Dave Portnoy of Barstool Sports Losing Money in Stock Market

[Pete-zza]

QD,

I agree with everything you said. I am also a fan of Bill Bernstein, and was influenced by his book The Four Pillars of Investing, about which Jack Bogel said:

"A TRIUMPH! It is my candidate for the best investment book of 2002."

If you are interested, Ben Carlson of the Wealth of Common Sense interviewed Bill in April at:



Peter

[quietdesperation]

Peter,

  thanks for the link, I thought it a wonderful interview. Interestingly, it's the first time I've heard Bernstein (obliquely) recommend a rising equity glide path when he talked about funding expenses with the fixed income portion of the portfolio. I've read articles by pfau and kitces on the subject:

https://www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/

but I'm still processing what that means for us in terms of risk tolerance and behavior. Luckily, I've discovered some unexpected human capital in the form of 20 hours a week of remote cloud consulting and that has covered our expenses to date. But we'll have to make a decision on adopting the idea sooner rather than later...

best,

[Pete-zza]

Peter,

  thanks for the link, I thought it a wonderful interview. Interestingly, it's the first time I've heard Bernstein (obliquely) recommend a rising equity glide path when he talked about funding expenses with the fixed income portion of the portfolio. I've read articles by pfau and kitces on the subject:

https://www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/

but I'm still processing what that means for us in terms of risk tolerance and behavior. Luckily, I've discovered some unexpected human capital in the form of 20 hours a week of remote cloud consulting and that has covered our expenses to date. But we'll have to make a decision on adopting the idea sooner rather than later...

best,

QD,

In my experience, the sequence of risk situation most often arises as people are about to retire or are newly in retirement when the stock market drops significantly, as in a recession or bear market. But what might have helped many people is if they had a bucket portfolio that was created before retirement. For years, I read about the bucket approach to investing, as promoted, for example, at Morningstar, under the tutelege of Christine Benz. To show you what I mean, I did a Google search to find a typical article by Christine on the subject. Here is one such article:

https://www.morningstar.com/articles/840177/the-bucket-approach-to-retirement-allocation

I think it helps to know that it is usually people who have a decent net worth that can most benefit from using the bucket approach. At the moment, the average net worth of someone in their 60s is around $1,122,000. That amount is amenable to using the bucket approach. Unfortunately, the median net worth for that age group is only around $222,000. That limits the ability to do much in the way of retirement planning. Yet, it is still possible to take withdrawals from the retirement account to help cover day to day expenses. That is what my cousin does for whom I created a portfolio at Vanguard.

Obviously, people with substantial net worth, say, above a million dollars, have a different set of options available to them. And when they reach the age where their tax-deferred accounts are subject to the RMD (required minimum distribution), they will have a portion of the RMD in their personal accounts (money market funds) from which they can spend as they like, including covering expenses.

In my own case, I did not need a bucket approach because I retired with a pension and that was later supplemented with Social Security. I also had dividend income. But, collectively, I had enough to more than cover my expenses. In a sense, that is what is happening to you at least in part by the remote consulting income you are generating. But having adequately covered my day to day expenses as mentioned above has allowed me to take greater risk with my tax deferred accounts (IRAs) by leaning more to the stock side. At one point, I had about 80% of my tax deferred accounts in stock related funds. The rest was cash. But since the passage of the Secure Act, which did away with stretch IRAs, which would have benefitted my son and potentially even his own heirs for their lives, I have had to give a lot of thought as to where I go next. I say this because my son and his wife are not interested in stocks or bonds or the like. They prefer real estate.

But one thing that is clear is that I will not be buying individual stocks. I have never been good at that. What most people do not realize is that about forty percent of stocks disappear over time, because of closure, bankruptcy, merger or acquisition. But for folks like Dave Portnoy, trading stocks is a gig that he can afford to do without harm to his overall net worth.

Like Bill Bernstein, my focus at this juncture of my life is not on my personal needs but rather on where my assets go upon my death. So, I will have to come up with a plan that works not only for me during the rest of my life but is also a good plan for my son and his family upon my death. My attention to my family is not anything new. For years, I have given annual tax-free gifts to my son and his family. I started with my son in 1990 and continued that practice to the current date for my son and his wife and daughter.

Peter

[quietdesperation]

peter, thanks for your well thought out post. One of my last projects was a dodd-frank stress testing project for a large bank so it was natural for me to adopt that framework to guide our asset allocation. I created a couple of scenarios around steep market decline coupled with assumptions around long life expectancies and complete loss of human capital. I also modeled to some extent Bernstein's four horsemen of deep risk identified in his book Deep Risk, How History Informs Portfolio Design: Severe and prolonged high inflation, Prolonged deflation, Confiscation, and Devastation. One can never be sure, but we really should be fine.

my original thinking around consulting was that my mind seemed a little fuzzy (perhaps too much time on the PM forum!) and in need of fresh challenges. However, now that we can't travel due to the pandemic, it has been nice to have the opportunity to bolster our portfolio.

best,

[Chicago Bob]

Are you old dudes gonna tell us how to make some good ole fashion moniez?!!  🤠

[wotavidone]

At the moment, the average net worth of someone in their 60s is around $1,122,000.

'kin 'ell. is that all? Even allowing for the exchange rate, I'm worth more than that in my late 50's
I always knew I was above average. 

But one thing that is clear is that I will not be buying individual stocks. I have never been good at that.

Had a decent conversation at work with a young fella today, at the behest of an older colleague. Young fella is very talented engineer who is just completing an MBA.
Discussed money management, investing, shares (what you guys call stocks), etc.
I told him I never made money picking individual shares (stocks) by myself.
You either get paid advice or buy ETF's/LIC's

[quietdesperation]

'kin 'ell. is that all? Even allowing for the exchange rate, I'm worth more than that in my late 50's
I always knew I was above average. 

congrats! Unfortunately, here in the US, the average is probably not enough to fund a long retirement though it really depends on expenses.

Had a decent conversation at work with a young fella today, at the behest of an older colleague. Young fella is very talented engineer who is just completing an MBA.
Discussed money management, investing, shares (what you guys call stocks), etc.
I told him I never made money picking individual shares (stocks) by myself.
You either get paid advice or buy ETF's/LIC's

take a look at this:
https://freakonomics.com/podcast/stupidest-money/

"Stephen J. Dubner reaches a well-reasoned conclusion – backed by financial industry immortals – that the money spent on fees is a waste when compared to the strategy of the passive fund that tracks a market index. He cites a study where only the top 2% to 3% of active fund managers had enough skill to cover their cost."

[Pete-zza]

Most of the people I know with serious money to invest tend to go to places like Fidelity, Schwab and Vanguard and have them manage their accounts for a fee. For example, in the case of Vanguard, which I know the best of the three, will manage accounts of $50,000 or more for 0.30%. I once mentioned that as an option to my cousin who also has an account with Vanguard. I mentioned it because she is very heavy with stock funds in her portfolio, which is fine when the market is doing well but when recessions hit a lot of damage can be done, like the 78% peak-to-trough decline that took place when the dotcom boom ended and the roughly 54% decline of the Global Financial Crisis in 2007-2009. Whenever we meet or talk or exchange emails on the subject, I remind her of the risks. She acknowledges the risks but prefers to keep her account as is. Actually, her portfolio has done well, and performance wise has done better than I have done because my portfolio has a fair amount of cash. In the meantime, she is content to use the proceeds of the RMD and other periodic withdrawals to help with expenses. To make matters even better, I do not believe that her total income is high enough for her to pay much in federal income taxes. My cousin also has a money savings account outside of Vanguard that she does not touch for investment purposes. That is really her "emergency bucket".

As for some interesting statistics, at Fidelity the average account balance for IRAs and 401(k)s as of this past February was around $112,300. That number can double or even triple for investors who are 65 and older. But the median numbers can be quite poor--about half or less than the average numbers depending on the class of investors by age and the like. To be sure, Fidelity definitely has its shares of millionaire accounts. Out of about 27.2 million accounts at Fidelity, 441,000 IRA or 401(k) accounts it manages had balances of $1 million or more as of a few month ago. The number of million dollar plus accounts represent about 1.6% of all the accounts.

I haven't seen comparable recent numbers for Vanguard but it has a class of investors known as Flagship members who have from 1M to 5M to invest. As of this time, Vanguard has about 30 million investors, and of those about 70,000 have Flagship accounts. So, while there really aren't a lot of high net worth people at Fidelity and Vanguard, they should be safe in retirement. As best I can tell, the average and median account balances at Vanguard are similar to the numbers at Fidelity.

Peter

[Pete-zza]

This afternoon, I got an email to a blog post that discusses the 60/40 portfolio and what its future may be. The blog post is at:

https://theirrelevantinvestor.com/2020/06/25/the-new-60-40-portfolio/

I tend to agree with what the blog post says about the 60/40 portfolio, principally because of the decline in bond rates over the last 40 years. As shown in the graphic below, at one time bond yields for 10-year Treasuries were as high as 15%. I remember that well because I put my parents into such bonds, but of a shorter duration (principally T-bills) than the 10-year Treasuries. Also, at the time, I was in the process of moving from Massachusetts to Illinois and mortgage rates were around 16%. The company absorbed all of that above 9% when I bought a new place in Illinois. After 40 years, there are bound to be a lot of new things happen that influence bond rates and yields. For the reasons mentioned before, I am inclined to avoid bonds at this point, even though bonds can and do offer some downside protection during down markets. I might add that I am not the only one leaning on cash. There is about 8 trillion dollars in cash sitting on the sidelines. That is almost a quarter of the value of the US stock market, which is 30 trillion dollars. That actually bodes well for the stock market going forward although some may use the money for other purposes.

I had to laugh when I read in the cited Bloomberg article that CALPERS in California is considering going to private equity in lieu of bonds. Most pension funds need annual returns of around 8% (which some pensions have dropped to around 7%) in order to meet the pensions obligations that were essentially guaranteed to its retirees. They have been far from 7-8% so they are upping the ante in search of higher returns by going to private equity even if the risks are much higher than bonds. Interestingly, Ben Carlson, who was the interviewer of the Bernstein video that I cited yesterday, and who started out his career with an institutional investment consulting firm developing portfolio strategies and creating investment plans for various foundations, endowments, pensions, hospitals, insurance companies and high net worth individuals, seems OK with the move toward private equity. Ben is a good and capable guy so I respect his opinion.

I might mention that the author of the above cited blog article, Michael Batnick, is a co-worker with Ben Carlson. They are both with Ritholtz Wealth Management, which is a registered investment advisory (RIA) firm in New York City focused on providing financial planning and wealth management services to its clients. I mention this because the other day Barry Ritholtz said that his firm is moving away from the 60/40 to a 75/25 stock-bond portfolio for its clients.

Peter

[corkd]

Had both, kept the j-45 because it sounded better... and the d28 was 1955!

I really lucked out on reverb earlier this year and got a sweet j-29 at a great price. Still had the plastic on the pick guard, and the seller had added Grover locking tuners.

[quietdesperation]

peter,

  responding to your two posts here. We did an interesting wealth management project for the ultra-high net worth segment. As you might expect, financial advisors have some unique challenges servicing this segment and, in some cases, the line blurred btw personal assistant and financial advisor ("get me a reservation at 11 madison tonight"). Traditional portfolio management and valuation systems didn't work well for this segment due to the broad, esoteric and unstructured nature of the asset classes they held. What made the project especially challenging was that the company fiercely guarded the privacy and the asset classes of their 1000 or so clients. So when we asked which asset classes they were hoping to capture and model, the answer was "anything you can think of". In the end, we didn't feel totally comfortable with our ability to succeed and walked away from future phases of the project. Still, it made for an interesting glimpse into the lives of the utlra-rich.

  Many of the people I worked with on wall st eschew vanguard, fidelity, etc. for private bankers. As far as I can tell, the only "benefit" is that, after signing several disclaimers around risk and lawsuits, they allow their clients to participate in risky asset classes with opaque fee structures and the possibility of greater returns. Despite my advice to the contrary, one of my partners purchased a number of equity-linked notes from his private banker. I've been reticent to ask him how they fared in the latest market downturn.

the batnick article is interesting, he seems to present nominal returns rather than real returns. I'm not sure how one can present past or future performance analysis without some context around inflation. I suppose the same could be said for the graph of 10-year treasuries you posted and anecdote around 15% return for your parents.

"So what is an investor to do? You can consider stocks that haven’t performed as well, like value, emerging markets, or foreign developed countries. You can consider other asset classes like gold, commodities, or bitcoin. You can consider other strategies like venture capital, private equity, or private real estate. You can try to outperform the index."

 I'm not sure who his target audience is but it seems to me, he could have connected the dots a little better for his readers:  changing investor expectations around the 4% withdrawal "rule" comes to mind. Also, if one believes social security will be around, to my eye, delaying until max retirement age makes more sense in times of low expectations around performance.  Personally, given the prediction that the U.S. GDP will be overtaken by China and India in the next 10 years, we've increased exposure to our international (ex-US) index fund while maintaining our overall exposure to equities.

As for Ben Carson being OK with Calpers exposure to private equity, while I respect your assessment of Ben, I'd guess his background disposes him towards a positive assessment of the strategy.  Personally, I think it an absolutely terrible idea.

best,

ps
 "I mention this because the other day Barry Ritholtz said that his firm is moving away from the 60/40 to a 75/25 stock-bond portfolio for its clients."  it seems absurd for Ritholtz to make a blanket statement around asset allocation without regard to age?

[Pete-zza]

QD,

In my posts, I had people with moderate incomes and wealth profiles in mind, the kind of people who cannot manage their own money (which is really the majority of the population) and need help at a reasonable cost. Hence my reference to outfits like Fidelity, Schwab and Vanguard. This would preclude investing in private equity, venture capital, IPOs and other exotic investments.

With respect to your comment about inflation at the time that 10-year bond rates were at stratospheric levels historically, inflation was also at very high levels, as shown in the first graph below. Eventually, Fed Chairman Paul Volcker took the unpopular step of drastically raising the Fed funds rate to 20% in March of 1980 and kept it above 16% until May, 1981. The second graph shows the pathway of the Fed fund rates during the 1970s and 1980s.

I agree with you that Batnick and Carlson and Ritholtz are having a hard time being specific about the proper course of action to take in a climate of low interest rates. They are groping but what they have been saying has been resonating with many others in the financial arena. In Ritholtz's case, I believe his comment about the 75/25 stocks/bonds was in relation to the 60/40 combination and how they might alter that ratio. As money managers, they are well aware of the usual factors that are considered in advising their clients, including their ages and also their risk capacity and tolerance and income needs.

With respect to the 4% rule, that rule has come under attack in recent years. And this past April, Wade Pfau was interviewed on this matter by Christine Benz and Jeff Ptak at Morningstar, at:

https://www.morningstar.com/articles/980620/wade-pfau-the-4-rule-is-no-longer-safe

See, also, this series of articles (registration may be required) on the subject:

https://www.morningstar.com/articles/988953/morningstars-guide-to-setting-your-withdrawal-rate

I also agree with you that delaying taking Social Security later rather than sooner is a good idea. I'm not worried about its future because no politician will dare touch changing it. At least at the moment, proposing changing it is considered political suicide, on both sides of the aisle. The latest projection has the combined Social Security trust funds that pay retirement and disability benefits running out of cash reserves by 2034. Even if Congress does nothing to shore up the system by 2034, such as increasing the age of recipients (remember that in the 1930s life expectancy at birth was only 58 for men and 62 for women) or means testing the program, Social Security will be able to pay out 79 percent of promised benefits until 2090. In my case, I took Social Security early because I retired several years early and felt that it would be a reasonable supplement to my pension income. But if I were counselling someone taking retirement at normal ages, I would say delay taking Social Security as long as possible.

I am personally also in agreement with you on the idea of pension funds dipping into the private equity market, hence my having laughed when CALPERS said that it was seriously considering private equity as an investment. However, since Vanguard is proposing to add private equity as an investment at their company, I am waiting to see the particulars of how that will be done, including whether that option will be available to individuals.

Since the matter of retirement income has been discussed, I noticed yesterday that Paul Merriman authored an article recently for Market Watch that discusses a way of improving portfolios to produce better outcomes for retirees. The article is at:

https://paulmerriman.com/retiring-in-bad-times-dont-worry-about-your-investments/

When I saw that Merriman proposes to add four specific funds to a basic S&P 500 fund, that proposal prompted me to revisit my cousin's portfolio that I put together at Vanguard to see if those funds were included. The answer is yes. But she also has international funds that parallel the domestic funds, both in blend and value. She also has a REIT (Real Estate Investment Trust), primarily for income, and the Vanguard Health Care sector fund, which has been a good performer so far this year, and even more so historically. Owning foreign funds and value funds has penalized my cousin over the past several years, much as it has penalized me over that time period, but because she has a fair amount in growth funds, which includes the likes of Amazon, Apple, Google/Alphabet, Facebook, Microsoft and Netflix, that has mitigated the harm done to the foreign and value side of her portfolio. But should reversion to the mean return for international and value stocks, as it has done historically, and the FAANMG stocks start to falter, then those parts of her portfolio should do much better.

As I have mentioned, my cousin is very low on bonds. And because she has so little in bonds, there is no need to do rebalancing between stocks and bonds, although there could be rebalancing between domestic and international. I tend to view her portfolio as an "all weather" portfolio but without much in the way of bonds that does not require a lot of attention. All of her funds are Vanguard funds, variously held in a personal account, IRA accounts and a Roth account (they were cobbled together from accounts that my cousin held at different times and places in her work career). Many of her funds are index funds. The RMD does not apply to the Roth account. With her permission, I track her portfolio on a regular basis and it usually is at a high whenever the market is at a new high.

Peter

[foreplease]

Peter,


I understand and have seen reversion to the mean from both sides. It seems easier to find things that decline to the mean than it is to find things that increase to the mean. Something to do with a stock that falls 50% needing to increase 100% to get back to where it was - call that the personal mean, average purchase price, break-even point, etc.


In my mind I have to think of it as revert to the mean for declining prices and progress to the mean for increasing prices. Do you or QD know of a relationship between 50 & 200 day moving averages and ‘the mean’?

[Pete-zza]

Do you or QD know of a relationship between 50 & 200 day moving averages and ‘the mean’?

Tony,

No, I am not aware of such a relationship.

But what is clear is that there are some who believe that value stocks are dead and will remain so, despite the fact that the gap between value and growth is at record high levels on a historical basis covering many years. The pundits attribute this gap to the strong performance of growth companies such as the FAANMG companies, and signs that the performance of these stocks going forward still looks very good. Also, some are giving credit to technology that is disruptive in nature, as reflected, for example, by IPOs that have done extremely well in the stock market despite having no profits and, in some cases, no sales. These companies have attracted the day traders also, as part of the Dave Portnoy phenomenon that has taken hold.

I read an interesting article recently on some of the above factors, at:

https://blog.evergreengavekal.com/no-revenue-no-profits-no-problem/?pdf=10539

The relevant portion of the article starts at about page 3 (bitcoin is covered at the beginning of the article).

I should also mention that earlier this year I took a subscription for a monthly report on disruptive technologies and stocks. I did that for strictly learning purposes. But since then I have gotten emails almost daily from some of the authors of the reports, and others under the same ownership, trying to entice me to sign up for their services. To do this, they have cited examples of their great success stories in the market. I have concluded that the services best appeal to those who want to trade. So I have not opted to sign up for their services (in some cases the fee was about 2K and, allegedly, that is a reduction from their normal fee). I should add that over the past year I have seen many other examples of people offering their "get rich quick" services to the public along the lines of the example discussed above. And in some cases, well known personalities have been drawn into the process, such as Bill O'Reilly formerly of Fox. There are links all over the Internet to get rich quick schemes that are being peddled to the public. To me, that is ominous. No thank you.

Peter

[foreplease]

I prefer to think certain industries or even sectors are and may remain stagnant, but not dead; saying that value stocks, which could encompass many sectors, are dead or even stagnant seems too general to me. It ignores fundamentals and company stories.


I feel that way about the term IPO too, though as you say many have huge losses. One recent IPO that is not a new company and has substantial earnings is RPRX , Royalty Pharmaceutical.


In the end much of this stuff is cyclical and I believe we have been fooling ourselves wrt defining our cycles. Any of the following can be expected as it has been a long time: inflation, higher taxes, higher interest rates, and unemployment, which spiked with the Covid shutdown.

[Pete-zza]

Tony,

Here is an example of an article where small cap value stocks are deemed to be in trouble:

https://www.morningstar.com/articles/988237/small-value-stocks-peril-and-opportunity

In my own case, in the past I have owned small cap value funds, with good results, but no longer do. My cousin, however, does have a couple small cap funds. Small caps are a favorite of Paul Merriman, based on the long term performance of that sector. He will often pair a small cap value fund with a target date retirement fund for young investors who are just starting to invest.

Peter

[quietdesperation]

Peter,

  Based on the portfolio constituents you mention in your post, it seems like you may have created the Merriman ultimate buy and hold portfolio for your cousin. While I applaud Merriman's mission, I'm a little skeptical of his method of portfolio construction. It's been a couple of years since you mentioned him but I recall reading on his website that the portfolio was the result of a giant fund screen with the goal of optimizing return and volatility. To my eye, that approach simply chases past performance, and, to wit, I believe he's changed the portfolio constituents/weights over time (not entirely sure, my memory these days is fuzzy on just about everything!)

  In the end, if you believe as I do that the U.S. market is hyper-efficient, Merriman's portfolio would cause the market to arbitrage away any advantage the strategy may have conferred. I believe this point is still playing out among academics and practitioners around the "Fama/french" size and value constituents of Merriman's portfolio.  In fact, using Merriman's own methods shows that from 2000 to 2019, an investor could simply have simply chosen the wellington or Wellesley fund and enjoyed superior returns with significantly less risk.

 There is a scenario I may have mentioned in another post that may put these factors back in play. I was working on a project for an information provider of equities indicative data to the buy-side. I asked the product manager how he hoped to succeed since, to my eye,  penetrating the marketplace made the data less and less valuable. He agreed and it turns out the company attributed the ebb and flow of their subscription base to this dynamic.  I remarked that it was like the Yogi Berra restaurant quote: "Nobody goes there anymore. It’s too crowded".  I suppose something similar might be possible for size and value factors. On the other hand, one would guess the arbitrage has been codified in 100s if not 1000s of algorithms, so ultimately, IMO, these factor premiums are dead.

best,

ps I started this post early morning, closed my computer, drove rt to Philadelphia  (5 hours) to drop off our nephew, and just finished my post. I didn't realize in the intervening time you had posted twice so this post was not informed by your last two posts...

[quietdesperation]

I prefer to think certain industries or even sectors are and may remain stagnant, but not dead; saying that value stocks, which could encompass many sectors, are dead or even stagnant seems too general to me. It ignores fundamentals and company stories.


I feel that way about the term IPO too, though as you say many have huge losses. One recent IPO that is not a new company and has substantial earnings is RPRX , Royalty Pharmaceutical.


In the end much of this stuff is cyclical and I believe we have been fooling ourselves wrt defining our cycles. Any of the following can be expected as it has been a long time: inflation, higher taxes, higher interest rates, and unemployment, which spiked with the Covid shutdown.

Peter, did you mean to say the value premium is dead?

[Pete-zza]

Peter, did you mean to say the value premium is dead?

QD,

No, I did not mean to suggest that. What I have observed over the past year or so is a lot of articles where the authors raised the question of whether value investing is dead or not. Of course, the proponents of value investing, like Rob Arnott at Research Affiliates, have come to the defense of value investing, as he and his associates have attempted to do in this article:

https://www.researchaffiliates.com/en_us/publications/articles/reports-of-values-death-may-be-greatly-exaggerated.html

I have also noticed that there are value oriented funds that now purchase the stock of companies like Netflix and Alphabet and Facebook even though in the past they would not have been in their portfolios based on the way that value stocks were evaluated. These days, increasing emphasis is placed on the value of intangibles. This aspect, as well as the Fama French analysis, is covered in the above article. And also in this typical article:

https://www.ipe.com/ahead-of-the-curve-value-investing-in-the-next-decade/10034818.article

This morning, for fun and to satisfy my curiosity, I did a Google search using the search words "Is value investing dead?" I got about 37,100,000 results.
That alone may be a reasonable basis for someone that has a reasonable timeframe, like a young investor, to add value to a portfolio. In my case, I am more inclined to look at large cap value, in part because such a fund is likely to have dividends as part of the return. For my granddaughter, I would be more inclined to have her look at small cap value. For example, Vanguard had a small cap value fund that is down year-to-date by almost 25%. Its expense ratio is only 7 basis points. But since September of 2007 when the fund was created, the average annual return is 9.40%. This is not uncommon. Value funds often lead out of recessions, like the one in 2007-2009. The aforementioned fund also pays a dividend (its SEC yield is currently 2.5%).

Peter

[wotavidone]

"Stephen J. Dubner reaches a well-reasoned conclusion – backed by financial industry immortals – that the money spent on fees is a waste when compared to the strategy of the passive fund that tracks a market index. He cites a study where only the top 2% to 3% of active fund managers had enough skill to cover their cost."

Don't disagree with that conclusion.
It's when you insist on buying individual shares that professional advice beats trying to pick winners yourself.
I generally tell newbies several things:
For relatively unsophisticated investors like myself, day trading is gambling.
Don't do it unless you are OK with seeing the value of your investment vary wildly day to day.
Use only money you are prepared to lose.
Funds provide a way of diversifying whilst making small regular purchases.
Whatever you do, don't get your advice from a man at the bar.