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>I am not saying it is trivial to consistently outperform the indexes, just that the difficulty is significantly overstated. The difficulty isn't overstated be

>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

> 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.