4 ms·

This post is disingenuous. What percentage of hedge fund managers would beat an index fund? What percentage of people have access to said hedge funds? And even

by tabeth 9y ago

This post is disingenuous. What percentage of hedge fund managers would beat an index fund? What percentage of people have access to said hedge funds? And even if you can beat the market, how much time, money and energy are you going to use to beat it? Taking into account the margins by which you may beat it by, is it worth it? Probably not for a single individual even thinking about this question. Common now.

opportune 9y ago
Sure, an index fund may win over time, but part of what a hedge fund is supposed to do is to hedge against the market. A lot of hedge fund customers are pension funds, people close to retirement, etc. For these people, the long term health of fund is of course important, but they can't afford the volatility - if their investment loses 10% of its value in a year, they may not be able to make the payments or subsist on the income as much as they wished. As a result it's not really fair to compare the long term performance of a hedge fund with an index fund. Index funds are more aggressively invested and thus more volatile.
- tabeth 9y ago
  OK, but what about the (many) hedge funds that are volatile? There are indeed funds that are better than index funds, but they're inaccessible to the average person, and therefore irrelevant.
  - opportune 9y ago
    You're right, there are volatile hedge funds, although it might be accurate to say that there are more and less volatile funds than indices. Moreover, there are plenty of bad funds that only exist to dupe clueless retail investors into giving them their money. I wouldn't say that all hedge funds are good, and in fact regular people are probably screwed when it comes to picking a good one (in part because some hedge funds are what I like to call "20/20 funds" and are just statistical testaments to the fact that some fraction of poorly managed funds will still do well). Volatility isn't a binary thing. Although the less-volatile more-return funds are out of reach for regular people, the less-volatile less-return funds are not, and these still have a lot of value for people who are less tolerant of risk.
dsacco 9y ago
My comment isn’t disingenuous. I’m neutrally presenting the reality that it is possible to beat the market. I’m not saying most people should try it, and in fact I specifically stated most people should stick to index funds. I also specifically admitted most people who beat the market are outliers, just like professional athletes. The point here is that it’s dogmatic to continually say, “you won’t beat the market, don’t even try, look what Buffett says about it”. I have laid out, in this thread and others I’ve linked to, how it is possible to beat the market in principle. No, not everyone will do it, but people will want to try anyway, so in my opinion they may as well be equipped for success, insofar as they can be. I haven’t tried to undermine the position that index funds are the best option for most investors. I’m just providing perspective for those who understand that and want to try actively trading anyway. I dislike the blind advocation of index funds in a matter of fact manner - it doesn’t actually improve financial education as poignantly as discussions such as this one do. A complete presentation should include the subject in entirety, not the, “We know what’s best for you” version.
- SirLJ 9y ago
  I do absolutely agree with dsacco even though I had my share of arguments in the past with him... You can absolutely beat the market, but you have to work on it and put the effort, same as you can heal people (as be a doctor), create awesome businesses (as entrepreneur), etc...
- deleted 9y ago
  [deleted]
- tabeth 9y ago
  The part that is disingenuous is this: > There are plenty of hedge funds which beat the market so significantly and so consistently over long timespans (even decades) that choosing any single one of them would have handily won the bet You say there are plenty that would beat the market, OK, sure. How many would not? What percentage of the funds would win? The way you frame the conversation is disingenuous, given this entire conversation (grand parent and post before that) are about retirement strategies, presumably for average folks. Beating the market may not be strictly impossible, but no one here other than you claimed that. The fact that it is improbable is just that, a fact. So yeah, disproving a claim no one made and denouncing dogma is pretty disingenuous, imo.
andrewflnr 9y ago
Calling someone disingenuous is a very strong claim you didn't even attempt to justify. The only argument you offered is aimed at a strawman: GP never disputed that beating the market is really hard and trying it is probably dumb. While I'm here, it's "c'mon, now".

by tabeth 9y ago

opportune 9y ago

Sure, an index fund may win over time, but part of what a hedge fund is supposed to do is to hedge against the market. A lot of hedge fund customers are pension funds, people close to retirement, etc. For these people, the long term health of fund is of course important, but they can't afford the volatility - if their investment loses 10% of its value in a year, they may not be able to make the payments or subsist on the income as much as they wished. As a result it's not really fair to compare the long term performance of a hedge fund with an index fund. Index funds are more aggressively invested and thus more volatile.

tabeth 9y ago
OK, but what about the (many) hedge funds that are volatile? There are indeed funds that are better than index funds, but they're inaccessible to the average person, and therefore irrelevant.
- opportune 9y ago
  You're right, there are volatile hedge funds, although it might be accurate to say that there are more and less volatile funds than indices. Moreover, there are plenty of bad funds that only exist to dupe clueless retail investors into giving them their money. I wouldn't say that all hedge funds are good, and in fact regular people are probably screwed when it comes to picking a good one (in part because some hedge funds are what I like to call "20/20 funds" and are just statistical testaments to the fact that some fraction of poorly managed funds will still do well). Volatility isn't a binary thing. Although the less-volatile more-return funds are out of reach for regular people, the less-volatile less-return funds are not, and these still have a lot of value for people who are less tolerant of risk.

dsacco 9y ago

My comment isn’t disingenuous. I’m neutrally presenting the reality that it is possible to beat the market. I’m not saying most people should try it, and in fact I specifically stated most people should stick to index funds. I also specifically admitted most people who beat the market are outliers, just like professional athletes. The point here is that it’s dogmatic to continually say, “you won’t beat the market, don’t even try, look what Buffett says about it”. I have laid out, in this thread and others I’ve linked to, how it is possible to beat the market in principle. No, not everyone will do it, but people will want to try anyway, so in my opinion they may as well be equipped for success, insofar as they can be. I haven’t tried to undermine the position that index funds are the best option for most investors. I’m just providing perspective for those who understand that and want to try actively trading anyway. I dislike the blind advocation of index funds in a matter of fact manner - it doesn’t actually improve financial education as poignantly as discussions such as this one do. A complete presentation should include the subject in entirety, not the, “We know what’s best for you” version.

SirLJ 9y ago
I do absolutely agree with dsacco even though I had my share of arguments in the past with him... You can absolutely beat the market, but you have to work on it and put the effort, same as you can heal people (as be a doctor), create awesome businesses (as entrepreneur), etc...
deleted 9y ago
[deleted]
tabeth 9y ago
The part that is disingenuous is this: > There are plenty of hedge funds which beat the market so significantly and so consistently over long timespans (even decades) that choosing any single one of them would have handily won the bet You say there are plenty that would beat the market, OK, sure. How many would not? What percentage of the funds would win? The way you frame the conversation is disingenuous, given this entire conversation (grand parent and post before that) are about retirement strategies, presumably for average folks. Beating the market may not be strictly impossible, but no one here other than you claimed that. The fact that it is improbable is just that, a fact. So yeah, disproving a claim no one made and denouncing dogma is pretty disingenuous, imo.

andrewflnr 9y ago

Calling someone disingenuous is a very strong claim you didn't even attempt to justify. The only argument you offered is aimed at a strawman: GP never disputed that beating the market is really hard and trying it is probably dumb. While I'm here, it's "c'mon, now".