How is our Portfolio?

[Sniper]

[ QUOTE ]
financial advisors (the poo-bahs in this forum certainly have more faith in them than in fund managers).


[/ QUOTE ]

Taken out of context, I don't think this statement is true.

If you have a decent sized portfolio to invest, and know virtually nothing about the markets, a conversation with a financial advisor that can evaluate YOUR specific situation, and guide you in thinking about all necessary issues, is certainly useful... But, it is only a starting point!

To anyone that is looking to have a nice sized nest egg built up by the time they retire, investing the time to learn more about the markets is +EV.

[ QUOTE ]
BRK.A > BRK.B > financial advisors > index funds > fund managers

[/ QUOTE ]

First, financial advisors and fund managers aren't products that you can invest in... their suggestions or products are... so they don't really fit in this equation.

Second, the specific ranking of investment options will vary based on many varied and specificly individual factors.

Finally, while some of the posters here are very serious supporters of Buffett, I don't think they would blanket recommend that everyone put their whole port in Berkshire stock!

[AceHigh]

[ QUOTE ]
[ QUOTE ]
russell 2000 is an index of small caps

[/ QUOTE ]
which is just now finishing up its 6th consecutive year of outperforming the S&P500, so some people might think that 35% would be too much to be putting into small caps right now.

[/ QUOTE ]

Don't we wanna be in funds that out perform the S&P? I think the Russell is probably a better index.

[buffett]

[ QUOTE ]
Don't we wanna be in funds that out perform the S&P? I think the Russell is probably a better index.

[/ QUOTE ]
This hinges on whether you believe that the powerful concept of reversion to the mean applies in this case. I do, so I expect the Russell 2k to do relatively poorly over the next few years. (I also believe, though, that in the super-long term, small caps will outperform as a matter of course.)

[AceHigh]

[ QUOTE ]
[ QUOTE ]
Don't we wanna be in funds that out perform the S&P? I think the Russell is probably a better index.

[/ QUOTE ]
This hinges on whether you believe that the powerful concept of reversion to the mean applies in this case. I do, so I expect the Russell 2k to do relatively poorly over the next few years. (I also believe, though, that in the super-long term, small caps will outperform as a matter of course.)

[/ QUOTE ]

So if we both believe Russell will outperform S&P why do you think reverting to the mean applies? Isn't the Russell behaving the way we both predict it will?

[buffett]

[ QUOTE ]
why do you think reverting to the mean applies?

[/ QUOTE ]
It's a question of time horizon. I expect near-term (next few years) underperformance and long-term (next few decades) outperformance.

[AceHigh]

But it's already doing as the mean predicts isn't it? So we would expect it to continue wouldn't we?


Or do you think Russell will under perform for some other reason?

[buffett]

[ QUOTE ]
we would expect it to continue wouldn't we?

[/ QUOTE ]
Maybe this quote from a recent UBS report does a better job of articulating my point:

"...small capitalization stocks have outperformed large capitalization stocks for the past six years....such streaks are not unprecedented, but there has been only one other instance in which small caps outperformed large caps for a longer period—a 10-year span that lasted from 1974 to 1983. Over the long term, small-cap stocks, on average, have outperformed large-cap stocks by about 5% per year...By the end of the 1990s, it was much easier to make the case that small-cap stocks were a good value relative to large-cap stocks....Now, after six years of relative outperformance, small caps can no longer be considered "cheap" on a valuation basis. Valuations of small-cap stocks, which were far below their long-term averages at the height of the tech/media/telecom mania, have now reached or slightly exceeded their average valuations relative to large caps."

[AceHigh]

Thanks, I understand that.