21 ms·

> a bizarre amount of hostility out in the world toward people who assert it is possible to have consistently great performance without index investing. I thin

> a bizarre amount of hostility out in the world toward people who assert it is possible to have consistently great performance without index investing. I think the hostility comes from the fact that such individuals almost always make the assertion sans evidence, and often stand to make money from suckers -- in the gambling sense, i.e. people who don't know the odds -- who believe them and trust them with money. I'm sure if someone demonstrated their ability to outperform the market prospectively, and also were willing to accept outside investment, they would have people knocking down their door to get in. However, there is no entity with a long track record of outperforming the market that is both open to outside investors and claims that they will continue to outperform with a high degree of certainty. Aside: the people want to know 1. how long you have been investing 2. the rough amount of assets you have invested 3. what your annualized rate of return is over the period mentioned in question 1. Not that this would prove anything, because anyone can claim to have had 25% ARoR over the last forty years, but it would at least be interesting to know what the claimed performance is.

empath75 7y ago
I managed to get something like a 400% return over 2 years by buying amazon and nvidia right before the crypto bubble took off. Made more than most of my friends who bought bitcoin did (sell gold in a gold rush)
- random314 7y ago
  Is that your entire portfolio?
- 55555 7y ago
  How is crypto significant to Amazon? was cloud mining ever a significant part of AWS?
jandrewrogers 7y ago
People improperly conflate public active funds, which are not incentivized to outperform, with all portfolios. Funds that consistently outperform for a very long time almost universally end up closed or are prop trading shops, the latter which would have no reason to exist if they didn't outperform. All of these have practical scaling limits but it isn't inordinately difficult. Only comparing indexes to public active funds is a bit of a straw man because it actively selects for under-performers. I'm a long-term risk modeler, originally for fun and later for profit. I build portfolios of US large caps based on categories of risk that are not priced into the market because they are difficult to model in a conventional way. This is an entirely uncontroversial way to outperform indexes but you wouldn't build a public investment vehicle around it. My oldest continuous portfolio goes back to the turn of the century, at around 20-21% ARR (more recent portfolios are a bit better). Per year, it requires maybe several hours of my time. I have a few friends and acquaintances that seem to do a bit better (but also spend more time on it) that also trade on un-/mis-priced risk, often as a justification to polish their data science skills, across a variety of asset classes. I am not saying it is trivial to consistently outperform the indexes, just that the difficulty is significantly overstated. The hurdle most people trip over is that there are no shortcuts to figuring out how to build your own models from first principles and how to trade them.
- pedrocr 7y ago
  >I am not saying it is trivial to consistently outperform the indexes, just that the difficulty is significantly overstated. The difficulty isn't overstated because in aggregate it's mathematically impossible. The total market return is zero-sum so someone else has to take the other side of your bets and lose return. That someone else is not me, I'm getting the market average consistently to within a decimal point from my index fund. Here's Sharpe's simple take on it: https://web.stanford.edu/~wfsharpe/art/active/active.htm https://web.stanford.edu/~wfsharpe/art/active/active.htm
  - 55555 7y ago
    > This need not be taken as a counsel of despair. It is perfectly possible for some active managers to beat their passive brethren, even after costs. Such managers must, of course, manage a minority share of the actively managed dollars within the market in question. It is also possible for an investor (such as a pension fund) to choose a set of active managers that, collectively, provides a total return better than that of a passive alternative, even after costs. Not all the managers in the set have to beat their passive counterparts, only those managing a majority of the investor's actively managed funds. For anyone who misreads the subtleties of your post and thinks they cant make consistent alpha through active management. They can, but (without knowing anything about them) probably won't.
    - pedrocr 7y ago
      Oh, it's definitely possible to outperform. And for every bit of that performance someone else is taking the losing side of that bet. What most people must realize is that as retail investors with no special insight into the market the chance that someone is giving them a chance to be on the winning side of the bets is not great. If you can't identify who the sucker is, it's probably you, so taking the average at low fees is your best bet.
- 55555 7y ago
  Where do you discuss this with like-minded people? Where do you read/write about this?

empath75 7y ago

I managed to get something like a 400% return over 2 years by buying amazon and nvidia right before the crypto bubble took off. Made more than most of my friends who bought bitcoin did (sell gold in a gold rush)

random314 7y ago
Is that your entire portfolio?
55555 7y ago
How is crypto significant to Amazon? was cloud mining ever a significant part of AWS?

jandrewrogers 7y ago

People improperly conflate public active funds, which are not incentivized to outperform, with all portfolios. Funds that consistently outperform for a very long time almost universally end up closed or are prop trading shops, the latter which would have no reason to exist if they didn't outperform. All of these have practical scaling limits but it isn't inordinately difficult. Only comparing indexes to public active funds is a bit of a straw man because it actively selects for under-performers. I'm a long-term risk modeler, originally for fun and later for profit. I build portfolios of US large caps based on categories of risk that are not priced into the market because they are difficult to model in a conventional way. This is an entirely uncontroversial way to outperform indexes but you wouldn't build a public investment vehicle around it. My oldest continuous portfolio goes back to the turn of the century, at around 20-21% ARR (more recent portfolios are a bit better). Per year, it requires maybe several hours of my time. I have a few friends and acquaintances that seem to do a bit better (but also spend more time on it) that also trade on un-/mis-priced risk, often as a justification to polish their data science skills, across a variety of asset classes. I am not saying it is trivial to consistently outperform the indexes, just that the difficulty is significantly overstated. The hurdle most people trip over is that there are no shortcuts to figuring out how to build your own models from first principles and how to trade them.

pedrocr 7y ago
>I am not saying it is trivial to consistently outperform the indexes, just that the difficulty is significantly overstated. The difficulty isn't overstated because in aggregate it's mathematically impossible. The total market return is zero-sum so someone else has to take the other side of your bets and lose return. That someone else is not me, I'm getting the market average consistently to within a decimal point from my index fund. Here's Sharpe's simple take on it: https://web.stanford.edu/~wfsharpe/art/active/active.htm https://web.stanford.edu/~wfsharpe/art/active/active.htm
- 55555 7y ago
  > This need not be taken as a counsel of despair. It is perfectly possible for some active managers to beat their passive brethren, even after costs. Such managers must, of course, manage a minority share of the actively managed dollars within the market in question. It is also possible for an investor (such as a pension fund) to choose a set of active managers that, collectively, provides a total return better than that of a passive alternative, even after costs. Not all the managers in the set have to beat their passive counterparts, only those managing a majority of the investor's actively managed funds. For anyone who misreads the subtleties of your post and thinks they cant make consistent alpha through active management. They can, but (without knowing anything about them) probably won't.
  - pedrocr 7y ago
    Oh, it's definitely possible to outperform. And for every bit of that performance someone else is taking the losing side of that bet. What most people must realize is that as retail investors with no special insight into the market the chance that someone is giving them a chance to be on the winning side of the bets is not great. If you can't identify who the sucker is, it's probably you, so taking the average at low fees is your best bet.
55555 7y ago
Where do you discuss this with like-minded people? Where do you read/write about this?