4 ms·
About one third of managers beat the market. The problem is that there is no correlation between year-to-year performance of managers: the manager who beat the
by greenshackle2 9y ago
About one third of managers beat the market. The problem is that there is no correlation between year-to-year performance of managers: the manager who beat the market this year is no more likely to beat it next year than any other manager.
https://blog.wealthfront.com/illusion-stock-picking-skill/ https://blog.wealthfront.com/illusion-stock-picking-skill/
- Scea91 9y agoThat is a very bold claim. As a counterexample, I bet that some of them are more likely to beat the market than me if I started investing.
- rayvd 9y agoUnless you invested in the S&P 500 :)
- greenshackle2 9y agoBy managers I mean professional portfolio managers. Individual investors pretty much all do worse than market. EDIT: obviously that means there is skill involved. But it seems that professional managers are close enough in skill that luck is the dominant factor.
- monktastic1 9y agoRight, the point is that his manager consistently beat the market (even if by a small amount). Not that I knew this before just now.
- greenshackle2 9y agoI wasn't able to find actual data on his performance, what I found is that: "Cascade does not publicly disclose its performance results". If someone has actual numbers I'd be happy to see them.
- hinkley 9y agoIt occurs to me that maybe the way to beat the S&P is to focus on the losers and not the winners. That is, if you could figure out which listed companies were going to fare the worst and build a partial index fund with the rest, you'd beat the index. Similar research style to short selling but with less downside.
- Retric 9y agoI don't think it's any easier to find companies that will under preform. Apple stock seems over priced right now with P/E:17.66 and not so great growth prospects, but so does Amazon and Facebook and the rest of the S&P 500 when you take a close look.
- gozur88 9y agoIn theory a company's expected poor performance is already priced into the stock.
- dandr01d 9y agoIf picking the winners is impossible, how would picking the inverse set (e.g. losers) be any different?
- apetresc 9y agoI'd assume it's because most companies aren't big winners or big losers.
- scythe 9y agoIn order to beat the market, you have to know something it doesn't already know. But eventually, it's (they're) going to learn that, too, so you'll have to learn something new. The only way to keep beating the market is to gather information faster than the "average" and keep up with the information that it has, relative to what you invest in, although usually you can accomplish most of the work in the latter half (beta, IIRC) by watching the market itself. In brief, as Martin Shkreli put it: invest in yourself...
- GCA10 9y ago
- deleted 9y ago[deleted]