4 ms·

I don't really understand your comment. > Most investors have poor returns because they defer to their self-defeating cognitive biases, they don't take the tim

by kevhito 10y ago

I don't really understand your comment. > Most investors have poor returns because they defer to their self-defeating cognitive biases, they don't take the time to understand investing, and they often naively believe they have a simple "system" which will outsmart the market. The article you cite directly contradicts this. It claims that investors who have the best returns are those who specifically don't take the time to understand investing, and that there very much is a simple "system" that works, namely, forget about your investment account entirely, or at least let it sit dormant for a few decades and do nothing. More to the point, your comment smells like justifying the wealth disparities, and counters the WP article ("If you start out with wealth, you don’t have to be a financial genius to tap the miracle of compounding and end up with real money.") with... nothing but a vague claim that smart investors can make a lot of money.

FLUX-YOU 10y ago
Wealth disparities will always exist as long as information takes time to distribute and is not public. This is, I think, what the GP means when an "average investor" thinks he has information or a system that the market doesn't and trades on it. If that trade succeeds, it reinforces his behavior. If it fails, something else must have gone wrong but he keeps letting his system drive his money until he can't take the losses (or he makes a bunch of large trades successfully and quickly retires). It's the equivalent of poking the market with a stick with a pavlovian response when there's several academic fields that would explain a great amount for you instead (which was expensive before the internet).
- WalterBright 10y ago
  I've tried a couple stock "systems" of my own construction. Got my ass handed to me every time. They only worked on historical data :-)
WalterBright 10y ago
My point is that buy and hold is actually a more sophisticated investment strategy than one might think. For one thing, knowing enough about investment vehicles to pick the right buy and hold is straightforward only if you know what you're doing. And secondly, uneducated investors are usually convinced their clever strategy they made up on the spot will beat the market - they just refuse to believe in buy & hold. And thirdly, cognitive biases that destroy investment returns are fairly well documented in the book "Thinking Fast and Slow". The article completely supports my point, in showing how awfully the average investor does compared with the buy and hold investor.
- nosuchthing 10y ago
  Buy and hold is infinitesimal in comparison to day trading options and directives, where fortunes can be amplified exponentially in minutes from insider trading or narratives from news publications which have an effect on the reactionary "dumb money" of the common public traders.
  - ericd 10y ago
    They can also be lost just as quickly when the market doesn't conveniently act like you think. If the system was rigged in the way you suggest, hedge funds would do much better as an asset class than they actually do (after fees, they've significantly underperformed an S&P 500 index fund). WRT your claims of rampant insider trading, when the SEC sees heavy option volume before public news breaks, frequently, someone goes to jail.
    - nosuchthing 10y ago
      With off shore accounts, dark pools, HFT, and an excess of money, one can imagine there are loop holes. https://www.bloomberg.com/news/articles/2014-07-23/don-t-tell-anybody-about-this-story-on-hft-power-jump-trading https://www.bloomberg.com/news/articles/2014-07-23/don-t-tel... http://www.npr.org/2013/04/09/176579895/to-find-insider-trading-follow-the-kids-money http://www.npr.org/2013/04/09/176579895/to-find-insider-trad...
graeme 10y ago
Buy and hold is an above average investment strategy. Many people panic sell in lows, and impulse buy in highs. They believe, implicitly, that they can market time.

by kevhito 10y ago

FLUX-YOU 10y ago

Wealth disparities will always exist as long as information takes time to distribute and is not public. This is, I think, what the GP means when an "average investor" thinks he has information or a system that the market doesn't and trades on it. If that trade succeeds, it reinforces his behavior. If it fails, something else must have gone wrong but he keeps letting his system drive his money until he can't take the losses (or he makes a bunch of large trades successfully and quickly retires). It's the equivalent of poking the market with a stick with a pavlovian response when there's several academic fields that would explain a great amount for you instead (which was expensive before the internet).

WalterBright 10y ago
I've tried a couple stock "systems" of my own construction. Got my ass handed to me every time. They only worked on historical data :-)

WalterBright 10y ago

My point is that buy and hold is actually a more sophisticated investment strategy than one might think. For one thing, knowing enough about investment vehicles to pick the right buy and hold is straightforward only if you know what you're doing. And secondly, uneducated investors are usually convinced their clever strategy they made up on the spot will beat the market - they just refuse to believe in buy & hold. And thirdly, cognitive biases that destroy investment returns are fairly well documented in the book "Thinking Fast and Slow". The article completely supports my point, in showing how awfully the average investor does compared with the buy and hold investor.

nosuchthing 10y ago
Buy and hold is infinitesimal in comparison to day trading options and directives, where fortunes can be amplified exponentially in minutes from insider trading or narratives from news publications which have an effect on the reactionary "dumb money" of the common public traders.
- ericd 10y ago
  They can also be lost just as quickly when the market doesn't conveniently act like you think. If the system was rigged in the way you suggest, hedge funds would do much better as an asset class than they actually do (after fees, they've significantly underperformed an S&P 500 index fund). WRT your claims of rampant insider trading, when the SEC sees heavy option volume before public news breaks, frequently, someone goes to jail.
  - nosuchthing 10y ago
    With off shore accounts, dark pools, HFT, and an excess of money, one can imagine there are loop holes. https://www.bloomberg.com/news/articles/2014-07-23/don-t-tell-anybody-about-this-story-on-hft-power-jump-trading https://www.bloomberg.com/news/articles/2014-07-23/don-t-tel... http://www.npr.org/2013/04/09/176579895/to-find-insider-trading-follow-the-kids-money http://www.npr.org/2013/04/09/176579895/to-find-insider-trad...

graeme 10y ago

Buy and hold is an above average investment strategy. Many people panic sell in lows, and impulse buy in highs. They believe, implicitly, that they can market time.