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John Bogle’s Insights on Investor Mistakes

Comment posted to “Common Investor Mistakes and Other Investing Insights,” an interview with John C. Bogle, in the July 2014 AAII Journal.

I keep re-arranging the deck chairs because I keep thinking it will make me smarter. Thank you, Mr. Bogle, for your wisdom.

—Vernon Lewis from California

You did the membership a great favor by publishing your two-part interview with Jack Bogle. The man is the greatest benefactor of small investors in the history of the markets. I began following his advice back in the 1980s: Buy and hold very low-cost, broadly diversified index funds that implement your asset allocation. It has worked beautifully. It’s always good to be reminded of his wisdom and no-nonsense approach—keeps us focused on what works, rather than what’s the latest fad. Many thanks to you and to him!

— Robert Rudisill from Florida

Investors vs. Traders

Comment posted to “‘Market Wizards’” Advice: Doing the Uncomfortable Thing,” by Jack Schwager, in the July 2014 AAII Journal.

While this article and its insert section is interesting and may be helpful, I find it confusing also. Always of critical relevance (to me, anyway) is this most basic question: Is there a difference between being a “trader” and being an “investor”? I say yes! Articles like this seem to just commingle terms like “investor,” “trader,” “market participants” and “people.” We have: “This article is an excerpt from his new book, ‘The Little Book of Market Wizards,’” which distills the valuable insights from these interviews... into essential lessons every investor can benefit from.” Okay, well enough. It seems to me, though, that points are raised based on behaviors of traders, yet conclusions are made as if all people behave like traders do.

—Paul Senior from California

Tax Consequences of Investing

Comment posted to “The Tax Consequences of Investing,” by Charles Rotblut, CFA, in the July 2014 AAII Journal.

Excellent article and one of the ones I enjoy, a review of the basics and some detail that serves as a good reminder. I really enjoy these styles of articles.

—David Dolce from Rhode Island

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Don’t Ignore Mid-Caps

Comment posted to “How Much Small Cap Should Be in Your Portfolio?,” by John McDermott, Ph.D., and Dana D’Auria, CFA, in the July 2014 AAII Journal.

While I agree with the premise of the article, I don’t think that it went far enough in that it seems to ignore mid-cap stocks. I think that a balanced approach to owning large-, mid- and small-cap stocks would serve better with the percentages determined by the investor’s situation.

—Robert Mclaughlin from Virginia

Correction on Covered Call Calculations

Comment posted to “Assembling a Covered Call Portfolio on Dividend-Paying Stocks,” by Ben Branch, in the June 2014 AAII Journal.

It appears that Mr. Branch makes a basic mathematical error by triple-counting the $0.83 call premium, does he not? First he counts it as part of the reduction in cost basis. Then, he includes it as part of the income for the holding period. Then he counts it again as part of the total return.

—Bill Haug from Nevada

Charles Rotblut responds:

We’ve corrected the error on AAII.com. The gain calculation for the covered call position on shares of AT&T (T) should have been $1.38 in dividends plus $2.23 in capital gains less the stock purchase price of $35.60 adjusted for $0.83 in call proceeds. The formula is ($1.38 + $2.23) ÷ ($35.60 – $0.83), for a gain of 10.38% ($3.61 ÷ $34.77).


Discussion

Richard Berwanger from MD posted 3 months ago:

Concerning asset allocation of stocks/bonds whatever it is for you e.g. 60/40 70/30. Would this still be reasonable in a rising interest rate time - wouldn't you be in bonds that are falling in price and rebalance into more bonds as stock prices rise. For the last 30 years interest rates have fallen - so it worked.


Ashok Choksi from CA posted 3 months ago:

If I recall the dialogue correctly Elizabeth Taylor advises the late James Dean: "Money is not everything". To which he quips: "When you have it".
So we are talking about most of us who have some dough. But we forget: It is not everything.
The best advice one can follow as an investor in the stock/bond markets is: Not to be overwhelmed by the meticulous "What Works" compendium of advisory articles and books. After all money is not everything when you have a more or less secure livelihood. Play with it here and there but, for Pete's sake, don't let us identify ourselves with "money", become too attached to making more and more of it, neglecting the vast panorama of life, living and relationships.


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