3 ms·

this is a somewhat obvious comment, but the notion of "an average individual" and "everyone" is very different. some people can specialise in price discovery a

by shoo 11y ago

this is a somewhat obvious comment, but the notion of "an average individual" and "everyone" is very different. some people can specialise in price discovery as their occupation, and some people can specialise in growing sweet potato, or teaching kids, or nursing, or what have you. the former person can spend their time and energy learning how to pick stocks by hand, and influence the market, and the latter people can spend their time and energy learning and doing other useful things, and they can invest in index funds. Here's a completely different angle of attack: suppose I believe that the market doesn't price things correctly, and that some countries/sectors/companies are over valued, and some are under valued. in general, for some arbitrary set of of unpopular beliefs, there isn't an index fund I can buy into that is a good approximation of my beliefs. Even worse, it probably isn't possible for me to build a portfolio by linearly combining different index funds to approximate my desired portfolio allocation. For example, suppose I want to invest in countries A,B,C,D,E and sectors U,V,W,X,Y,Z subject to ethical constraints K and L. It may be the case that for each of the countries I can buy an A-country-ETF, and a B-country-ETF, and a global-sector-U-ETF, and a global-ethical-K-ETF, and for large countries I may even be able to buy a country-C-sector-X-ETF, but I can't make a good approximation of my desired portfolio by adding linear combinations of these things together. I don't really want to buy an canned portfolio in the form of an ETF, I want to buy a custom portfolio, or a custom portfolio factory, say. But perhaps part of the success of ETFs for non-expert folk like me is that they'd prevent me from expressing my strange individual beliefs about the market (which will probably result in worse investment outcomes for me than if I just did something mainstream).

Ntrails 11y ago
Assume that average individual represents people who have jobs unrelated to analysing companies/markets and therefore are managing their money in spare time only. To me stock picking on the basis that you know better than the market is largely hubris. Most of the people I know who do it don't do any meaningful benchmarking so it's impossible to properly assess success. When the market goes up they made money (yaaay - I picked well) but when they lost money it's because the market went down (nothing I can do in the face of that). There are a decent number of people manually investing their pension and I genuinely think some proper requirements on reporting would be valuable for them.
zhte415 11y ago
So, you're looking for a way to express non-conformist beliefs about markets, and are happy to take a hit for that if incorrect, is that correct? Walking in the footsteps of giants, the first modern individual, for me, being Ricardo. https://en.wikipedia.org/wiki/David_Ricardo https://en.wikipedia.org/wiki/David_Ricardo You mention 'buying global' Bear in mind that most stock markets outside Anglo Saxon countries are very different, as company financing goes very differently. 'Buying Germany' is completely different from 'Buying DAX'. If you're seeking an index, there should be passive funds for most major MSCI indexes down to the obscure, but they're representative of stocks, not of economies and fundamentals. If you're interested in building portfolios, then proxies are the best bet, and that's why funds-of-hedge-funds exist. They cover a lot of exotic interests by packaging together hedge funds into certain groups. I have always avoided these, however, as often hedge funds avoid being part of funds-of-funds.

by shoo 11y ago

Ntrails 11y ago

Assume that average individual represents people who have jobs unrelated to analysing companies/markets and therefore are managing their money in spare time only. To me stock picking on the basis that you know better than the market is largely hubris. Most of the people I know who do it don't do any meaningful benchmarking so it's impossible to properly assess success. When the market goes up they made money (yaaay - I picked well) but when they lost money it's because the market went down (nothing I can do in the face of that). There are a decent number of people manually investing their pension and I genuinely think some proper requirements on reporting would be valuable for them.

zhte415 11y ago

So, you're looking for a way to express non-conformist beliefs about markets, and are happy to take a hit for that if incorrect, is that correct? Walking in the footsteps of giants, the first modern individual, for me, being Ricardo. https://en.wikipedia.org/wiki/David_Ricardo https://en.wikipedia.org/wiki/David_Ricardo You mention 'buying global' Bear in mind that most stock markets outside Anglo Saxon countries are very different, as company financing goes very differently. 'Buying Germany' is completely different from 'Buying DAX'. If you're seeking an index, there should be passive funds for most major MSCI indexes down to the obscure, but they're representative of stocks, not of economies and fundamentals. If you're interested in building portfolios, then proxies are the best bet, and that's why funds-of-hedge-funds exist. They cover a lot of exotic interests by packaging together hedge funds into certain groups. I have always avoided these, however, as often hedge funds avoid being part of funds-of-funds.