3 ms·

Can you do it for years though? How about decades? The evidence is that even the Harvard-trained finance grads, best of their class, making 1 million a year, h

Can you do it for years though? How about decades? The evidence is that even the Harvard-trained finance grads, best of their class, making 1 million a year, heading the very best funds, with 2nd degrees in mathematics etc., cannot do this. I almost feel like the discussion at this point should proceed straight to "no anecdotes please, show your work" (evidence, data, the more the better). The evidence is extremely strong that the index fund strategy vs. human fund managers contest is really just another form of the computer chess strategy vs. human chess player one (or Go, if you prefer that). Just think of it as 'computer game players vs. human game players,' as a category. It really isn't much of a contest in the long term. The computers have been winning, and will continue to win, as history is ever more on their side.

monero-xmr 4y ago
As you might guess from my username, one area where I made insane gains is in cryptocurrency, and not because of a Ponzi “greater fool theory” but by carefully analyzing bitcoin and Ethereum (primarily) from economic, technological, and philosophical principles and making investments that I have held for a very long time. My gains are so overwhelmingly absurd and contrary to the supposed “Harvard experts” that making such a calculated, reasoned bet should have been impossible. Yet I have made investments in so many things over the years, so I don’t know how to square it other than, “I personally read the evidence, investigated the tech, thought about it logically, ignored the experts (and HN might I add!)”. According to the efficient market hypothesis such things should be impossible.
- doubleunplussed 4y ago
  The EMH doesn't say these things are impossible, it says you got lucky and won't be able to reproduce the same gains better than chance in the future.
  - monero-xmr 4y ago
    And I 110% disagree or my many and varied investments wouldn’t continue to far better than an index fund. As another recent example I went hard into oil and gas via ETFs back in May. Why I did this is for various reasons but my conclusion was that demand would surge and supply was constrained. Almost a 2x and that’s in liquid positions. I have taken some profits but still gonna wait a bit. According to EMH I shouldn’t be able to do this, yet here I am sitting on tons of gains.
    - djkivi 4y ago
      Where should someone invest next? How do you get your investment ideas?
      - monero-xmr 4y ago
        Contrarian investing (and contrarian opinions) are the way for the individual. Doesn’t mean every bet has to be opposite the herd but as an individual you need to lean into your strengths (nimbleness and ability to pivot quick) to beat the big guys. For last 15 years it was about making gains at all, but now that inflation is 10% it’s how you prevent losing your money. So much of the future depends on a tiny, unelected body that controls the global economy (the Federal Reserve) that you need to think about interest rates a lot. I come from the Austrian perspective but I understand mainstream economic reasoning so I can put myself into that mental framework when thinking about the future. However fundamentally I am a classical economic liberal, free market, Austrian. I think inflation is here to stay for a while. I don’t think Biden and society in general can stomach a massive recession. Putting cash into short term treasuries can get you a guaranteed 5% which could be safe play given how crazy the markets are. I am cold on AI. Everyone and their mother has been predicting self driving cars, massive job losses to automation, and so on for years. Never happens and not going to. I would avoid this industry as an investor. As labor it can be advantageous as talent is over-compensated. I’m skeptical of electric cars. Renewables make sense in places but also a skeptic on the time frame. Would avoid electric car and ESG equities. Residential real estate in places without strong rent control vibes is a good bet. If you can do it yourself even better - the government subsidizes your mortgage and small time landlords avoid a lot of the political intrigue. If you can get an investment property or a small multi family, I would consider swapping equities for that and let rent follow inflation each year. Short Europe and China. Long Africa and India. A bunch of opinions here but hopefully this fills in some pieces.
maria2 4y ago
Last time I checked, the “mutual funds don’t beat the market” is kind of a myth perpetuated by S&P Dow Jones Indices to hype their own index products. First of all, what is the S&P 500 if not a handpicked collection of stocks? To say mutual funds don’t beat the S&P 500 is to say that S&P is the best stock picker out there. I find that unlikely. Second, something like 10% of mutual funds do beat the S&P 500 on long time horizons.
- rofo1 4y ago
  Where did you find that 10% beat S&P? First of all, that's low %, but I don't think even that is accurate. So you have 1 in 10 chance of identifying who might beat the S&P. Congrats. Can you share a source for that? As far as I remember, the odds are around 1 in 300 (this is from memory, but that information is from Bogle's books directly). I think that research was done since 1970, but I am not sure.
  - maria2 4y ago
    https://www.nytimes.com/2022/12/02/business/stock-market-index-funds.html https://www.nytimes.com/2022/12/02/business/stock-market-ind... The actual stat they provide is: > And over a full 20-year period ending last December, fewer than 10 percent of active U.S. stock funds managed to beat their benchmarks. Still, if it was 1 in 300 I think they would say “fewer than 1% or fewer than 0.5%”. So I’m assume between 9 and 10 percent beat the S&P. I suggest reading the linked article with the mindset that nearly all of the content comes from S&P directly. It’s basically a market piece. For instance, when they say the mutual funds don’t perform consistently, they use a crazy metric of picking the top 25% performers from one year and seeing how many are in the top 25% next year. Basically their point is that mutual funds won’t beat the S&P every single year, and therefore the S&P is better. But if course, unless you’re only investing for a single year, you should care more about the expected total return. Just my two cents.
    - rofo1 4y ago
      They are talking about 2000-2021; what I mentioned is from 1970 (again, that is from memory, I don't have the book in front of me, at the moment). But almost surely that number is nowhere near 10% that can beat S&P in the last 50 years. Not a lot of funds even continuously exist for 50 years - most of them closed.
rofo1 4y ago
> I almost feel like the discussion at this point should proceed straight to "no anecdotes please, show your work" (evidence, data, the more the better). wallstreetbets figured it out: "positions or ban" :) It's a rule there.

monero-xmr 4y ago

As you might guess from my username, one area where I made insane gains is in cryptocurrency, and not because of a Ponzi “greater fool theory” but by carefully analyzing bitcoin and Ethereum (primarily) from economic, technological, and philosophical principles and making investments that I have held for a very long time. My gains are so overwhelmingly absurd and contrary to the supposed “Harvard experts” that making such a calculated, reasoned bet should have been impossible. Yet I have made investments in so many things over the years, so I don’t know how to square it other than, “I personally read the evidence, investigated the tech, thought about it logically, ignored the experts (and HN might I add!)”. According to the efficient market hypothesis such things should be impossible.

doubleunplussed 4y ago
The EMH doesn't say these things are impossible, it says you got lucky and won't be able to reproduce the same gains better than chance in the future.
- monero-xmr 4y ago
  And I 110% disagree or my many and varied investments wouldn’t continue to far better than an index fund. As another recent example I went hard into oil and gas via ETFs back in May. Why I did this is for various reasons but my conclusion was that demand would surge and supply was constrained. Almost a 2x and that’s in liquid positions. I have taken some profits but still gonna wait a bit. According to EMH I shouldn’t be able to do this, yet here I am sitting on tons of gains.
  - djkivi 4y ago
    Where should someone invest next? How do you get your investment ideas?
    - monero-xmr 4y ago
      Contrarian investing (and contrarian opinions) are the way for the individual. Doesn’t mean every bet has to be opposite the herd but as an individual you need to lean into your strengths (nimbleness and ability to pivot quick) to beat the big guys. For last 15 years it was about making gains at all, but now that inflation is 10% it’s how you prevent losing your money. So much of the future depends on a tiny, unelected body that controls the global economy (the Federal Reserve) that you need to think about interest rates a lot. I come from the Austrian perspective but I understand mainstream economic reasoning so I can put myself into that mental framework when thinking about the future. However fundamentally I am a classical economic liberal, free market, Austrian. I think inflation is here to stay for a while. I don’t think Biden and society in general can stomach a massive recession. Putting cash into short term treasuries can get you a guaranteed 5% which could be safe play given how crazy the markets are. I am cold on AI. Everyone and their mother has been predicting self driving cars, massive job losses to automation, and so on for years. Never happens and not going to. I would avoid this industry as an investor. As labor it can be advantageous as talent is over-compensated. I’m skeptical of electric cars. Renewables make sense in places but also a skeptic on the time frame. Would avoid electric car and ESG equities. Residential real estate in places without strong rent control vibes is a good bet. If you can do it yourself even better - the government subsidizes your mortgage and small time landlords avoid a lot of the political intrigue. If you can get an investment property or a small multi family, I would consider swapping equities for that and let rent follow inflation each year. Short Europe and China. Long Africa and India. A bunch of opinions here but hopefully this fills in some pieces.

maria2 4y ago

Last time I checked, the “mutual funds don’t beat the market” is kind of a myth perpetuated by S&P Dow Jones Indices to hype their own index products. First of all, what is the S&P 500 if not a handpicked collection of stocks? To say mutual funds don’t beat the S&P 500 is to say that S&P is the best stock picker out there. I find that unlikely. Second, something like 10% of mutual funds do beat the S&P 500 on long time horizons.

rofo1 4y ago
Where did you find that 10% beat S&P? First of all, that's low %, but I don't think even that is accurate. So you have 1 in 10 chance of identifying who might beat the S&P. Congrats. Can you share a source for that? As far as I remember, the odds are around 1 in 300 (this is from memory, but that information is from Bogle's books directly). I think that research was done since 1970, but I am not sure.
- maria2 4y ago
  https://www.nytimes.com/2022/12/02/business/stock-market-index-funds.html https://www.nytimes.com/2022/12/02/business/stock-market-ind... The actual stat they provide is: > And over a full 20-year period ending last December, fewer than 10 percent of active U.S. stock funds managed to beat their benchmarks. Still, if it was 1 in 300 I think they would say “fewer than 1% or fewer than 0.5%”. So I’m assume between 9 and 10 percent beat the S&P. I suggest reading the linked article with the mindset that nearly all of the content comes from S&P directly. It’s basically a market piece. For instance, when they say the mutual funds don’t perform consistently, they use a crazy metric of picking the top 25% performers from one year and seeing how many are in the top 25% next year. Basically their point is that mutual funds won’t beat the S&P every single year, and therefore the S&P is better. But if course, unless you’re only investing for a single year, you should care more about the expected total return. Just my two cents.
  - rofo1 4y ago
    They are talking about 2000-2021; what I mentioned is from 1970 (again, that is from memory, I don't have the book in front of me, at the moment). But almost surely that number is nowhere near 10% that can beat S&P in the last 50 years. Not a lot of funds even continuously exist for 50 years - most of them closed.

rofo1 4y ago

> I almost feel like the discussion at this point should proceed straight to "no anecdotes please, show your work" (evidence, data, the more the better). wallstreetbets figured it out: "positions or ban" :) It's a rule there.