 Welcome to the Bogleheads Chapter Series. This episode was jointly hosted by the Tampa Bay and retired life-stage chapters and recorded March 13, 2024. It features Betsy Peacore, CFA, sharing perspectives about her journey from active portfolio manager to retired passive investor. Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence. This recording is for informational purposes only. It should not be construed as personalized investment advice. Again, hello everybody. I'm Alan, one of the coordinators for the Tampa Bay and also the retired life-stage chapter. We have a very unique meeting on tap tonight with one of our Tampa Bay local chapter members, Betsy Peacore, CFA. Betsy is a former active portfolio manager who will share perspectives about her journey from being an active portfolio manager, now becoming a passive investor in retirement. Betsy's husband, Chris, will be assisting us tonight as a moderator along with Lady Geek Helping and I believe Henry is on as well and Jim from Chicago. I appreciate your help, Roger or Robert if you're on, shoot me a PM and I'll make you co-hosts. Rather than me muggling up Betsy's introduction, I'll turn the mic over to Betsy's husband, Chris, and let him do that. Actually, he's very kindly offered to formally introduce her and serve as moderator for her presentation. Thank you very much, Chris, and I will turn the mic over to you now. Thanks, Alan. I'm glad to be here for this and share Betsy's perspective. So, I'd like to introduce my best friend, my wife, mother of two great kids, my partner in life, and a 25-year veteran of Wall Street. Small scat, small cap, right? Cap, stock analysis on investment. I just, I didn't want to read your resume but I wanted to hit, there's, I'd say, seven different moments that shaped her investing career. It all started back in 1988 when she graduated from UVM University of Vermont with a physical therapy degree. You say, how the heck did that, where is that relevant? Well, number one, she was able to graduate with a degree in physical therapy, which is no small task. And introduced her to the healthcare systems. And as she found out later on, she did learn that Fedside Mando was not her forte, so that's one of the reasons why she got out of it. She did start an investment club in 1997 in one of our, in our neighborhood where we lived in Tampa, actually. And then while she was still in physical therapy, she was trying to get her master's degree in healthcare management at USF. And she, she bumped into a guy named Keith Schillett, who, who talked to her a little bit about switching to finance. And that's when she switched to a finance major. Coincidentally, she also did an internship with Raymond James during that time while she was in school. In around 2000, January 2000, we moved to Vermont and she got her first finance job. So, ended her physical therapy career, got into finance at a company called National Life in their corporate finance department, not in investing. But that didn't take long because within 11 months, she was hounding the sentinel investments equity folks at lunch and whatnot in the elevators to get a job in the investment side. So that's when she became an equity analyst. And then finally, you know, 13 years after she had her career with sentinel, she was able to get a job with Raymond James and the Eagle Assets. Small PAP and mid to mid funds. So with that, I'm super proud to introduce my wife Betsy. Wow. So hello everyone. And thank you Mr. people for the kind introduction. When I attended my first Tampa Bay chapter meeting for the Bogle heads I saw Alan kind of raises eyebrows. You know, I told him what my past career was as an active manager. And I think he was thinking why would an active stock picker. He had a Bogle head meeting. Was I there to abuse the members. Or was I just plain lost. What he and other members didn't realize is that I was actually there to learn from all of them to have a deeper understanding of the Bola headway. Yes, I was very lucky in my 25 year career of managing small cap stocks. We were able to successfully beat our bogey. We gave our clients the return they wanted. And at the right level of standard deviation or risk. And actually even to this day, I do still feel that there could be advantages to own in both active and passive products, especially when it comes to small and micro cap plan. But for me and my time. And my life of investing. It's all about Bogle right now. And I will give a shout out in case they're here they might are the listens of the YouTube after to my daughter's boyfriend Spencer. At Christmas in 2021 he did present me with a Jack Bogle book on passive ETF and passive investing. Thanks Pence. So sorry about this after two different two different screens to get to where I want. So for this agenda, there will be two parts to the presentation part one will be what I call the active management slides. I would like to give an overview of how my team looked at the world of small caps. I will provide a number of slides to describe our rigorous investment process and you'll hear that term quite a bit throughout this presentation, because it's very important to long term success. This include how we found our investments or what you guys might say stock picked, then show you a couple tools we use every day on a daily basis to kind of monitor the portfolio and some on a quarterly basis. Finally, I'll show you an attribution analysis and I'm not, I know we have a savvy group here, but I'm not sure how familiar you are with how we were judged by our clients and our and our bosses for how we got paid. And then part two will be the fun part that's retirement. I'll show a brief slide of how to compare the two sides of active management versus passive investing. And then my adorable spouse will come back into the screen and will answer a few questions that we anticipate people might ask out there, but then I'll open it up to Q&A. Oh, and before I move on, I did put little quotes in purple. So if you get bored looking at the presentation of the slides can always read the quotes, and they are something that I tried to live by. And somehow they resonate with me and I hope they resonate with you. I should have had you do this course. Okay, so here's the bio. We start actually I do want to read the first quote. And boy did you ever need this one you're in. I got it there I think and boy did you ever need this on my job. You are never as dumb as you think you are when you are wrong, but you are never as smart as you think you are when you are right. And since most of the time I was only 60% right that was a good thing because I was beating most of my bogey. I guess I'll point out I was not a typical analyst as my husband said my bachelor of science degree was in physical therapy. I stayed in PT for about seven years before I decided that the healthcare industry was not for me. I want to hear about everybody's aches and pains every day. So I always enjoyed following stocks. I think I bought my first company when I was 18 years old and if you need to know it was out backstage house. I can't remember if I made money or not, but we'll give it that. It also helped that my eldest brother who still remains in finance, he started out as a chemical engineer for Pfizer and he also decided to pivot. He made his way up to the big ranks and fidelity investments. He was the one who helped me open my first brokerage account. So anyhow I decided in 1998 or 1997 that I would follow this passion as a career and I went back to school like Chris said and I obtained my MBA in finance and entrepreneurship. It took a lot of time and energy and also a move back from Florida to Vermont to break into this business. Because you don't get many looks if you don't have an Ivy League degree or at least a background in finance or mathematics. But I had the passion and I had the drive and I definitely desired a career in small caps. So my first foray as Chris mentioned was at Sentinel Investments. Sentinel was owned by National Life. There I was hired as an equity analyst and because of my undergraduate degree, the team put me in charge of healthcare. We did very well and the product grew from a little over 200 billion to 3 billion, which is a fantastic feat. And then we actually stopped assets from coming in. As one might suspect though, our team who at the time had been together for over a decade began to be pursued by suitors. And in 2012 we decided to leave and work for Eagle Asset Management, which is a division of Raymond James Financial. This was good news to me because it was sort of camera. I started my internship layer being pro bono equity analyst to now I was being paid in the higher ranks. Let's put it that way as a portfolio manager. Raymond James also provided the team more flexibility to build new products. We didn't have to run a mutual fund. We could run SMAs or separately managed accounts and more resources to help us sell the products. Okay. Let me just hold on a second. Sorry about that. So the world of small caps and I didn't put much on this slide. I just really enjoy this quote, find what you love and do it every weekend for the rest of your life. Find what you're good at and do it every weekday. So again, I think the group that we have here is pretty financial savvy, but just so that you know the market capitalizations by my team as definition. And this is when I ended my career. Small cap was defined as 500 million to 5 billion. My team of course stayed up towards that 1 billion mark because of liquidity. And we let our winners run all the way to 10 billion. Mid cap was 5 billion to 20 billion and large cap was 20 billion and above. So the world of small caps. So how did I fall into it? I lucked out. I lucked out. There was an open at Sentinel investments on the small company fund. This fund was managed by an extremely passionate and somewhat odd portfolio managers ever met a portfolio manager, not me. They're, they're somewhat different. And that said, he and the other analysts who I worked for, taught me a great deal about proper investment process. Ding, there goes the term in case you're drinking a beer. And and it really became and they really became my mentors into the business. So the positives. I was excited to follow small caps. It was an area on the street where I think you could really add value as an active manager. It's just easier to meet the Russell 2000 than the S&P 500. I'm sure you could find many statistics that show so. Plus, there's a lot more companies to follow. You could really find your own niche or in a specialty industry. I also enjoyed the fact that I could talk to the CEOs and CFOs of many of my companies frequently. And you didn't just get put in front of some division head that my counterparts who followed large cap companies would only have access to. Because unless you have a significant amount of AUM or assets under management, such as the T rows and the fidelities of the world. You're not speaking to the corner office. Takeout premiums were very exciting. I remember Phillips. They received a big package for me personally. Because they took out 1 of my companies for 4 Fridays in a row for a pretty significant premium. Thank you Phillips. And we developed our own big picture. Everyone talked about the market, the S&P 500, the Dow Jones. But I'll tell you, we were able to see signs and symptoms of a different market from the smaller guys. And it gave us an advantage. The negatives of following small caps while later in my career, the market cap moved up. It became difficult for us to trade as we grew assets. Volatility both up and down, as you know. It wouldn't surprise me to see a stock move 50% upside or downside. And of course, the coverage of our companies was slim, which could be an advantage. But we never used the price targets that you'll see the sell side post. But we did like to hear what they said about our companies because sometimes misinformation was an opportunity for us. All right, here we go. Get in there. The ever important investment process. This is key for when I was an active manager and now as a retiree. It's basically the same process as although in retirement, I'm using passive investments instead of small companies. I'm learning new tools to monitor my progress. And I'll be checking our performance, my husband and I, at the end of the year with a different type of analysis. But for the next nine boring slides, I'll review the components of the investment process as an active manager. Investment will be the first five slides of how we describe how we found our very high quality companies. Then I'll give you two slides that show just a sampling of our tools that we used again to monitor. And then finally, evaluation, which is the attribution analysis, which I described to you. Find your investment. So again, I'm not going to go over these slides. As you probably all beg me not to in any big detail, but I just really want to demonstrate the due diligence that our team put when we found any of our companies or an investment idea. And the order of these slides, by the way, is key to our success. Our search always started with management. And I used to love it when my companies grew interesting enough that a CEO would come from a larger company. They had the right experience to lead the company, hopefully to mid cap or even large cap level. For example, I would love to see when a CEO or a leader from J&J, Medtronic or Striker showed up as the CEO of one of my companies. Product and market, we always needed to know the secret sauce of our companies in one line. So this was not only important for our clients, but also for my teammates. A good analyst can give an elevator pitch on any of their companies on any given day. Can you do that with your passive investments? Sorry. Let's see, manufacturing, marketing and distributions. Operations, logistics and sales are tricky for small companies. They had to outsource many of the functions, as you probably read about. So you had to be not only aware of your company, but you had to be aware of the company that they outsourced their product through their manufacturing too. These relationships are sometimes very key to operations. Research and development, and again, this is just another aspect of the company that we had to do that had to be heavily investigated. It can be a game changer. What I found interesting to me was always to listen to the CFOs of my companies and how they allocated those research dollars to the division leaders. Some would do a competition among the division leaders to see who could come up with the best product or service. And they would receive the bulk of the ARD dollars. But some would just use the numbers. And finally, last but not least, was our financial accounting. Now I will tell you, we always save valuation for last. We wanted to find all those aspects that I just described to you in those four other slides before we did any valuation work. This could be, this was tricky doing valuation on small cap companies, and we didn't want to waste our time. There were so many companies out there to study. So if they didn't have those high quality attributes, we said goodbye without any valuation work. So also what this did for us when we were doing our work, it allowed us to determine if we were going to give a premium or a discount to some of these, to some of the model, to what the model spit out for us. And we always, always determined a fair value of where we got into the company and our price target of where we would exit based on what we came up with. And again, we use a number of tools and models to determine this. And that's basically the find the investment part of the investment process. So now a couple slides on, on a sampling of our tools, something that passed. Yes. So first I have to start with the quote because I was a practice in physical therapist. But man, is it more important now than ever, then your knees. So anyways, that's, that's just a little home. The next, like I said, this is this tool here is what we call a valve table. And I know as much as far as I went, not my other team members, I ran it every morning. And through the years, as you know, at the top, this was 2003, the value table that I gave you, but the columns continually changed. We evolved our process, but not far from where we, where we came from, but they changed throughout the years. But it was a quick and dirty way of where to concentrate your time. And maybe I should focus more time on certain areas. This particular valve table was mine. And yes, those are my scribble notes. And yes, I somewhat remember what I wrote it. The next tool, again, these are just a sampling was called our sector strategy tool. It was a one pager. This tool was basically a deep dive that each of us did every quarter. And of course I'm presenting you with the healthcare sector as that was my forte. This tool was used quarterly, like I said, to determine if a particular sector was on track and always make sure that we didn't miss out on something. And it was a good way to compare the sector performance is among the portfolio. And I know this sounds between the two tools like we traded quite often, but really we traded less our turnover rate, I think was less than 20%, which is actually really good for an actively managed portfolio. And that also includes all the money that kept coming into us. So it included all our small program trades that we had to do to to invest that money. All right, the last two slides, hopefully I didn't bore you too much is our attribution analysis. So I love this quote, and I said it often to my clients as I was leaving the profession, the best way to double your money is to fold it in half and put it in your pocket. So anyways, attribution analysis and I'm not sure you folks are familiar with this, but this is how we were paid. So we were paid not only by the returns that our companies delivered to the portfolio, but by, which I think is measured by selection interaction. And that's in the third to the last column, but we also were paid by allocation effect. So did we put enough weight into the particular holding to make a difference from the index. And in this case, the index is in that second set of columns the Russell 2000. So for example, under healthcare equipment, the very first line you'll see there I opened it up to the Massimo corporation. And Massimo, if you look to the right was up 62.37% in 2016. Whoo, good stock pick Betsy. We own it the entire year but so did the index. So guess what I got a big fat zero for stock selection or selection interaction as it's called here. Yeah, we own 98 basis points of it and the index only owned 15 bits. So I received a positive contribution of 26 basis points towards the healthcare performance. So 2016 as you can see here was a very good year for the healthcare sector it was up 5.3% over the index. Just to bring you back to reality by my performance was up 28%. The index was down 7.36% and healthcare was the number one performing sector for the sector. But if you looked and many of you probably are looking down at the bottom to see the total, you'll notice that yes we had a good year we were up 19.2% or 19.92%. The index was up 21%. Unfortunately, so yes we lost in 2016 by 1.440%. But I can't end on that. I can't end where the portfolio does crap. So the very next year 2017 I present to you. And of course healthcare was towards the bottom of the barrel, but luckily, if you notice if you're able to read these tables and I circled it. My stock selection was awful down 71 basis points, but because I overweighted the sector by 17% the index only had 15%. My allocation effect was up 70 basis points for an overall contribution of only negative 1%. So that's that's not bad or negative one basis points. So if you look at total on the bottom though, the portfolio product had a good year. We were up 20.6%. The index was only up 14% 14.6%. So we beat the index overall by 5.96%. Now, as I described this whole investment process, the investment, the tools, the evaluation, I hope it somehow kind of feels familiar to all of you bogelheads. Again, in this case, the investment is based on small cap individual companies, the tools were team were developed by very, very incredibly intelligent. IT people who work for both Bloomberg and fax it. Those are the two platforms that I use while I was an active manager Bloomberg and fax it and evaluation of course is the attribution analysis. So I'll end my active part of the presentation with just like, okay, what's what's a day in the life then what was a day in the life of an active manager or analyst. Every morning at 6am, I was checking company company news or holdings. Then I was checking the market news that I prepare for a team meeting, which we had an 8 o'clock every morning. Then we had between 2 to 10 calls set up with the sell side the buy side manager teams competitive companies others. We're always searching for new ideas. We built models. We had a team exercise that we did. And a team exercise is exactly what I it's actually what it means. Literally, we would exercise. So one person would go out for a run. We anything we did for 30 to 60 minutes to get us away from the market every day except maybe during seasons or when we had fun. All right, onto the fun part. And retirement. Now this is what I anticipated retirement to be. I'm tired to be this amazingly fun life with with paddle board and their mountain biking and hiking and just big views. But wow, for someone who has always been in control, at least financially, I felt a total disarray and I'll explain why. I had to consolidate over 20 different accounts with so many different moving pieces stocks, bonds, alternatives. They were HSAs, they were backdoor Ross that I needed to convert to regular walls. And then oh my God, I had a husband who was retiring seven months later, and I had screwed up his personal portfolio just as much as I screwed up mine. So there was chaos. And the real kicker was when I transferred all my separately managed accounts in kind. I ended up with over 150 yes 150 different individual companies or stocks that span from micro to large. But at least I felt I could I had confidence that I could consolidate these equity positions over time. Oh, no, the confidence slowly began to bit Wayne, because I realized one of these SMAs that I had transferred over had over 100 individual bond positions and government munis corporates ABS, ABS, I had no clue what that asset back securities, which I knew nothing about bonds. Now you might ask yourself, how did someone so knowledgeable in markets allow herself and her spouses personal portfolio to become so complex. Well, I'll give you the answer. I'm not saying compliance department at Raymond James. They encourage us all, all active managers to hire a Raymond James financial advisor and allow some of our assets to be managed by a person, basically given up our trading rights. Because the SEC likes to see that among those of us who manage assets reduce our conflict of interest. So just like some of you out there who have experienced Chris and I sat down with a financial advisor, a really good guy who proceeded to go through our goals, our investment risk levels, and kind, etc, etc to follow a certain plan until we hit retirement. And just like all of you out there. I came to the conclusion that after I retired because I had to pay my financial advisor just like you that I would say goodbye to. Who is still a good friend by the way and become a do it yourself. But I need a serious new plan. So much research, including just like all of you. I read retirement articles on morning star on motley full on brokerage sites where like houses like fidelity and trash while I listened to 100 podcasts. And I watched many YouTube videos, and I finally decided to go with the bubble heads. Yay. So the ever important investment process comes back to us. In this case, we're not looking at individual companies. They are well known, maybe a few I still have not so well known passive ETFs in a very diversified categories that I think will provide my husband and I've solid returns for the next 30 to 40 years. Primes tools. I have brought it down to just a few tools to monitor both our cash flow in our portfolio. So just for example I use tiller for budgeting, although I was a mint person forever. Now that helps to budget and I use personal capital similar to Allen to monitor my overall portfolio, but I also, like many of you have a self built Excel file that I created many years ago, and I keep tweaking. And now I haven't linked to a service called why sheets that just provides pricing and dividend data that I will never let go. So now I use new retirement to build a fairly sophisticated plan with a bunch of well thought out assumptions, and it's all based on assumptions now. But that's similar to what I did when I plan a price target and fair value to determine if we can continue to live the retirement style that we like and not outlive our assets. I also use money with fidelity for a double check. And I still question myself whether I should consult with a financial advisor, maybe a fee only advisor once a year, just to confirm our plan. So in summary, let's see if I can find the summary. What's the difference. I'm just going to read the slide and I'll let you guys read the side. So an active portfolio management versus retired passive invested. A rigorous investment process. Bogle headway use a simplified process, which I find much easier quality back then meant finding high quality companies. I showed you all the things we did to evaluate. Now I use a highly diversified passive ETFs or funds. I think I'm leaning more towards ETFs just to minimize my cost valuation. I had to do a number of methods to determine fair value and price target. They included assumptions. Now I use process proper asset allocation to minimize our taxes balance. I set it up portfolio with the right mix, including appropriate sectors here balance includes, guess what, never time the market. Stay the course by rebalancing annually only if necessary. So with that, I will lead us to see question and answers, which is the next slide. And Alan, I think I'm going to let Chris go ahead with our can questions first. If that's great, fantastic Betsy. It's really interesting to see how the, the Wall Street insider sausage is made behind the scenes. And there it is that that's that's a cookbook. That's a recipe right there for any of you. Absolutely fascinating. I wonder how many active managers, you know, any other active managers in retirement who have embraced passive investing file or similar. They're all telling me to go to hell. That's basically the ones who are still working in the business. I had not I actually take the truth. I'm, I'm the, my colleague does use a number of ETFs to use for his portfolio and just because we find that. It was a stressful position. And a lot of us are just done with it, you know, so well. Before we get onto the questions, I was going to point out interesting today I was out walking and listening to the current Morningstar Longview podcast. And they had on you may be filled with this individual from Wasatch global investors based in Salt Lake City. They had the CEO, Jamie Taylor, who was a small cap fund investor talking about his process, their process for stock picking quite interesting with Ben's interviewing him. That's cool. Yeah, I do know of James. Yes, I have met him. He's a growth. He's more in growth. But yes. Yeah, more growth. Yeah. Yeah. All right, Chris. Okay, we'll start with the ones that she prepared for me. And then we'll get into some of the ones that thanks everybody for hitting the chat and we'll get to those for sure. So Betsy, we've been in our household, getting our passive investing always known as the evil empire. Yes. So how are you going to turn your back on active investing, especially in small companies well invested in for years. That's a great question. Thanks, I thought. So yes, I Vanguard was always known as the evil empire and and they continue to gain assets and continue to gain assets as active managers continue to watch. And that's why I think you see fidelity and T-roll take a take a bit into that that foray. So for me, I'm not really turning my back on active investing, but I just know that what it takes to pick good stocks, as far as my mentality goes, I don't have access to the people. To the tools to the to what I needed to do for a deep dive into small companies. Now that being said that I still own a few names to this day. But just like the market constantly change so do companies. And I know there's going to be a point where I can't follow it as closely and tell you the truth. I just don't want to. Good. Okay, so what do you tell someone who wants to or desires to pick their own stocks instead of investing in an index. I'd say good luck. I'm just kidding. I'm just kidding. There, there's definitely opportunities to find, especially in small companies, an advantage over the market. I do believe if you follow company closely, and maybe you have access to Yahoo Finance and Google Finance that you could probably do a decent job. And sometimes it's just a hobby for people. So go go for it. But that being said, I truly believe and especially as I've learned mobile that index investing, you're going to get a solid return over the long term. It's a buy and hold and I believe in it. I believe in those returns. And you can't go wrong with a 9%, 9%, 10% return in index investing. Well, like you said, you guys had a good year and 6% over the index, but that's a lot of work to get the basic percent over. And then we lost, we lost the year before. So yeah, so it's just, it's just super hard. You had, you had access to the tools faster. Yes, like Yahoo and each others aren't as fast as Bloomberg. We had news, I'll tell you right now, anything you see on CNBC, we knew it three hours before you got told. So, yeah. Oh, especially in small, maybe not logical. So we've got, we've got 80 to 90 people on here. Can you give us a hot stock tip? A hot stock tip, follow the bubble head way. All right, so it's only been a little over a year that you've begun following the bottle head method. So are you, there's two parts of this. Are you truly there? Meaning, do you say your portfolio totally looks like a bubble head? Yeah. No, as Alan or any of you probably know, when you adopt a portfolio of 150 stocks and you adopt 100 bonds, there's no way I can change. Although I would love to change in a day to get everything moved over. I have been moving towards that way. I bet you don't take me at least three, if not five years, if not 10 years to become completely vulnerable. Well, that relates to a question that you had, you know, that we'd have a big tax bill if you just converted everything over and sold everything off. Yeah, exactly. Is there anything else to that? I mean, some of those sales weren't necessarily taxable. Is that true? It is true. It is true. It was a mixture. It was a mixture because my financial advisor not only had taxable money, he had tax deferred money. And I believe I ran my small, very small Roth at the time. And then of course, my company had a lot of other products that they were managing for us. Okay. So with the bubble method, is there anything you see for improvement with this methodology? I'm glad Lady Geek was on here earlier and I will bring her up because as I told her, and she admitted that the Bogle head site was created as a billboard site many, many years ago. And right now I'm lost. I'm a little lost. So I find myself, as you all feel as an analyst, I find a link and then I go to the next link and then I go to the next link. And the next thing you know, it's two hours later, and I didn't consolidate my brain. So I request that maybe we get a millennial. Alan, you took the poll. There's hopefully one person who was early retired. Maybe they can help us develop a more simple. I mean, I actually even went with your suggestion and looked at the tools provided, you know, the financial tools. And that's even that section is kind of tough to figure out. I'll just interject for a minute. I think a good starting point for the basics is the Bogle has University that has taken place the last two years at the conference. There concise short lectures covering specific topics, especially the Bogle has 101 for beginners. And then the Bogle has 501 that they did this past conference for more advanced topics but yes the the wiki and the in the Bogle has website can be certainly be overwhelming you can really go down the rabbit hole. Well, if there's any and if there's any other consolation, I was a civil engineer working for a consulting firm for 35 years and and our website stunk. I mean, we couldn't find anything on it. We had mounds and piles of information and things but so they need to be updated in general. All of them do. Period. You know, it's just another tool. It's like going, going through your, you know, the desk and cleaning out the books you don't need anymore. You know, so one last question that I got. So retirement so far, what's your biggest eye over that see like all of you. The Bogle has we're savers right, we don't like to spend money. And it's been so so tough for me to let those dollars go. So to go from accumulation all those years and I and I hope the young people here to distribution it's scary. And you, you, and for some reason you're not thinking you have 30 years you, you think that you still have another 100 years for some reason I don't know my brain. And you, and you need to be allowed to spend money. And it's, it's tough. Betsy, for what it's worth. I did a column about 10 years ago for Forbes on that exact topic, switching gears going from saving to spending. And I interviewed a lot of people for it and the Bogle heads and I was not unique. I found out that a lot of people really have a problem. And I think the big problem is, we don't know how long we're going to live. If we did, we could divide. And we would know the answer, but we don't. And the fear of the fear of running out of money is after saving all your life to have a good retirement, and then you get there and you're afraid to spend it. So it's, it's a common problem and I was guilty of it. My editor at Forbes was approaching retirement. She knew I was already retired. So she asked me what it was like. And I said, well, that's a good topic for an article. And so then I started interviewing the members and found out that I was not the only one that was really worried about it. So you're not alone, Betsy. Thank you. Thanks, Mel. We're trying to spend honestly. So you want me to read through some of the questions or you want to take some or. Why don't we alternate between people who want to raise their hand and ask a question and then I haven't been following the chat back closely but maybe some of my co-coordinator colleagues can can read them off as well. But let's start if anybody has a question they want to ask live, raise your hand please. Don't be shy. This will only be viewed by a few thousand people. Yes, Russ. Russ, you hit your hand up. Yes. Oh, let me welcome from Warden, Colorado. Hey, where's the snow tonight? That's what I hear anyway. And the wife and I were about 76. We've been retired. We're both retired military and use the TSP and all that, which was in way at index funds. And what I want to say is I use quicken and they've got a planning function in there. It's really great. And, you know, I can say, you know, we're going to do this, we're going to do that. We want to go there, put money in it and say, okay, what's going to happen. And they take what we have, our assets, checking accounts, everything, and then they run it through and say, okay, here's a graph. And this is, you're not going to go broke in your lifetime. That's what I want to hear. I can put anything in there. I can do all kinds of manipulations. The other thing is we are pretty much into Vanguard time-dated funds, mostly somewhat 2065 for the money that I don't think we're ever used. And then we've got Ross on the side of that. And then I still have 2020 and 2060. Well, I've got 2022, 20 also. Because, you know, it's sort of more safe because there's more bonds in it. And I like to 2065 because it gives me a little exposure to the international stocks, not so much of international bonds. So I wanted to ask, with all this money into 2065s, and it's really hard to, like, move around things. So what's your position on moving some money from the 2065 or any of the Vanguard funds? If you look at the makeup of it, they've got these bond funds and stock funds and moving into their ETFs. So you're paying the market more, but it gives you ability to, you know, if it's down whatever. And that's the other thing is we keep, we're 76 years old. So we keep two years of mandatory required distributions in a money market fund. So it's safe. It's cash in the bank. It's cash. So if the market tanks, we got two years at least. We don't have to worry about it. So what we did in 2020 was like 2020 and everything is like, yeah, okay, well, whatever. If I can interject for a moment, Ross, I think you're talking about target date funds, I presume, which all the major fund families offer and with varying types of asset allocation. So it's really this one that we're there managing the basically the over time, how the allocation changes typically, you know, increasing the bonds and becoming more conservative. You're talking about breaking it up into this individual components and managing it yourself. Is that what you're referring to? Correct. Correct. Yes. Absolutely. I have thoughts on that. We'll let people speak, but my thoughts would be as you get older. If you, if just my own personal thoughts is that the beauty of a target date fund is a certain forget it if you agree with the asset allocation and the glide path, you go out and live your life. Let the pros manage it. Now, if you get older, if you're concerned about cognitive decline or other issues, you want to start taking more responsibility where you're more agonizing and potentially losing sleep at night, trying to figure out what to do. My philosophy is to simplify things as I get older, not make them more complicated. That's my two cents worth. Okay. Thank you. I appreciate it. And Russ, I was just going to say, I'm too new to the game. I've never invested in target date funds. I know that they offered them and at my 401K, but I always felt that that was a, I don't know, a weak way of investing just from my standpoint because I was an active manager. So I felt like I always wanted my hands in the game. But again, just like Alan said, as I get older, I need to simplify. And I get so frustrated that the US government has created this tax system that we have to pay attention to now. When I was making money, I didn't have to worry about this much, but now we have to figure out this asset allocation. And maybe the target date funds are perfect for you. But again, I don't feel like I have the experience to explain to you to jump in or out or market time. I've got a set number of ETFs that I feel very comfortable holding and you would know them. I mean, it's a lot of Vanguard ETFs. There's some Invesco 01s. I actually sort now on net expense ratio and find a few and then I go with the cheapest one. And the holdings really don't, they don't differ quite that much. I don't know how they get away with charging 20 basis points for one and 10. Maybe they're a little bit more specialized, but right now that's what I'm doing. Yeah, there are some S&P 500 index funds that's still charged like upwards of 75 basis points and get away with it. Well, we're pretty much Vanguard. Yeah, we're all Vanguard. Yeah. All right. We have, I think, Jitendra, you've hit your hand up. And thank you, Russ, for that topic. Oh, yeah. Yeah. Thank you. And Jitendra, Jitendra, you're muted. How do I get on it? Can you hear me? Okay. Yes. Yeah. Okay. Thank you, Betsy. It was a nice presentation. Thank you. The point I thought, I know, I see most of the people like me bald-headed is not bald-headed, bald-headed, is that X is the situation. Now, when you do what you were talking about active or ETFs and all, the game I like to play and I'm playing it with individual stocks, which was the one subheading in your topic, gives you control to maneuver the tech situation. Like last year when things were bad, I look at it, how much red I have or how much green I have, then I just bang, bang, bang. My goal was to bring down my income, otherwise it goes Medicare goes up and all that. So to that end, I know you can do this with ETFs some easily, but individual stocks takes advantage because you know the date. Also, I know it requires little active management because you know the date and you said, okay, I want to sell it after January or whatever. And as you know it, all of you guys know tax is so low on a long term. It's like a win for all of us. What do you think of that? Well, I don't know if I'm the right person to ask that question. I might have Alan interject. So your basic question is, it's better to stay with individual stocks when it comes to the tax situation versus control over it. I actually probably agree with you. I haven't seen the tax situation with my ETFs right now. I keep all my individual stocks, my growth stocks in my taxable accounts and you're right, I have more control. I decide when I sell them. I don't have them telling me when they're selling. But I am going to get in trouble because I do use, I have to. My money's not, I mean, we're split 50-50. I think we did a good job with our tax deferred and our tax efficiency and our taxables. But I still have to have a certain percentage in each of the ones that I haven't quite figured out how to balance because I've got so many losses in these bond positions that it'd be silly for me to sell right now. Because I just, well, first of all, I don't like selling out a loss on names that I know will gain because there's lots. No, but I'm sure you know it more than me. You can buy in kind next day. Yes, yes, yes. If you're an agency bond turnpike, you buy California turnpike or something like that. You're sure it's true, but I just, I don't know. Okay. Besides that requires active management and who's want to spend the time. So that's my second question. Because I'm older than you guys. And as I hear the word from Allen simplification, yes. But I'm sure all of us gets a little, I don't want to use the word cake, but jolly out of doing our own thing. My broker says that's your morphine. Okay. Otherwise I go crazy in the morning if I don't do a couple of trade or read. So, and still make the money or at least most of the time, whatever. So point is the next question is the simplification. Yes. You can buy four or five Kipling are also right. What the best growth and all lowest expense ratio and buy those. That's fine. But that doesn't get you anything. You, you can do some text advantage there. If you write the date that you bought it is on the screen and sell it. Maybe whatever the gain you got it. Maybe it does. So any thoughts on. Stay 60 to 80% short of active and 2030. I have certain fun, which is already on. I don't even touch. It came from old fidelity to swap whatever. So that's my simplification. Any thoughts there? Let me interject. I guess if I can speak, I guess you're talking about the ability to tax loss harvest, obviously when you have buildings that have declined. And then that's a very well accepted Boglehead philosophy. And if you exchange it for something similar, you know, but not exactly the same. You're not, you're not going to have an issue with the IRS. Yeah. So if, if, if people want to do that, there's actually, there are firms now, like I think maybe well front betterment others that actually do automated tax loss harvesting for you with a basket of stocks that's active, very active, but relatively low expense ratio. But the problem is you're stuck, you're locked into that long term because ultimately you're going to have embedded capital gains. It's going to be harder and harder to get out of long term. You need to think about what happens to other you or those who inherit the assets. And that's what you're going to want to aim for. But keeping a small portion, if you like to, you know, play around and it's a hobby for you to pick out and play with individual stocks, limited to, I'd say, five to 10% of your portfolio. What is the, the, the fun part of your portfolio that'll scratch that itch. And the rest, leave it in index funds. That way you kind of get the best of both worlds. You can also tax loss harvest with, with index funds. If you have sector funds or large cap switch S&P 500 for the total stock market or vice versa. So there's tons of stuff in the Bogleheads Wiki about ways to accomplish that. Where do you get that? I'm sure Lady Geek can put something in the Bogleheads Wiki has a lot of resources talking about tax loss harvesting and that's all over the internet. You can get that anywhere on the internet. There's videos that talk about that as well. One thing I'm going to interject and then I'll get to you, Mel, is talking about, you know, stock picking and such. Even if you have small cap, say, you know, there's been a lot Paul Merriman and others who've advocated small cap value is being long-term, potentially outperforming the S&P 500. The beauty of having, say, a total stock market is fun. You don't have to worry about the small caps who grow and mature that are very well run, evolve, become the mid-cap, stay in the index. You don't have to worry about anything happening there. Later on, if they do extremely well, they may move it up and become large cap stocks. So that's one thing I wish I had done. I have a very small percentage of my total portfolio. That's actually the total stock market index fund. Instead, I have a sliced and diced portfolio. But I've added the, in this case, the Vanguard completion index or the extended market index. It has everything but the S&P 500. So I've consolidated my small and mids a little bit that way. But the beauty of having large index funds such as a total stock market index or total international, you don't have to worry about the gyrations amongst the asset classes within that fund. They do what they do. The best ones will float. The cream will float to the top. Others will drop off and it's going to have minimal tax implications for you. And it's okay to pay taxes. If you're paying taxes, that means you've made money somehow and we shouldn't regret that. Yeah, I have to wait. It's just so much. And I will just interject that, yes, I still have 20 stocks that I am following. But I've whittled it down so, but it's still a lot of fun and I probably can't give it up, but I'm trying. And every year it'll get worse. It'll get, I know it'll happen. We interoper habits. Okay. Okay. Mel, your hand is up. Yeah, I just wanted to thank, I have to run. So I wanted to thank Betsy for a very informative and interesting evening and thank you for all you do. We'll see you all later. Take care. Thanks Mel. Thanks Mel. By the way, for those of you who may not know, Mel was a great advocate. They call it Mel's on-law mid-caps. For many years on the Bogo Head's form and elsewhere, he basically spotted about what a wonderful sector it was, just the mid-caps. And I think they have long-term done quite well. I don't know if he's outperformed the S&P 500 or the total stock market long-term, but it's certainly an underappreciated segment of the market that's worth looking at. Definitely. Definitely. And it's a great place to be because they've outgrown the small-cap status and they're not fully large and you could have a ton of birth potential through them. All right, Pat, your hand is up. Yes. When I first started getting into investing, I didn't really know a lot about the index funds because it was quite a few decades ago. But I've definitely kept one of my actively managed funds because it has done extraordinarily well and continues to do so. And I also found that when the market tanked, what went down in that fund, the percentage went down was a fraction of what the index funds did. So sometimes, like you said with the small-cap, sometimes the act of investing can contribute. Well, I think the same thing kind of happens with protecting. I'm definitely a bogal head and that is what I'm doing now, but I'm going ahead and keeping this one fund and just when I saw it, it only went down a fraction compared to the dive that all my other index funds took. It makes me think. Over what period of time was that a short-term comparison or long-term that obviously different asset allocations and sectors will behave differently in the short-term? But if you're going to hold on to something long-term, you want to know how well correlated it is with the total market and is it really providing you any benefit over the long haul? Yeah, I purchased it in 1992 and I still own it. And I think it was during the lost decade. I can't remember whether it was 2008 or what, but when I saw the dive that it took and it never even, you know, when the market took a dive, this actively managed fund never even came close to plummeting to the extent. I was fortunate because I was working and I just left everything alone. So I ended up, when the market came back, I was way ahead of the game because I was buying bargains. But I just was really amazed, you know, how, you know, when my other stuff was just tanking, you know, 50% and whatever, this was just like a fraction. Yeah, it went down, but it wasn't that horrible dramatic thing that everything else was doing. All right, so he's asking what the fund is. Of course, you want to see if it has holdings that are comparable to what you're comparing it against. If it's a bond fund or something else, you know, I'll tell you what the fund was, Fidelity Contra Fund. Okay. Yeah, that's, doesn't want to think well, long-term. All that was actively managed is relatively low expense ratio for an actively managed fund. Yes. Interesting. Yes. Of course, again, remind everybody, we can't give, you know, specific custom advising investment advice for everybody here. It's just speaking in generalities. Very him. Yes. I was just wondering what the equity bond ratio is Fidelity Contra Fund, because for example, during the Great Recession, my Vanguard Wellington, which is an active fund, a 6040 fund did not lose much at all either, but it was 60% stocks and 40% bonds. Fidelity Contra. It did not do the same as my stock funds, and it did not perform the same as bond funds because the asset allocation was different. And also some funds have, especially if they're T-Row price funds, which I owned at that time, they have what we call the kitchen sink put into them. T-Row price funds do well because they add puts and calls, hedge funds, foreign stocks, they put a lot into even their target date funds. They put a lot of that stuff in there, specifically so that when the market changes, you will not lose your principal. You will stay up ahead is what they say in their prospectus. The difficulty is that the expense ratio is so high, you will eventually lose what you gain in your expenses if you hold those funds. I might again interject. I'm sorry for a moment. This type of thing, I don't think we have time. I could pull up the Delta Confer Fund and share that with you on the screen. But you know who does a lot of that is Rob Berger. I know Betsy is a big fan of Rob Berger's YouTube channel, as am I. And he's really wonderful. He's been at the last two Boglehead conferences. He pretty much embraces the Boglehead philosophy, plus or minus. And what he does now every other week is does a live YouTube and Facebook session for two hours taking questions and comparing funds and talking about the pros and cons, comparing their assets. And if you watch him, I think this is the sort of thing that he does. He also is currently compiling on his website, which is I think robberger.com, a whole resource of tools, all the conceivable personal finance tools that are available, including links with screenshots of them, his comments on the pros and the cons. I actually mentioned that to Lady Geek and she put a link to his website in our wiki, because the Boglehead's wiki can't keep up to the extent that he's keeping up with this. And I encourage you all to check that out. It's robberger.com, and he's got a section there on tools that he's just now compiling, but includes new retirement, and power or formerly personal capital, a ton of others, and it's going to grow, and he says he's going to maintain that. So it should be a great resource. Yep, I agree. Let me see if I can... My guys who are looking at the chat, we have any specific questions here that I've missed per se. Somebody posted contra fund is pretty much almost 100% equity. Yeah, I think the thesis behind the contra fund was contrarian, right? It invested in things that were not momentum. So she was getting things very cheap, probably cheaper as the market continued to go down. Probably did very well. Yeah, I don't know if they did any type of things like shorting the market or anything else, any other type of fancy type... I do have access to someone who's a big way to get finality, so I could ask that question. Okay. Greg, your hand is up. Yeah, thank you. I'm really curious. I've got several responses to this, including from Chris, which I appreciate, but I'm not sure I understand the allegory, and maybe I'm just dense, but earlier you had a slide, some data, and you said, bend the knee. And I know I understand bending the knee may be smart when you're lifting weights, but were you talking about lifting weights? I was. I was. Those are just... all the quotes came from different parts of my life. So I remember when I was going through my physical therapy program, the way to actually transfer patients, you had to bend the knees always to use your quads, because the quads is the strongest muscle in the body. And then turn. So you're going to transfer patients from beds to chairs. The way to train it was to keep them close to your body, and people with some kind of family member would just, you know, I'm trying to show you, but they never bend their knees, so I had to train them. So this does not apply to the financial side? No, but every time I saw one of my colleagues go to pick up a bunch or a box, I'd be like, hey, bend your knees. I have another question. I put it earlier in the chat if I could move on to that. You mentioned that if a CEO moves from Metronik to one of your companies, that that was a positive indicator for you, because they might be able to grow the company, right? But I'm thinking wouldn't that be a red flag as well or at least something you want to look into, because there's a lot of CEOs at certain levels, and the only place they can get a job is maybe at company D, which is smaller. Well, what I would always do, Greg, is see where in Striker or Metronik or J&J that they led. So if I had a company like the CEO from Philips who ran the Electro Magnetic Division and then my company, that's all my small company focused in on, of course I wanted them, because they ran more money there at Philips than they did in this company. So I had a ton of success every time. Yes, maybe some red flags on somebody just looking for a CEO position that didn't make sense in that area, but for me it always turned out to be a huge positive 99% of the time. Thank you. It's not the CEO of Johnson & Johnson, it's a division leader going from there to be a CEO of a smaller company. Yeah, that makes more sense, I think. Correct. Oh, yes. If I saw the CEO of Johnson & Johnson I'd be like, no, that would be a red flag. Well, that's one of the advantages obviously of having an index fund. There's no manager risk in terms of a manager leaving and management changing. It follows the index. Oh, yes, from time to time the index might change, but that's just one less risk that you have to deal with and worry about. And there's a lot to be said again about getting older, certainly for me. I like simplifying and anything that I don't have to worry about just makes my life easier. Well, Alan, I could chime in on that too. I know Betsy went through a very tenuous, not tenuous, but long duration planning to retire for that exact reason, because they didn't want the whole thing going to tank when she left. So they hired a couple, they interviewed and hired a couple of people. They left the notification at the right time and it was all about we're going to keep our process and we're not changing Betsy's going to leave and that's what people do. So don't freak out everybody, but that's a valid challenge. And she went through it correctly. Yeah, I think Morningstar actually tracks that and one of the measures they track is the team. Somebody posted a question here that I'll read about what do folks think of Avantus ETFs? In general, they are actively managed at right and lower cost and have somewhat different approach. So Avantus is kind of like, I guess it kind of a spin-off from dimensional funds, the same concept where they're kind of an indexy, but they have another process on top of that for their asset stocks selection. What are your thoughts, Betsy, as how both of those operate and their approach? So I'll tell you right now, Alan, I'm not familiar with those ETFs. I'm focusing on the Vanguard, the Invescos, the that's another one. I found a couple, Franklin Templeton, I look for International, but I'm not familiar with Avantus. I'd have to look that up myself. And I don't know the dimensional funds. I think they were based on different types of strategies that I never paid attention to. Yeah, they were interesting. They started off mainly focusing on extreme small-cap value, maybe somewhere between micro and small-cap focusing on value. And they're basically, I believe, following academic research coming out of University of Chicago and the Nobel laureates that did that work that were consultants with them. I don't know how they perform long-term, but I think they're pretty highly regarded in the industry as a way to kind of have a more or less an index approach, but with a little bit of an active tilt to it that's still reasonably inexpensive. I personally don't own any of the funds, so I haven't followed them. Does anybody else own either Dimensional or Avantus ETFs? Avantus, the guy who started Avantus broke away from Dimensional. I think he was maybe even a co-CEO, because he wanted to introduce ETFs, which initially Dimensional did not want to. Just like Bogle didn't like ETFs. But eventually now Dimensional has had to come out with ETFs to try to maintain their business. But is anybody else using either of those funds? I'll look it. I don't even know how the active ETFs are doing. I mean, do you pay attention? I mean, except for the only one I know is Kathy Wood, right? We all know how that's done. By the way, Jay, your hand is still up. Did you have another comment, Jatendra? Did you have another comment, Jatendra? Your hand is still up. Maybe not. Greg, your hand is up. Okay. I'll persist here. There's a few really good questions back about 5.44 p.m. That's probably specific time. So you might want to go back. There's one from Steve that I was curious about. But I'll put in one of my own, and that's Steve Ben for himself. I can read it for us. Just read it, Greg. I'll give you a few here. Which small index do you follow and why in choosing your own funds? That's part A. Part B is do you tilt a small value or other factors? So I know that's a very good question. I use the Vanguard. I use both. I use the Vanguard growth. I use the Vanguard value. I also have found this interesting ETF. The ticker is P.S.C.T. and the only reason why I use it is it's all small cap tech stocks and all of those tech stocks. We own half of those in the portfolio. So I called my tech analyst who still works for Eagle and he's like, oh, this is great. He mentioned it as a great one. Now the net expense ratio is a little bit higher. So I do do some specialized. And that's one of them tech. I do own a healthcare ETF and I'm not going to give you that one. I actually have to look it up in small cap. And what's the other small cap one that we've been using? I'll have to look it up. But I'll make sure it's not bad. How much weight do you put into looking at the underlying index? I have so in my equity portfolio right now, I just looked at this. I have 66%. I have I believe I have 70% of that is towards large cap. But that's just because the mega caps have done so well. I am looking to readjust this. 25% in mid cap. And then the rest goes in small cap. Okay, I'll cut to the chase. Are you a factor believer? No. No, okay. So total market approach at this point. Correct. Okay, I'd be glad to read a question from Steve M who submitted this a while back. This one. Please do. Okay. Thanks, Alan. Knowing that you knowing what you know now about managing a portfolio in retirement. And how you have active investing during one's investing career. Are the potentially high gains in your actor portfolio that would trigger taxes if you transition to a passive index portfolio worth it to most people? That's a good question. So I know that me would in small cap Greg or Steve, I should say. Yeah, that's me. That's a great question. We did not have to worry about taxes as much as the large capital. And the reason being is that our turnover normally we made sure that we matched some of our losses our big losses with some of our big gains. So I know that tax at the end of the year for the mutual funds or whatever, or even even the SMAs could end up as a huge tax bill for some of the investors. I know for our actively managed, I'm sure there's many active managers who are now looking at this because that's one of the number one complaints is that the end of the year they couldn't control their taxes. So either you owned us in a tax deferred product which we would sell or if you owned us in a taxable product that we would kind of monitor that tax situation. It was again much easier in small cap than it is in large cap and would I recommend a I don't think knowing what I know now and because I have many friends in large cap I would not recommend an actively managed large cap that just focuses on S&P 500. It's just too hard it's I don't know I just found the returns minimal in small cap it's a different story and it would depend on the manager. I asked that question because I'm early in my retirement and I I don't know maybe 14 years ago or so is when I learned about Bogleheads and I was like, oh, index, okay and from that time on yeah, I was all index but I and I I managed to pare down some of my more active stuff but still I wish I had gotten it all and in retrospect I'm like, gosh, you know kind of wish maybe I hadn't that wasn't optimal but alright I am where I am, you know, so I was like that's that was that was the motivation and your your your presentation which was wonderful is talking about how do you evaluate active oh this is good this is we take it very seriously we look at the management we look at the numbers and you know all that kind of stuff was like that's true but you reach you then get to a point in your life where like I don't want to deal with this anymore. Yeah, anyway that was sort of the motivation of my question Thank you for your response. It's a great question. Thank you. Lady I'll get to you in a moment I want to put a question Betsy because you were talking about this did you guys know as managers what percentage of the holdings are the individuals or institutional versus the the individual investor that held your fund what the breakdown was between the two. Oh yes oh yes I we had software that we could tell actually who was trading our stock by the end of the day so for instance if fidelity owned a big portion of one of our stocks we knew it because of the movement in the stock or just what we or what we would see on earnings and I'll tell you right now I would say in our companies we hardly saw movements from the individual investor it was mostly the institutional and I'll tell you right now it was artisan it was wasatch it was it was it was some of the big T rows you know just any of the big ones that you see out there we could tell who was moving the stock but you didn't change anything based upon whether it was predominantly institutionally owned versus the individual investor I presume most of it was maybe institutional or separately managed to count through say a Raymond James or other you know advisor I'll tell you right now I never paid attention to the individual investor I always paid attention to the smart money and but but the smart money gets it wrong too but I really paid attention if there was seven of my peers all in this one company that I never recognized before that try kind of drove me to do analysis on that company interesting thank you okay lady geek yeah yeah this discussion reminds me of Gus Salter many years several years ago when he was at the Philadelphia Bogleheads conference when Gus was running the funds and no he was like Jack Bogle's right-hand man I remember speaking with him directly and he or at least with the audience he gave a very interesting talk on how the fund managers keep track keep on track with the indices like the S&P 500 he would say every day they would go and they have mornings they would have all these meetings and you had to have the sharpest people who did this on a daily basis how the heck did they keep that fun tracking within like 0.001% of the index it is a very difficult job it is almost like an art to doing that so I just it just this discussion reminds me of speaking with Gus Salter and he people who knew him at least from seeing him at the conference every year the guy is like phenomenal in terms of theoretical math and stuff this is his this is his love I believe but he just kept saying how difficult they really really how to manage the fund the guys who did the trades how they tracked every index and it was really amazing how well they did that so that you keep talking about buying an active and passive that completely mass the underlying details of how this stuff actually happens it actually boils down to people and algorithms so that's what I wanted to make that point well lady geek I'll tell you we had an advantage we had an active manager we would actually watch and we would try to play games play games on end of quarter and this was early in my career because we weren't allowed to do it by SEC rules at the end but we knew that Vanguard had to have so much percentage in certain names so when they started their small cap we would buy these companies that had very low liquidity we would know that we would push it up a certain percentage and Vanguard on that Monday would do it like on a Friday on that Monday we would see that stock rise by 6 to 10% and we would sell immediately because we knew Vanguard had to have that closeness to the index but you know what Vanguard got smirled about it too they would watch those positions and they would keep an eye on it and now you know that they can kind of have a time frame before they actually actively push that passive position so it is very interesting but there is software that we could buy that could tell us what Vanguard was doing isn't it called front running is that called front running well you front run if you're a manager if you're personally doing it but if you're doing it as a fund manager I'm running your money I'm doing what's best for the client so I could do it all day long and not get in trouble again the SEC rules have changed since that time but Vanguard has become the Spihima so whenever they started becoming a passive manager for one of our indexes we loved it I think front running implies really illegal you know information you definitely know information before you're supposed to know it she was talking about it you kind of suspected that was going to happen because you'd seen it happen a lot of times so you kind of anticipated it but you didn't 100% know it was going to happen now that's right well on that being said we could never buy a company that was outside of our investment process you weren't seeming to buy a biotech company that had no earnings that just wasn't part of our but there was ways of watching it is ways of watching to make sure that you could still get a good return off the stock even if Vanguard didn't participate but it is interesting the street has to make money somehow everybody's going passive there's a book that was written that's described front running called something like flash boys or something it has the word flash in it fascinating book from a number of years back I love those it was about laying this fiber object in the most optimal way so that they could get like a multi millisecond advantage to what was going on yeah there was a high frequency the high frequency traders that had the computers the closer they were with their mainframe the wall street the milliseconds that they could gain it was all speed of light it was like how much can we optimize this yes they didn't want the fiber bent it was intriguing and eventually I think the book was made five six seven years ago something like that I think the SEC came up with some new regulations that they had to all route everything through a common source I think a common computer or something without the playing field they eliminated that from some regulation it sort of slowed it down a little yeah yeah yeah also the last big event or cool well not cool or neat no kind of thing that happened with me was watching that GameStop because I actually we actually our poor consumer analysts had dumb money it's called have you guys seen that movie that's it's called dumb money you got to watch it it's all on the GameStop and it's fascinating to see what the little investor could do to those who have heavily shorted a terrible company it was a terrible we were not invested but we kept monitoring it every day it was it was fascinating yeah it very interesting you know I'm curious I know you said you're I don't know if your children adult children are on this zoom and all Betsy but I'm just curious without I'm not putting them on the spot but when you have conversations with your children as all of us that have children and now we're retired and they're and they're approaching hopefully their peak earning years it's been interesting in trying to have financial discussions and having an opportunity to share our values and teach them which for me personally has been slow going I'm just curious how the two of you approach that with your kids one of our kids followed me into the business so he actually he works for a hedge fund in New York City and he has a total different mandate so it was funny though I worked I was work from home before work from home became popular I've been doing it for 20 years since Chris and I were based in Florida my company was my team was based in Vermont so he actually had access to all of the tools and he would come in and play a little bit but he didn't get serious until he went to college at Cornell and he learned all the ropes and he would now every day we talk about or there was a time where our careers overlapped and so he's definitely fully involved and believes in the process of investing but he's an active his mandate is totally different than what mine was and his brain is so much smarter our daughter so to answer your question a little bit too my perspective as a civil engineer I I tried to get him to get into engineering and luckily I think at the end of the day he'll be glad to do that so he got a degree in engineering and he ended up on Wall Street with those guys and our daughter like you just said she's a tricky one I try to send her those very few articles every week on what you should do with your money I started her off with her way back when she first started earning money but she's a tough one because her whole passion is art and she's not afraid to spend money even at her age she'll have no problem like we all have trouble spending money for whatever reason she doesn't haha now it's interesting the two biggest challenges I've personally encountered in retirement is as with you spending the money opening up the purse strings very very difficult after a life of more or less living way below my means and then also trying to educate the next generation our children and their friends and so forth and observing what's going on I'm glad to see there's an active there's also a vocal head subreddit that's active amongst the millennials and younger generation and it's nice to see but again we're for the most part the tip of the iceberg I think I think worldwide or certainly domestically investors are pursuing a passive approach everybody's chasing the almighty dollar and the game stops and the bitcoin and what not so it gets interesting well and you see a stock like NVIDIA I think it's again up like something's crazy like 200% one of those that's all it takes yeah interesting but even going back to your other part in the simple stuff like matching out your 401k as soon as you can getting in that mindset you know and they're both picking up on it but it's a process for sure any education I was very happy this is a couple of years ago when the crypto craze first started my daughter who lives in New York she asked me about crypto and I advised against it but she said all her friends are buying it she did not she picked up a little bit of what I said over the years but it really made my heart go pitter-patter when she said I know dad just buy and hold it's time in the market not timing the market and that made my day I said my life is complete I've been self-actualized wow that's great bitcoin's at 76,000 yeah it's well the ETFs we'll see how long it lasts that's right do we have more questions folks if anybody wants to raise their hand or submit it in the chat I got one question about was Betsy and active managers in general aware of what SPIVA what does SPIVA report I lost it I think I just saw this how active managers move to the index every year I'm aware of it no I don't read it that's interesting because those that do outperform for the first early years don't have persistence for the most part not saying that you didn't and certainly the small cap space has been easier to outperform the index but as a general rule I think now the SPIVA which is the S&P actually do an analysis as well called persistence those that do outperform do they persist in their outperformance and as expected no long term they generally don't and those that do you have to be able to pick those managers in advance in order to do really well and continue to outperform but we don't have anything to guide us to pick them in advance other than pure luck because they don't have a track record yet at that point interesting it was funny Alan to watch us go from 200 billion to 3 billion and it's because we became the hot little thing on the market and it was amazing how much money rolls in when it rolls in very quickly because you have to close your fund at all in order to limit we did and I'll tell you the truth but 2.2 million I think and the sales people kept selling us so we finally put a hard you end up doing a soft close at 2.2 and then we did a hard close at 3 billion because at that point we had kind of filled all the positions we couldn't take any more money yeah that's interesting in fact the podcast I mentioned the Longview with Morningstar with that small cab manager this week how often they have to close their they're actively managed funds because they just couldn't purchase anymore basically they done everything they could and they had too much money coming in right and the tough space is the microcap I think the microcap and that's why you don't see a lot of actively run microcaps by the brokerage houses because they don't make any money off you can't charge because it's that much work to put into these microcaps before you can actually put a portfolio together and then you have to immediately close it when it hits like a billion it's very interesting I think you sold us on the viability if you really want to work hard and perhaps outperforming and picking being a stock picker but I think for most of us whether you're a true Boglehead or more or less embracing a philosophy that the index is probably ideal for the majority of us and I think most of us certainly myself got I got my start trying to individually pick stocks and going way back gosh probably about 30 years ago I had a girlfriend who was actually a day trader and she I live in Tampa she was in Orlando and there was a small very small unknown company she found a chip maker called Sautec they were relatively unknown and we toured we went in and met with the management and toured their setup there which was incredible and I invested in them I was very impressed and they were it went nowhere and I ultimately lost some I sold it at a loss not a big loss but I realized at that point and unfortunately it took me a while beyond that to realize that just sticking to an index would be the approach but I probably carried on with stock picking for another few years before I finally threw in the towel well Alan to that point I mean I don't know how many different ideas and you know ideas for companies that have come along now that we're older and we're seeing these things you know and you got kids making an app and you know boy they all sound like really great ideas you know but it takes a lot to make it and make it work well as Jack Bogle was fond of saying is instead of trying to pick out the needle in the haystack just buy the whole haystack yeah exactly sounds good that pretty much sums it up alright folks any I'm sorry go ahead no any further comments or questions anybody okay if not I guess we'll wrap it up again I want to thank Betsy and Chris for a very unique shared perspective about how the sausage is made and active management and you're a rare breed to have admitted and been honest about the utility of switching to a more passive approach look forward to hearing your further perspectives at our local Tampa Bay chapter meetings I encourage everybody to check the Boglehead calendar of events so check out all the four life stage chapters that meet virtually on zoom as well as any Boglehead local chapters in your community or start one if you don't have one nearby and continue to come up with ideas and we'll keep all these conversations and shared perspectives going I want to do a quick launch a poll real quick the final poll for those of you still here just to get some feedback on what you thought of this meeting so bear with me folks I'm just going to do one more quick poll here if you don't mind answering this just for our feedback and obviously the people that I board already signed off so we expect to have a good response here that's probably way till a bit of red it's skewed yeah you must be one of those active managers all the numbers the numbers all right everybody I'll go ahead and share this waiting for the end of the quarter actually all right so all the people who didn't care for it are long gone but again that was wonderful Betsy and Chris everybody thanks for sticking with us if anybody wants to save the chat before I end this if you go down to the chat you'll see there's an ellipsis the three dots and you can go save chat it'll save it to your local computer Lady Geek typically saves the chat and anonymizes it and posts a link on the Bogleheads forum so you can also get it from there I didn't have a chance it's very hard when you're hosting to look at all the comments in the chat going by they go by too quick but again thanks everybody for attending hope this was useful and maybe Betsy you can drag us into the next in-person Tampa Bay Chapter meeting I don't think so thanks again