5 ms·

It's ego and over-confidence. People think they can outperform the S&P500. They can't.

by bowsamic 4y ago

carnitine 4y ago
Yes they can and many do. It’s just not likely if you’re actively trading.
- mensetmanusman 4y ago
  Of course some do, but there are just as many (and a bit more) that under perform. The average performance relative to the index matters.
  - carnitine 4y ago
    Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.
    - mensetmanusman 4y ago
      There is a chance to beat the market, just as there is a chance to beat the house.
    - bowsamic 4y ago
      Absolutely no normal person beats it except by dumb luck
      - carnitine 4y ago
        If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis? There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto. If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.
reducesuffering 4y ago
By definition, 50% of capital outperforms the SP500, which is an average. What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.
- freemint 4y ago
  Nope, nope, nope that's not how statistics works. Median != Mean Also volatility matters, like a lot.
  - reducesuffering 4y ago
    Median is obviously not mean. I never mentioned median anywhere. Where is the median of market return relevant here? Yes, volatility matters and is why people generally prefer to get the lower volatility average market return. But that’s not very relevant to many peoples claims on here that SP500 outperforms most capital, which is obviously incorrect.
    - mejutoco 4y ago
      Not OP but I think the 50% of cases above or below only applies if you refer to the median (https://en.wikipedia.org/wiki/Median https://en.wikipedia.org/wiki/Median). If you refer to the average, or mean, the distribution could be different.
      - reducesuffering 4y ago
        But I’ve never mentioned median. I’m stating that by definition, 50% of $ outperforms SP500. Sure that could be skewed, with a median underperforming, where in the extreme 1 participant has $20T outperforming and the other 1,000 collectively have $20T underperforming. But on average your $ has a 50/50 chance of under or over performing total market (and thus basically SP500) by throwing darts at a board.

It's ego and over-confidence. People think they can outperform the S&P500. They can't.

carnitine 4y ago

Yes they can and many do. It’s just not likely if you’re actively trading.

mensetmanusman 4y ago
Of course some do, but there are just as many (and a bit more) that under perform. The average performance relative to the index matters.
- carnitine 4y ago
  Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.
  - mensetmanusman 4y ago
    There is a chance to beat the market, just as there is a chance to beat the house.
  - bowsamic 4y ago
    Absolutely no normal person beats it except by dumb luck
    - carnitine 4y ago
      If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis? There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto. If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.

reducesuffering 4y ago

By definition, 50% of capital outperforms the SP500, which is an average. What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.

freemint 4y ago
Nope, nope, nope that's not how statistics works. Median != Mean Also volatility matters, like a lot.
- reducesuffering 4y ago
  Median is obviously not mean. I never mentioned median anywhere. Where is the median of market return relevant here? Yes, volatility matters and is why people generally prefer to get the lower volatility average market return. But that’s not very relevant to many peoples claims on here that SP500 outperforms most capital, which is obviously incorrect.
  - mejutoco 4y ago
    Not OP but I think the 50% of cases above or below only applies if you refer to the median (https://en.wikipedia.org/wiki/Median https://en.wikipedia.org/wiki/Median). If you refer to the average, or mean, the distribution could be different.
    - reducesuffering 4y ago
      But I’ve never mentioned median. I’m stating that by definition, 50% of $ outperforms SP500. Sure that could be skewed, with a median underperforming, where in the extreme 1 participant has $20T outperforming and the other 1,000 collectively have $20T underperforming. But on average your $ has a 50/50 chance of under or over performing total market (and thus basically SP500) by throwing darts at a board.