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> "you can't beat the market" You can, but not consistently according to the Efficient Market Hypothesis. If you are referring to e.g. factor investing, that's

by mmmrk 6y ago

> "you can't beat the market" You can, but not consistently according to the Efficient Market Hypothesis. If you are referring to e.g. factor investing, that's not "beating the market" in the traditional fund manager way, just holding it differently and taking more systemic risk for a higher potential upside (if the factor is indeed based on risk and not irrationality of market participants). > And best of all, with zero commissions, super tight bid-ask spreads, and easy to access APIs, "quant-lite" investing is more accessible than every before. I'm conservative here and would wait 10 years before jumping on some fancy new technique to make more money. Why? Because fin history is littered with fancy new ways of making money that primarily made the manager money. Any real advantages are going to be quickly taken up by competing money makers anyway. > In conclusion, every portfolio is an active portfolio, from deciding a equity/bond ratio, to investing in real estate, to deciding to buy some TSLA. It's all the same, so stay away from any dogmatic approaches to investing This is dangerously wrong advice. "Passive investing" in the Bogleheads sense and choosing e.g. a equity/bond ratio is based on science and 120+ years of available data (Efficient Market Hypothesis, Modern Portfolio Theory), buying TSLA is not. Real estate is a very mixed bag (for US research, see e.g. Beracha et al. 2012 "Lessons from over 30 years of buy versus rent decisions" in Real Estate Economics Vol 40 No 2, and https://www.prnewswire.com/news-releases/house-of-cards-morningstars-hellowallet-unit-examines-how-buying-a-home-vs-renting-and-investing-affects-wealth-creation-282253721.html https://www.prnewswire.com/news-releases/house-of-cards-morn...). Conclusion: the "dogmatic" approach is absolutely the right thing for 99% of retail investors to follow.

anon9001 6y ago
On March 1 2009, the S&P500 was $773. On January 1 1997, the S&P500 was $773. During the same time, bonds sold off too. Everything did. If you were dollar cost averaging into the market for 12 years, you could find yourself below where you started. That's a pretty demoralizing situation. I think being aware of market conditions and reallocating as you see fit is just part of being a responsible adult. Maybe sometimes you do want to hold VTI, but also it's not unreasonable to bet on Elon. I'm not saying everyone has to be highly leveraged and aggressive, but I think you're putting a tremendous amount of faith in the markets and intentionally looking the other way.
- phyalow 6y ago
  While I largely agree with your post, you are forgetting about the total return, yes the S&P was like for like on a net basis, but dont forget about dividends in the intermediate period.
- whodidntante 6y ago
  This does not account for dividends, which, if reinvested, would have produced a 22% gain during this time period, which is not too bad when "everything was selling off" Not spectacular, but you also need to compare this to whatever alternate investments you would have chosen at that time, and would have kept until now. Gold, Cash, small caps, real estate, multi-factor, managed futures, ? You also need to consider why you have chosen these to points in time. Looking backwards, there were probably better things to do with your money during that specific time period, but would you have chosen them in 1996 ? And would you have kept them until today ? And, if not, would the changes you would make have also done well ? You would need to be right in both investment selection and timing many times to have done better than the SP has done.
  - anon9001 6y ago
    I wasn't accounting for reinvested dividends, but inflation from 1997 to 2009 was 34%. I'm choosing those points because I remember hearing from retirees in 2008 that they had followed all of the advice and they are worse off than they were 10+ years ago. I saw too many cases of people being upside-down on their mortgages, while losing their jobs, while losing their retirements. In that situation, it's pretty hard to keep saying "don't worry, it'll come back, just keep dollar cost averaging in". If you were retiring in 2008, you might not be able to keep averaging with the market, even if you had the stomach to do it. Time in the market is still timing the market. We've only had modern portfolio theory since 1952. In the last few decades, we've done some really experimental monetary policy. I won't be shocked if we experience some event that brings us back to 2008 levels. I also won't be shocked if we see hyperinflation. The one thing I know is that you're always trying to time the market, it's just a question of if you acknowledge it or not. I think it's a good idea to max out your tax-advantaged retirement plans and dump them in indexes as sort of a safety net because your MPT advice is probably "too big to fail" at this point, but that only accounts for less than 20k/year of investment advice (for most employed people). After that, investing in a residence makes a lot of sense because of the tax advantages. If you happen to be in a situation where you can engineer more tax advantages (like owning a business or moving to a lower-tax state), then definitely do that. Once you've got all that sorted, it's pretty much just gambling.

by mmmrk 6y ago

anon9001 6y ago

On March 1 2009, the S&P500 was $773. On January 1 1997, the S&P500 was $773. During the same time, bonds sold off too. Everything did. If you were dollar cost averaging into the market for 12 years, you could find yourself below where you started. That's a pretty demoralizing situation. I think being aware of market conditions and reallocating as you see fit is just part of being a responsible adult. Maybe sometimes you do want to hold VTI, but also it's not unreasonable to bet on Elon. I'm not saying everyone has to be highly leveraged and aggressive, but I think you're putting a tremendous amount of faith in the markets and intentionally looking the other way.

phyalow 6y ago
While I largely agree with your post, you are forgetting about the total return, yes the S&P was like for like on a net basis, but dont forget about dividends in the intermediate period.
whodidntante 6y ago
This does not account for dividends, which, if reinvested, would have produced a 22% gain during this time period, which is not too bad when "everything was selling off" Not spectacular, but you also need to compare this to whatever alternate investments you would have chosen at that time, and would have kept until now. Gold, Cash, small caps, real estate, multi-factor, managed futures, ? You also need to consider why you have chosen these to points in time. Looking backwards, there were probably better things to do with your money during that specific time period, but would you have chosen them in 1996 ? And would you have kept them until today ? And, if not, would the changes you would make have also done well ? You would need to be right in both investment selection and timing many times to have done better than the SP has done.
- anon9001 6y ago
  I wasn't accounting for reinvested dividends, but inflation from 1997 to 2009 was 34%. I'm choosing those points because I remember hearing from retirees in 2008 that they had followed all of the advice and they are worse off than they were 10+ years ago. I saw too many cases of people being upside-down on their mortgages, while losing their jobs, while losing their retirements. In that situation, it's pretty hard to keep saying "don't worry, it'll come back, just keep dollar cost averaging in". If you were retiring in 2008, you might not be able to keep averaging with the market, even if you had the stomach to do it. Time in the market is still timing the market. We've only had modern portfolio theory since 1952. In the last few decades, we've done some really experimental monetary policy. I won't be shocked if we experience some event that brings us back to 2008 levels. I also won't be shocked if we see hyperinflation. The one thing I know is that you're always trying to time the market, it's just a question of if you acknowledge it or not. I think it's a good idea to max out your tax-advantaged retirement plans and dump them in indexes as sort of a safety net because your MPT advice is probably "too big to fail" at this point, but that only accounts for less than 20k/year of investment advice (for most employed people). After that, investing in a residence makes a lot of sense because of the tax advantages. If you happen to be in a situation where you can engineer more tax advantages (like owning a business or moving to a lower-tax state), then definitely do that. Once you've got all that sorted, it's pretty much just gambling.