Paul Meisel

Stock Earnings Yields vs. Bond Yields 1/85-3/07

Yes -- but there should also be a premium for anticipated growth, and treasuries don't grow. So there is some more data needed to make the analysis complete.

Based on the general strength (i.e. low risk) of the S&P 500 and a long-term growth trend of 2-3% the conclusion is correct, but your comment is on target.

Marvin Appel's One-Decision ETF Portfolio

There are many people who are intimidated by the financial markets -- there are many who have a folk wisdom view that professional market participants are evil speculators who are morally flawed -- there are many who are ignorant about finance are do not want to regularly subject themselves to exposing that ignorance. Just like I tend to avoid the dentist, they avoid dealing with their finances.

It would be wise financially for them to be more involved, but at what psychic pain? People make choices, and the flaw in many economic theories is the assumption of rationality -- or possibly the inability to recognize some intangible psychic utility in apparently irrational behavior.

Marvin Appel's One-Decision ETF Portfolio

I agree that history is not always a valid guide to the future -- but in some cases it is the best one we have, so it makes sense to use it for some input, appropriately modified with other insights you may have.

And I absolutely agree with the paragraph about "things we can control", except it misses one underlying point -- the appeal of these types of portfolios are to people that have ALREADY DECIDED that they are not going to hire an asset manager, and they are not going to spend 8 or 10 hours a week looking at their investment results. Many of these people, with mid and high six figure portfolios, don't want to spend more than 10 or 20 hours a year.

A predetermined decision not to spend much time on investment analysis changes the game -- but that is reality for many investors. Of course, asset managers and investment authors will try to convince these people to spend more of their resources on managing their investments, whether it be through asset management fees, the purchase of a book, magazine, or newsletter, or what have you -- that is the way of our world. But I think there is some value in recognizing some simple strategies for "no time, no study" investing for those people who choose to do it, regardless of how much we may disagree with the correctness of the approach.

The One-Decision ETF Portfolio

I think what is more important than your individual preference is the concept -- buy some things that are not too closely correlated to each other and provide some diversification, and leave them alone for 6 or 12 months at a time. The fact is that many investors do the latter anyway (leave things for months at a time) without enough thought about the choices. This could turn into a long-term contest -- pick your own version and compare with your friends. It would be more entertaining than fantasy football.

On the other hand, people who are sophisticated enough to evaluate the multiplying variety of ETFs for "enhanced products" and make risk/reward distinctions about foreign equity funds don't need a one-decision portfolio. They are re-evaluating their options much more frequently, either because their investments merit the attention or just because they find it to be fun.

The One-Decision ETF Portfolio

This is very useful to those who wish to avoid a lot of research, and cannot follow or invest in many different securities.

Using intuition and heuristics, I recently came up with something similar but slightly different for my children, who are starting Roth IRAs with small investments. Because they are looking at 4 digit investments, it is not practical for them to invest in 5 or 10 different issues, nor do they wish to follow them closely. So I came up with the following:

50%-80% Large cap dividend ETF (FDL);
20%-50% Russell 2000 Index (IWN).

The weightings are approximate; to minimize transaction costs I will purchase for them only one of the two ETF's on most deposit events. I intend to follow this strategy until they have perhaps $10,000, although I will reevaluate the strategy along the way.

I admit to a bias towards equities and away from bonds and REITS -- partly because of a hangover from reading Peter Lynch, and partly due to the age of my children (between 18 and 21).

I find it comforting when rigorous quantitative analysis (which I have the talent, but not the patience, for) arrives at conclusions that match those I reach with intuition and heuristics. This could be "great minds think alike" or "you can tell a person's intelligence by the degree to which his prejudices match your own..."