How many people who are not interested investing take the time to make forward-looking estimates of equity returns based on the Shiller PE or even know what the Shiller PE is or how to make the calculation reasonably?
No need to apologize. In general I am quite interested in investing and enjoy talking about it. I think the majority of my participation on this site is in discussions related to investing. I recently mentioned in a different thread that for many years I was engaged in trying to "beat the market". In 30 years I've come out about 0.2% ahead of the SP500. I am skeptical that I can equal that going forward, much less beat it. The reason is that I'm hitting that stage in life where my temperament will not allow me to simultaneously take as much or more risk as I did as a younger man with decades of professional employment ahead and, as they say, sleep well at night. Exposing myself to potential losses larger than I can afford for maybe 0.1% or 0.2% of extra return doesn't make sense.
I did not voluntarily get into index funds. A number of years back my employer redid the roster in the 401k plan to include only low cost funds, the majority of which are index funds. Prior to that they did the "performance chasing" dance of selecting funds with high Morningstar ratings and then dumping them a few years later when the returns inevitably began to lag. When Morningstar themselves concluded that their own ratings were poor predictors of relative future performance, and that the only reliable predictor of relative future performance they could find was the cost of the fund, my employer made the switch. Jack Bogle calls this (sort of tongue-in-cheek) the "Cost Matters Hypothesis", and CMH, rather than EMH, is the secret sauce to index funds, insofar as there is one.
I was initially angry about the makeover. I did not want to quit my job and the plan does not allow in-service rollovers into an IRA, so I was stuck. This happened 2 months after my idle daydream of early retirement solidified into The Plan. My 401k was a substantial component of that plan so I was at least interested enough in the topic of investing that I spent several months investigating index funds.
An interesting side note: index funds in a roundabout way led me to bogleheads.org. After a while there I began to feel like a resident of the Island of Misfit Toys because my plan to retire early was based much more on an ability to be content/happy with a frugal life than amassing a great fortune at a young age. There is a small minority of frugal souls over there and long story short, participation there is what ultimately led me here, after I heard whispers of this guy named Jacob who was like MMM on steroids.
Anyway, I'm veering too far off topic. In time I concluded I could make things work with index funds, and as a few years have passed I've concluded further that they are the best choice for me for the core of my portfolio. The point being: it wasn't laziness or disinterest that led me to that conclusion.
I'm not sitting with all my money in an SP500 index fund (the universal straw man of owning index funds). I don't consider my portfolio to be sophisticated, but beyond the standard US total market exposure, I have significant equity exposure to overseas developed markets, emerging markets, and US small caps. So within my willingness to put my money at risk, I'm making some plays for a little extra return. But I'm also increasingly concerned about stability, so I'm incrementally ratcheting up my bond holdings. That's a painful thing for me to do. It's a substantial drag on the return of my portfolio but it is something that in all likelihood will limit my downside risk. I'm coming into the phase of my investing life were I am most vulnerable to sequence of returns risk.
The one place I do throw caution to the wind and allow myself to have a little fun indulging in trying to beat the market is in my little backdoor Roth IRA. So far in 5 years the approximate score is SP500 15.5%/yr, iDave 9.9%/yr. Five years isn't very long, but when I look at that tally and contemplate leaving work under conditions dependent on me beating the market for success, I get a little queasy.
For all that I recognize that there are many roads that lead to Dublin and that the approach to investing that works best for me is only that. What is truly optimal is only knowable in hindsight. My personable belief is that for the vast majority people successful investing is much more a game of behavior and emotion than of intellect. The conclusion from that is different people can reasonably come up different approaches that are both best suited for them and reasonably likely to lead to successful outcomes. I don't consider other approaches "wrong". I hope everyone here has successes beyond their wildest dreams with their investments. That said, I admit to having a bit of a compulsion to rise and take the bait when I see little quips tossed around implying people who use index funds as an element of their financial strategy are an inferior species. But to me it's all in good fun and is educational. I don't need or want a safe space when my ideas are challenged. A little fire refines and strengthens them.
Last thing (I promise!) is that I anticipate a time in the future where I will not want to spend any meaningful portion of time managing investments. For me investing is a means to an end, and as the end is realized my patience for allowing the management task to detract from it will wane. There are a few things I might try for fun. I've never bought a stock in my life (only mutual funds/investment trusts). Someday I might take a little dollop of my taxable account money and make a game of trying my hand at putting together a little stock portfolio. It seems like a healthier activity than going to Las Vegas. But the part of the stash that will be keeping me warm and fed I foresee gradually maneuvering so it can operate on near-autopilot.
