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> Yeah, anyone who outperforms is on the other side of trades that underperform, so you're going to run into issues. True, but it's not like the bet is already
by jonahx 9y ago
> Yeah, anyone who outperforms is on the other side of trades that underperform, so you're going to run into issues.
True, but it's not like the bet is already decided because of this mathematical fact. In theory the good pickers can predict the outperformers. It's a surprising claim that this is, essentially, not possible -- or at least only marginally possible to a degree that's cancelled out by fees.
- ThrustVectoring 9y agoIf you average together a lot of stock pickers, you wind up with roughly a market-cap weighted index. If you average together everyone who holds stock, you wind up with exactly the market-cap weighted index.
- jonahx 9y agoRight. But it's still surprising that "experts" can't make a biased selection that is better than the exact average. On average, basketball teams in the NBA score X points per game. You now get to pick 5 teams and average just their scores. I'd imagine in that situation it's pretty easy to beat the league average. Again, it's a surprising and non-trivial fact that this isn't the case in the stock market, roughly speaking.
- munchbunny 9y agoThat's not entirely the nuance of Warren Buffet's argument though. His argument is that the stock pickers have the deck stacked against them on total returns to the investor due to high fees. So maybe they do actually do better than average, but that it's likely not "2 and 20" better.
- jonahx 9y agoSee my post above the one you replied to.