based on your own medical conditions and everything else. I think that 2% you could live forever, 3% might be okay. I think you have to look at the market valuations. Now it's very high there. We were overdue for a correction and whether we'll get it or not, is when we'll get it as a question is obviously an unknown. But if somebody wanted to be safe in the early years I would say 2% is about as safe as you can get. Three percent might work for you. Four percent by workforce if you've got a shorter life expectancy. 

That's everything, is everything, is a guess at this point because you know it would be really great if we knew how long we were going to live, but then we would probably have a heart attack.

Alan Roth: That's right. I’d say start at a 3%, if and only if, you're an incredibly low-cost disciplined investor. And then there are things that you can do such as--and David Blanchett who you just left Morningstar has done some brilliant work on this--if you can kind of carve out whether discretionary and non-discretionary, what you would cut if the market doesn't perform well. And then how much of your income is guaranteed either through Social Security or pensions, that those can then adjust from that 3% what you could safely spend. I'm not a believer in if the market doesn't do well you don't increase your expenditure because then over time you're cutting your lifestyle.

Jeff: Okay, good shifting gears here a little bit. There's some discussion on the chat around global bonds and I know Vanguard introduced the global or international bond fund and they're putting it in some of their target retirement funds. Maybe I'm speaking out of context here but what do you think about global or international bonds, and is there a spot for that in a US allocation.

Mel Lindauer: I'll let Allan take that because no I don't like that. 

Allan Roth: Yeah I was lobbied very heavily when Vanguard came out with it to write about it and I did write about it but I kind of gave it a ho-hum sort of recommendation and you know the argument is good that if you look at US stocks, international stocks, US bonds, international bonds, the largest part of the pie is international bonds. But international bonds are more expensive. I agree with Vanguard's hedging of them and if you look at the purpose of the bond portfolio it's the shock absorber the stable value the you know what you're going to have to live on and let's face in most of my bonds the vast majority are backed by the US government and if the US government goes out of business and the portfolio is going to fail so I don't see an incredible need to buy the international bond if you're going to buy it I would buy the Vanguard total international bond fund and if clients want to have them I'm happy to let them keep it.

Jeff: What would be the top percentage of your bonds you'd recommend in international bonds if you decide to go that way?

Allan Roth: You know I've never been asked that question so I'm going to on the fly, say I wouldn't certainly wouldn't go more than 10% of a bond portfolio. 

Jeff: Okay.

Allan Roth: And again it's high credit quality and it's hedged so it's not a bad thing but the fees are just a bit higher.

Mel Lindauer: Okay, I think one of the other important things too is investors should understand what they're buying and I don't think that they would necessarily understand international bonds. So I just am not a fan of them

Jeff: Got it. Okay, this one came in specifically for Allan. Can you give us some examples of lower hanging fruit mentioned in his articles, recommendations for the current environment.

Allan Roth: Well you know, like I mentioned, I'm earning 1% on my cash versus leaving it at a Vanguard or Fidelity at 0.01%. There are other things, like if you have access to that TIAA  Traditional with a 3% guarantee or the G fund if you're in the federal government. You know the only thing that makes less sense than an expensive active fund is an expensive index fund, which is guaranteed to underperform. 

But low hanging fruit is something, that I am paying down the mortgage, getting that 2.5% return. Those are, you know, I define low-hanging fruit as increasing your return without increasing any risk. So in other words you're guaranteed, virtually guaranteed, to do better with low-hanging fruit. 

Don't go with Mercedes-Benz financing, you know paying 2% on your cash because it's not even backed by Mercedes-Benz, much less a government. Don't get greedy on those things. Those aren't low-hanging fruit. The master limited partnerships, all those things that were just safe, it's like a toll road, you know the oil has to flow through it etc. Those are not low hanging fruit. Those are taking on a great amount of risk.

Jeff: Okay, great. Someone asked if you have your own website and LadyGeek posted to the wiki on your name and also daretobedull.com is where you can see Allan’s blog posts. And so on to the last question because we're coming up on our time limit here. It's going to be a little, maybe a strange question, but why not end with a strange question. What have you learned-- and this I think I'd like both of you to answer if you could--what have you learned in your life outside of personal finance that most helps you with personal finance.

Mel Lindauer: Well that's a good one without any warning.

Jeff:  Just fill it up for you guys.

Mel Lindauer: I think for me, I learned my lesson in finance very very early. And my parents had gone through the Depression and they didn't trust banks. So I saw the bank, the Lindauer bank, at home. And I saw my mother budgeting. Of course my father worked very hard. My mother was a home keeper, but she had an envelope for every expense and that was the budget.

So when Dad cashed his check he would give her the money and she would put so much in the envelope for food, so much for the electricity, so much for the house, and so forth. 

So I saw that managing your money, and you know if you  got to an envelope, you didn't have any money left, you had to readjust the stuff that you already put in the previous envelopes. So I learned that it was very important to manage your money. And even when you didn't have a lot of it. And also I learned that you have to save up for things that you want and instead of using credit.

When I was in the Marine Corps I  came home at 18 to buy a car and my Dad had to cosign for I learned that when you want something you save for it,you work for it. To me that was a very important lesson that I learned. And live below your means. I think it's lesson number one.

Jeff: That's great. Thanks for that. That's all good advice. You should you should write a book or something. (laughing)  I was kidding, I  said you should write a book with all that advice and then I'm like, oh yeah any last shots on you said Alan.

Allan Roth: Yeah, you know I would say like every Boglehead I was born wired to be frugal. And you know buying things on sale was a good thing. And when it comes to investing, those low fees, and the rebalancing, buying after a market plunge. Which I will admit was hard as heck for me to do last March or every time I have to do that. But yeah, it's those simple things that, you know, being frugal, buying things on sale. It works in investing as well. It's not exciting but it just works.

Mel Lindauer: Yep agree, Allan that's great.

Jeff: I just want to kind of wrap this up and thank Taylor for popping in there. We're honored with your presence Taylor. It's great to see you. We'll see you on the forum. And Mel and Alan specifically thanks for your time and energy to this. This has been an awesome Minnesota Boglehead meeting. We're thrilled that you took the time out of a nice weekend to join us and  it is recorded. Diana thinks hovering over the end recording and then the magic she does and I think we have a zinger at the beginning. Now in the end, for these fancy videos and we'll get them online somehow, and back out to people. So stay tuned for a wrap up with that.

 Allan Roth: Thanks Jeff, thanks Diane for doing all this, and Taylor thank you for being here.

Jeff: Awesome on that, well said. We will see you next time.



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