Welcome to the Bogleheads chapter series. This episode was jointly hosted by the Tampa Bay and Retired Life Stage Chapters and recorded March 13th, 2024. It features Betsy Pecor, 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 and should not be construed as personalized investment advice. And 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 Pecor, 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. And 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. Raj or Robert, if you're on, shoot me a PM and I'll make you co-hosts. Rather than me muddling up Betsy's introduction, I'll turn the mic over to Betsy's husband, Chris, and let him do that. No, 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, a mother of two great kids, my partner in life, and a 25-year veteran of Wall Street, small scap, small cap, scap, right?

Cap, stock analysis and investing. I just, I didn't want to read her 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. It introduced her to the healthcare systems. And as she found out later on, she did learn that bedside manner 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 Shillett, 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 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 at Raymond James and the Eagle Asset Small Cap and Smith Funds.

So with that, I'm super proud to introduce my wife, Betsy. Wow. So hello, everyone. And thank you, Mr. Peacore, for the kind introduction. When I attended my first Tampa Bay chapter meeting for the Bogleheads, I saw Alan kind of raise his 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 be at a Boglehead 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 Boglehead way.

Yes, I was very lucky in my 25 year career 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 owning both active and passive products, especially when it comes to small and micro cap land.

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 listen to 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.

So thanks, Spence. So sorry about this. I have to go through 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'll 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 of tools we used every day on a daily basis to kind of monitor the portfolio and some on a quarterly basis.

And 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. 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 in case you get bored looking at the presentation of the slides, you 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, Chris. OK, so here's the bio we start.

Actually, I do want to read the first quote. And boy, did you ever need this when you were in a. 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 percent right, that was a good thing because I was beating most of my voting. 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 health care industry was not for me. And I really didn't 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 Outback Steakhouse. 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.

And now he's 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 a Ivy League degree or or at least a background in finance or mathematics. But I had the 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 began. And because of my undergraduate degree, the team put me in charge of health care.

We did very well. And the product grew from a little over 200 million to three billion, which is 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 karma. I started my internship where 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. OK. 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 savvies, 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 five billion. My team, of course, stayed up towards that one billion mark because of liquidity. And we let our winners run all the way to 10 billion. Mid cap was five 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 if you've 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 thing. There goes the term in case you're drinking a beer and. And it really became 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 beat the Russell 2000 than the S&P 500. And I'm sure you could find many statistics that show so. Plus, there's a lot more companies to follow. And 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 companies would only have access to. Because unless you have a significant amount of AOM or assets under management, such as the T-Rows and the Fidelity's 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 one of my companies for four 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. Well, 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 be so it wouldn't surprise me to see a stock move 50 percent 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, although in Vermont, in retirement, I'm using passive investments instead of small companies.

I'm learning new tools and techniques. 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 is 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 Stryker 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 for 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, I have to do that. 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 outsource their product or their their manufacturing to.

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 to be 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 who could come up with the best product or service, and they would receive the bulk of the R&D 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 say 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 a 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 of slides on on a sampling of our tools. Something that passed, yes. So first, I have to start with a quote, because I was a practice and physical therapist, but man, is it more important now than ever? Bend your knees. So anyway, that's that's just a little.

The next, like I said, this is this tool here is what we call a val 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 note at the top, this was 2003 of the value table that I gave you, but the columns continually changed.

So we 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 value table was mine.

And yes, those are my scribble notes. And yes, I somewhat remember what I wrote there. 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 health care 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 performances 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.

I still, I still crack myself up. 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 health care 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. Woohoo! Good stock pick, Betsy. We owned 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. But we own 98 basis points of it, and the index only owned 15 BIPs.

So I received a positive contribution of 26 basis points towards the health care performance. So 2016, as you can see here, was a very good year for the health care sector. It was up 5.3% over the index. So just to bring it back to reality, my performance was up 28%.

The index was down 7.36%. And health care 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 1.40%. But I can't end on that. I can't end where the portfolio does crap. So the very next year, 2017, I will present to you. And of course, health care 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 over-weighted 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 not bad, or negative one basis point. 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 14.6%. So we beat the index overall by 5.96%. Now, as I describe this whole investment process, the investment, the tools, the evaluation, I hope it somehow kind of feels familiar to all of you Bogleheads.

Again, in this case, the investment is based on small cap individual companies. The tools were developed by very, very incredibly intelligent IT people who worked for both Bloomberg and Faxit. Those are the two platforms that I used while I was an active manager, Bloomberg and Faxit. And evaluation, of course, is the attribution analysis.

So I'll end my active part of the presentation. We're just like, OK, what's what's a day in the life and what was a day in the life of an active manager or analyst? Every morning at 6 a.m., I was checking company company news or holdings. Then I was checking the market news.

Then I prepare for a team meeting, which we had at eight o'clock every morning. Then we had between two to ten calls set up with the sell side, the buy side, management teams, competitive companies, others. We were always searching for new ideas. We built models. We had a team exercise that we did and a team exercise is exactly what 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 earnings seasons or when we had clients. All right, on to the fun part. And retirement. Now, this is what I anticipated retirement to be.

I started to be this amazingly fun life with with paddleboard and 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. The I had to consolidate over 20 different accounts with so many different moving pieces, stocks, bonds, alternatives.

There were HSAs. They were backdoor loss that I needed to convert to regular loss. 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 one hundred and fifty, yes, one hundred and fifty 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.

But oh, no, the confidence slowly began to be waning. Because I realized one of these SMAs that I had transferred over had over a hundred individual bond positions in government, munis, corporates, ABS, ABS. I had no clue what that asset backed securities, of which I knew nothing about bonds.

Now, you might ask yourself, so how did someone so knowledgeable in markets allow herself and her spouse's personal portfolio to become so complex? Well, I'll give you the answer. It was my gang compliance department at Raymond James. They encouraged 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 of et cetera, et cetera, 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 him. Who is still a good friend, by the way, and become a do it yourself. But I need a serious new plan.

And after much research, including just like all of you, I read retirement articles on Morningstar, on Motley Fool, on brokerage sites where like houses like Fidelity and Charles Schwab. I listened to 100 podcasts and I watched many YouTube videos. And I finally decided to go with the Bogleheads. Yay.

So the ever important investment process comes back to us. But 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 solid returns for the next 30 to 40 years.

Tools, I have brought it down to just a few tools to monitor both our cash flow and our portfolio. So just for example, I use Tiller for budgeting, although I was a mint person forever. That helps with budgeting. 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 have it linked to a service called Why Sheets that just provides pricing and dividend data that I will never let go. And evaluation. 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 planned a price target of fair value to determine if if we can continue to live the retirement style that we like and not outlive our assets. I also use e-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 slide.

So an active portfolio management versus retired passive investor. I focused on 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 proper asset allocation to minimize our taxes balance. I set up a 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 the question and answers, which is the next slide. And Alan, I think I'm going to let Chris go ahead with our canned questions first.

If that. Yeah, 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'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 over that file or similar. They're all telling me to go to hell. Now, I'm just that's that's basically the ones who are still working in the business. I have not. I actually tell you the truth. I'm I'm the my colleague does use a number of ETFs to use for his portfolio just because we find that it was a stressful position.

And a lot of us are just done with it, you know, so well. Yeah. Right. Before we get on to the questions, I was going to point out. Interesting. Today, I was walking and listening to the current Morningstar Longview podcast, and they had on. You may be familiar with this individual from Wasatch Global Investors based in Salt Lake City.

They had the CEO, J.B. Taylor, who is 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 guru. He's more growth. But yes, I have more growth focus.

Yeah. Yeah. All right, Chris. OK, we'll start with the ones that she prepared for me, and then we'll get into some of the ones. Thanks, everybody, for hitting the chat. And we'll get to those for sure. So, Betsy, we've been in our household. Vanguard passes investing zones, always known as the evil empire.

Yes. So how are you going to turn your back on active investing, especially in the small companies you've 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 as active managers continue to watch.

And that's why I think you see Fidelity and T.R.O. 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 it, 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.

OK, 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 a 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, 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 nine percent, nine, 10 percent return in an index investment. Well, like you said, you guys had a good year and you're six percent over the index. So that's but that's a lot of work to get to be six percent over. So and then we lost we lost the year before.

So, yeah, so it's just it's just super hard. And you had you had access to the tools faster. Yes. Like Yahoo and 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 large. So we've got we've had 80 to 90 people on here. Can you give us a hot stock tip? A hot stock to follow the ball go ahead and win. All right. So it's only been a little over a year that you began 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 like a bottle? Yeah, no. As Alan or any of you probably know, when you adopt a portfolio of one hundred and fifty stocks and you adopt one hundred 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 Steve had, you know, that we have a big tax bill.

If you just converted everything over and sold everything off. You're exactly. Is there anything else to that? I mean, some of some of those sales weren't necessarily taxable. Is that true or? It is true. It is true. I thought it was a mix. 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 and then, of course, my company had a lot of other products that they were managing for us. OK, so with the Bogle method, is there is there anything you see for improvement with this methodology? Well, I'm glad Lady Geek was on here earlier and I will bring her up because as I told her and she 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 but 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. I Alan, you took the poll. There's hopefully one person who's early retired. Maybe they can help us develop a more simple. I mean, I actually even went with your suggestion out and looked at the tools provided, you know, the financial tools.

And that's even that section is kind of tough to to figure out. If I can 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. They're concise, short lectures covering specific topics, especially the Bogle has one on one for beginners.

And then the Bogle has five on one that they did this past conference for more advanced topics. But yes, the the wiki and the and the Bogle has website can be certainly be overwhelming. You can really go down the rabbit hole. Well, there's a and if there's any other consolation, I was a civil engineer working for a consulting firm for thirty five years and and our website stunk.

I mean, we couldn't find anything on it. We had mountains and piles of information and things. But so they they they need to be updated in general. All of them do. Periodic. You know, it's just another tool. It's like going going through your, you know, your 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 opener, Betsy? Like all of you, let's Bogle heads were 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 not hope the young people hear it to distribution, it's scary.

And you and for some reason you're not thinking you have 30 years. You you think that you still have another hundred years for some reason. I don't know my brain. And and you need to be allowed to spend money. And 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 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 a 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 the members and found out that I was not the only one that was really worried about it. So, yeah, 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 that 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 had your hand up. Yes. Oh, really? Welcome from Wharton, Colorado. Hey, first the snow tonight. That's what I hear anyway.

And the wife and I were both 76. We've been retired. We're both retired military and used TSP and all that, which was in way 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, OK, what's going to happen? And they take what we have, our assets, checking accounts, everything. And then they run it through and say, OK, here's a graph and this is. You're not going to go broke in your lifetime.

That's that's what I want to hear, because I plan to live to 100. That's what I believe. I, you know, 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'll ever use.

And then we've got Ross on the side of that. And then it's still I still have 20, 20 and 26. Well, I've got 20, 22, 20 also because, you know, it's sort of more safe because there's more bonds in it. And I like the 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 in the 2065 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, yeah, it's you're playing the market more. But it's 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 of we don't have to worry about us. So what we did in 20 was like 2020 and everything is like, yeah, OK, 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 only this one that we're there managing the basically the overtime, 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 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. I'd love to hear if you if just my own personal thoughts is that the beauty of a target date fund is it's a sentence, 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. OK, thank you. I appreciate it. And so I was just going to say, I'm too new to the game. I've never I've never invested in target funds. I know that they offer them in 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 U.S. 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 it so 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 I've got a set number of ETFs that I feel very comfortable holding.

And you would know. I mean, it's a lot of Vanguard ETFs. There's some Invesco ones I found. I actually sort now on net expense ratio and find a few. And then I go with the cheapest one. And if the holdings really don't, they don't differ quite that much. I don't I don't know how they get away with charging 20 basis points for one and ten, 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 still charge like upwards of 75 basis points and get away with it. I don't know. Well, we're pretty much Vanguard. Yeah, we're yeah, we're all Vanguard. Right. Oh, yeah. All right. We have I think to tend to you've had your hand up.

And thank you, Russ, for that topic. Oh, yeah. Yeah. Thank you. And to tend to tend to your muted. How do I get in there? Can you hear me? Oh, yes. Yes. Yeah. OK. Thank you, Betsy. What a nice presentation. The point I thought I know I see most of the people like me.

Bold headed is not bold headed. Bold headed is that X is the situation. Now, when you do what you were talking about. Active or ETF 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 this 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 bing bing bing. 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 that with ETF some easily, but individual stocks takes the advantage because, you know, the date.

Also, you know, I know it required a little active management because, you know, the date and you said, OK, I want to sell it after January or whatever. And. As you know, all of you guys know, tax is so low on a long term, it's like a rainfall 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 our control over it. I actually probably agree with you.

I haven't 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. Yeah, I don't have them telling me when they're selling. Yeah, but I am.

I am going to get in trouble because I do use. I have to. I don't have 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 like, well, first of all, I don't like selling at a loss on names that I know will gain because their thoughts.

No, but I'm sure you know it more than me. You can buy in kind next day. Yes. Yes. Yeah. And you just see one turnpike. You buy California turnpike or something like that. You're sure it's true. But I, I, I just I don't know. I decide that it was.

Active men and men who want to spend the time. So that's my second question, because I'm I'm all older than you guys. And as I hear the word from Alan, 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 said, that's your morphine, OK? 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. Want 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 tax advantage there. If you write the date that you bought it, it's on the screen and sell it. Maybe whatever the gain, you got it.

Maybe it does. So any thoughts on. Stay 60 to 80 percent. Short of active and 20, 30. I have something 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 that that's a very well accepted bogal head philosophy. And if you exchange it for something similar, you know, but not exactly the same, you're not you're 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 Wellfront, 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 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 either you or those who inherit the assets. Obviously, upon your death, it gets a stepped up cost basis and that'll wipe out any embedded gains if that's what you 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, I say, five to 10 percent of your portfolio is your 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 a large cap, switch S&P 500 for the total stock market or vice versa. 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. So, 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 fund, you 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. And later on, if they do extremely well, they may move 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 slice and dice portfolio. But I've added the in this case, the Vanguard completion index or the extended market index. There's everything but the S&P 500. So I've consolidated my small and mid a little bit that way. But the beauty of having large index funds such as a total stock market index for 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 flow to the top. Others will drop off. And it's going to have minimal tax implications for you. And it's OK to pay taxes. If you're paying taxes, it means you've made money somehow. And we shouldn't regret that.

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.

You got to wean her off her habits. OK. OK, Mel, your hand is up. Yeah, I just wanted to thank. I have to run, so I want 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.

Thank you. Thanks, Mel. By the way, for those of you who may not know, Mel was a big advocate. They call it Mel's Unloved Midcaps. For many years on the Bogleheads Forum and elsewhere, he basically spouted about what a wonderful sector it was, just the midcaps. And I think they have long term done done quite well.

I don't know if it's outperformed the S&P 500 or the total stock market long term, but it's certainly an under an underappreciated segment of the market that's worth looking at. Definitely, definitely. I call them midcaps and it's 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 growth potential through them.

All righty, Pat, your hand is up. Yes. When I first started getting 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, you know, the percentage went down was a fraction of what the index funds did. So sometimes, like you said, with the small cap, sometimes, you know, the act of investing can can contribute. Well, I think the same thing kind of happens with protecting.

I'm definitely a bogo head and that is, you know, 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. You know, 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, this I purchased it in 1992 and I still own it. And I think it was during the last decade. I can't remember whether it was 2008 or what. But when I saw the dive that it took and it never, you know, when the market took a dive, this 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 when my other stuff was just tanking, you know, 50 percent 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, I'll tell you what the fund was. Fidelity Contra Fund. OK. Yeah, that's I think, well, long term. All that was actively manages relatively low expense ratio for an actively managed fund. Yes. Interesting. Yes. And of course, again, to remind everybody, we can't give specific custom advising investment advice for everybody here.

It's just speaking in generalities. Miriam. 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 60 40 fund. Did not lose much at all either. But it was 60 percent stocks and 40 percent bonds.

Fidelity Contra 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.R.O. price funds, which I owned at that time. They have what we call the kitchen sink put into them.

T.R.O. 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 your principle. 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 on this type of thing. I don't think we have time. I could pull up Fidelity Contra 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 he's been 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, the 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 I think Rob Berger dot 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 Bogleheads 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 Rob Berger dot com. And he's got a section there on tools that he's just now compiling, but includes new retirement, you know, empower 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. Yeah. I agree. Let me see if I can. My guys who are looking at the chat, we have any specific questions here that I have missed, per se. Somebody posted contra fund is pretty much almost 100 percent equity.

Yeah, I think the thesis behind the contra fund was it 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.

Roaches, I do have access to someone who's a big wig at Fidelity, so I could ask that question. OK, Greg, your hand is up. I do. Yeah. Thank you. I'm really curious. I 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. OK. Those are just all the quotes came from different parts of my life.

So I remember when we were 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 only transfer patients from, you know, beds to chairs.

The way that it was to keep them close to your body. And people would sometimes the family member would just, you know, I'm trying to show you, but, you know, they never bend the knees. So I had to train them. So this does not apply to the financial. Oh, no.

No. But every time I saw one of my colleagues go to pick up a bunch of papers or a box, I'd be like, hey, bend your knees. I have another question, if I could. I put it earlier in the chat. If I could move on to that. Sure. You mentioned that if a CEO moves from Medtronic 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 that fail at certain levels. And the only place they can get a job is maybe at Company B, which is smaller. Well, what I would always do, Greg, is see where in Stryker or Medtronic or J&J that they led.

And so if I had a company like the CEO from Phillips who ran the electromagnetic division and then my company, that's all my small company focused in on. I say, of course, I wanted them because they ran more money there at Phillips than they did with 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. Ninety nine percent of the time. Thank you, sir, to me, it's great. It's not it's not the CEO of Johnson and Johnson.

It's a division leader going from there to be a CEO of a smaller company. Yeah, that makes more sense, I think. Yeah, correct. Correct. Oh, yes. Oh, yes. Not to see if I saw the CEO of Johnson and Johnson, I'd be like, well, that would be a red flag.

OK, well, that's 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, as we get 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 she didn't want the whole thing to go in the tank when she left.

So they hired a couple, they interviewed, they hired a couple of people. They let out 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 that's what people do. So don't freak out, everybody.

But that that's a valid challenge. And she went through it correctly. Yeah, I think Morningstar actually tracks that. And one of the one of the measures they track is the team. Somebody posted a question here that I'll read about. What do folks think of Avantis ETFs? In general, they are actively managed, right, and lower cost and have somewhat different approach.

So Avantis is kind of like, I guess, a kind of a spinoff from Dimensional Funds, the same concept where they're kind of indexy, but they have another process on top of that for their asset stock selection. What are your thoughts, Betsy, as how both of those operate in their approach?

So I'll tell you right now, Alan, I'm not familiar with those ETFs. I'm focusing on the Vanguard's, the Invesco's, the that's another one. I found a couple. Franklin Templeton, I look for international, but I'm not familiar with Avantis. I'd have to look that up myself. And I don't 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 start 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 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 Avantis ETFs? Avantis, the guy who started Avantis 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. Kind of like Bogle, 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 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 Cathie Wood, right? We all know how that's done. By the way, Jay, your hand is still up.

Did you have another comment, Jitendra? Did you have another comment, Jitendra, your hand is still up. Maybe not. Greg, your hand is up. OK, I'll persist here. There's a few really good questions back about 5.44 p.m. That's probably Pacific 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 Fenn for himself. Well, if you can read it for us. Just read it, Greg. All right. Well, I'll give you I'll give you a few here. Which small index do you follow and why in choosing your own funds? That's the 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 and I use the Vanguard value. I also have found this interesting ETF. The ticker is PSCT, tell you the truth. 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 I said, do you recognize this? Are we still and he's like, oh, this is this is a great. He mentioned it as a great book. Now, the net expense ratio is a little bit higher.

So I do do some specialized. I have and that's one of them tech. I do own a health care ETF and I'm not going to give you that one. I actually have to look it up in small cap. And then and what's the other small cap one that we've been using?

I have to also look it up. But I'll make sure that. How much how much weight do you put into looking at the underlying index? I have. So in my equity, so in my equity portfolio right now, I just looked at this, I have 66 percent. I have. I believe I have 70 percent of that is towards large cap.

But that's just because the mega caps have done so well. I am looking to readjust this. I have 25 percent in mid cap and then the rest goes in small cap. OK, I'll cut to the chase. Are you a factor believer? No, no. OK. So total market approach at this point.

Correct. OK, I'd be glad to read a question from Steven who submitted this a while back. This one is due. OK, thanks, Alan. Knowing that you knowing what you know now about managing a portfolio in retirement, do you feel differently about the value of active investing during one's investing career?

Are the potentially high gains in your active 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 we would in small cap, Greg or Steve, I should say. Yeah, that's me. That's you. That's a great question.

We did not have to worry about taxes as much as the large cap did. And the reason being 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 at 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 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. And then I asked that question because I'm 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.

OK. And from that time on. Yeah, I was all indexed. 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 and in retrospect, I'm like, gosh, you know, kind of wish maybe I hadn't. That wasn't optimal, but all right.

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. We take it very seriously. We look at the management and 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 you're like, oh, 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're talking about this. Did you guys know as managers what percentage of the holdings or the individuals or institutional versus the the individual investor that held your fund, what the breakdown was between the two? Oh, yes. Oh, yes. 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 where 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 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 account 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 track kind of drove me to do analysis on that company.

Interesting. Thank you. OK, Lady Geek. Yeah, yeah. This discussion reminds me of Gus Salter many years, several years ago when he was at the Philadelphia Bogle Heads Conference, when Gus was running the fund, you know, 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 morning 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 fund tracking within like point zero zero one percent 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 know him, at least from seeing him at the conference every year, the guy is like phenomenal in terms of theoretical and math and stuff.

This is his this is his love, I believe. But he just kept saying how difficult they really, really had to manage the fund, the guys who did the trades, how they tracked every index. And it was it was really amazing how well they did that. So you keep talking about buying an active and passive.

That completely masks the underlying details of how this stuff actually happens. It actually boils down to people and algorithms. So that's why I wanted to make that point. Well, Lady Geek, I'll tell you, we had an advantage being 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.

And we would know that we would push it up a certain percentage. And Vanguard on that Monday, we do it like on a Friday. On that Monday, we would see that stock rise by six to 10 percent. And we would sell immediately because we knew Vanguard had to have that closeness to the index.

But you know what? Vanguard got smart 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 you that we could buy that could tell us what Vanguard was doing.

Yeah. Isn't it called front running? Is that called front running? Well, you front run if you're a man, if you're personally doing it. But if you're doing it as a fund manager, I'm running your money. I'm doing 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 this behemoth. So whenever they started becoming a passive manager for one of our one of our indexes, we loved it. And I think front. I think front running implies really illegal. You know, information with you definitely know information, before you're supposed to know it.

Whereas what she was talking about is you kind of suspected that was going to happen, right? Because you'd seen it happen a lot of times. So you kind of anticipated it. But you didn't 100 percent know it was going to happen. Right now. Right. Well, that being said, right, we could never buy a company that was outside of our investment process.

You wouldn't see me buy a biotech company that had no earnings. That just wasn't part of our. But there was ways of watching it. It is ways of watching to make sure that you could still get a good return off the stock, you know, even if Vanguard didn't participate.

But it is interesting. Yeah. Yeah. The street has to make money somehow. Everybody's going to pass it. There's a book that was written that 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 optic in the most optimal way so that they could get like a multi millisecond advantage to to what was going. Yeah, that was a high frequency, the high frequency traders that had the computers, the closer they were with their mainframe. Yes. Wall Street.

Milliseconds. That's right. It was all. 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. It was intriguing. And eventually, I mean, 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. Yeah. Even out the playing field. They eliminated that from some regulation. It sort of slowed it down a little. Yeah. Yeah. Yeah.

Yeah. Yeah. Well, I'll tell you, though, the last big event or cool. Well, not cool or neat. Neato kind of thing that happened with me was watching that GameStop because I actually did it. We actually our poor consumer analysts had dumb money. It's gone. Have you guys seen that movie?

That's it's called some money. You better watch it. It's all on the GameStop. And it's fascinating to see what the little 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. And very interesting. Yeah, I'm curious, I know you said you're I don't know if you're your children, adult children are on this zoom at 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 in 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. Well, we were we were one of our kids followed me into the business.

So he actually he fought he 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 and my company was my 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. And so he he went to 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 he's definitely fully involved and and believes in the passive investment, but he's an active. His mandate is totally different than what mine was. And his brain is so much smarter. Our daughter. Wait, wait, wait. So to answer your question a little bit to my perspective as a civil engineer, I've I tried to get him to get into engineering.

And luckily, I think I think at the end of the day, he'll be glad that he did that. So he got a degree in engineering and he's he ended up on Wall Street with those guys. And then I don't our daughter, like 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 a Roth with her way back when she first started earning money. But she's a she's a tough one because her whole passion is art. And she's not afraid to spend money, even at her age.

So she'll have no problem. Like we all have trouble spending money, but for whatever reason, she does. Now, it's it's interesting that 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 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, I think probably less than five percent of individual investors are pursuing a passive approach. Everybody's chasing the almighty dollar and the GameStops and the Bitcoin and whatnot. So it's interesting. Well, I mean, you see a stock like NVIDIA. I think it's, again, up like something's crazy, like 200 percent.

There's one of those. That's all it takes. Yeah. Interesting. But just do we have but even going back to your other part and the simple stuff like matching out your 401k as soon as you can and, you know, getting, you know, getting in that mindset, you know, and and they're both picking up on it.

But it's it's it's a process for sure. And education, you know. Yeah, I was very happy. This is a couple of years ago when the crypto craze first started. My daughter, who lives in New York, was telling me, you know, she asked me about crypto and I advised against it.

But she said all her friends are buying it. And she did not. She 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. Yeah, but Bitcoin's at 76,000 now. So, yeah, it's well, the ETFs, all those ETFs now, everybody's piling into it. 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 Steve? We're at what the Steve report. I lost it. Oh, I think I just saw this. Yeah. How active managers lose to the index every every year. I'm aware of it. No, I don't read it.

Yeah, that's that's interesting, because, yeah, those that do outperform for the first early years don't have persistence for the most part. Not saying that you didn't. But and certainly the small cap space has been easier to outperform the index. But as a general rule, I think now the speed of folks, which is the S&P people 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 any thing to guide us and being able to pick them in advance, other than pure luck, because they don't have a track record yet at that point.

Yeah. Interesting. Yeah, it was funny to watch us go from two hundred million to three 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. Did you have to close your fund at all in order to limit?

We did. And I'll tell you the truth. We closed it at two point two billion, I think. And the salespeople kept selling us. So we finally put a hard you end up doing a soft close at two point two. And then we did a hard close at three billion, because at that point we had kind of filled all the positions.

We didn't we can take any more money. Mm hmm. Yeah, that's interesting. In fact, the podcast I mentioned, the the long view on morning with Morningstar with that small cap manager this week talks about that, how often they have to close their their actively managed funds because they just couldn't purchase anymore.

They basically they had done everything they could and they had too much money coming in. Right, right. And then I guess and the tough space is the microcap. I think the microcap and that 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 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. Yeah, it's very interesting. I think you sold us on the viability. If you really want to work hard and perhaps outperforming and picking as being a stock picker.

But I think for most of us, whether you're a true Vogelhead or more or less embracing the philosophy that the index approach 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 Sawtech. They were relatively unknown. And we toured. We went in and met with the management and tour 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 three, four 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, what else sound like really great ideas, you know, but it takes a lot to make it actually go and make it work.

Yeah. 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. Exactly. Sounds good. That pretty much sums it up. Yeah. All right, folks. Any I'm sorry. Go ahead. No. Any further comments or questions? Anybody?

OK, if not, I guess we'll 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 in 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. Our local Tampa Bay chapter meetings. I encourage everybody to check the Boglehead calendar of events. Also, 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 and we'll keep the all these conversations and share 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.

Obviously, the people that I board already signed off, so we expect to have a good response here. That's right, wait till the bitter end, it's skewed. Yeah, you must be one of those active managers. Numbers. All righty, everybody, I'll go ahead and share this. Waiting for the end of the quarter to actually.

All right. Yeah, so all the people who didn't care for it are 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 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 Chris along to our next in-person Tampa Bay chapter meeting. Yeah, I don't think so. Thanks again.