Filtering Content

A very long time reader left a comment on Monday's post telling me that he had read a bunch of content from William Bernstein and concluded that Bernstein's approach seems more rational than my sort of approach. The reader said he didn't really get top down and that things like country selection takes way too much time. The reader said he was going to move on from reading this blog and wished me luck.

This was a very positive comment (I'm not being sarcastic). There are quite a few facets here that deserve attention. As an end-user of stock market content, so here we are presuming that you are interested enough in the subject to seek out stock market content, you take in some range of opinion and method for the purpose of trying to learn, trying to improve some aspect of how you invest or some similar objective.

Along the way you take in information that is useful to you and information that is not useful, you filter that information and move on. Personally I find no utility in the articles that are along the lines of five stocks that famous money manager is buying. I know that plenty of people love those articles and find them useful. Like the reader mentioned above not getting top down, I don't get those types of articles.

To beat my yoga metaphor to death; there is plenty of room in the yoga studio for the reader's mat of indexed investing, along with my mat of active, top down along with everything else. Active, top down has flaws but seems easiest and most logical for me. Likewise with indexing for the reader. Both have positives and both have flaws. All investment approaches have positives and drawbacks. Not understanding the drawbacks to your approach is bad and I think prevalent unfortunately.

As far as not getting top down, for as long as he read this sight I think he does understand what it is about but maybe doesn't see the utility. It is simple, look at the big picture first. There are several competing studies that conclude the same thing which is that the majority of your return is determined by whether or not you are in the market and then making the correct sector and country decisions. Stock selection, the studies conclude, only accounts for 10% of the eventual return. Top down would say it is more important to figure out to avoid France, own China and be correct about oil prices (just a random and abbreviated example).

As far as taking too much time, investing is a pursuit where you can put in as much or as little time as you want. Obviously there is an entire industry of people that make it a full time vocation and there are also many 401k participants who simple select a portfolio from the administrator and spend no time on it. In between those extremes are all manner of investors with wide ranging interest spending varying time. To say one approach takes too much time would probably be more accurately captured by saying "too much time for me."

I wish the reader luck and thank him for his contribution in the comments over the years.