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> - empirically incorrect (the idea that very few people beat the index) Yep, definitionally 50% of stock market capital outperforms the market index average.

> - empirically incorrect (the idea that very few people beat the index) Yep, definitionally 50% of stock market capital outperforms the market index average. People recommend index because you don't know who / what will outperform (funds will charge you fees like 1% so random dart choosing a fund means on avg. you get market index - 1%).

danielmarkbruce 4y ago
Fees make this wrong, and then no one is talking about "stock market capital". They are talking about funds or people. As such, it's correct that few people beat the market.
- reducesuffering 4y ago
  50% of funds and people absolutely beat the avg. index. Again, assuming efficient market hypothesis, it's by definition. As I've said, after fees, which is returned to the investor in the fund ~ -1%, of course it's not worth it. But the funds are throwing darts, the people are throwing darts, and 50% are beating the index. Only if you disbelieve the efficient market hypothesis, and think a few funds are disproportionately profiting ~100%/yr (you could maybe make the case for Rentech $10m medallion), would that be untrue.
  - danielmarkbruce 4y ago
    Brokerage fees. Even without that, still no. There is an implicit assumption in your math that bad and good investors aggregate funds in the same amount. They don't. And, depending on exactly how strictly you are defining EMH - I mean, does anyone believe it in it's strictest form? It's a crazy idea.
WkndTriathlete 4y ago
No, this is definitely wrong. You're comparing an apple (average returns by investors) against an orange (average annual index returns). 50% of of returns, over all investors, beats the median (not average) returns over all investors, by definition, but the annual median returns over all investors is much smaller than the average annual index return. A very small number of people/investors (1) have beaten the average annual S&P returns over the long term. (1) https://www.amazon.com/Four-Pillars-Investing-Building-Portfolio-ebook/dp/B0041842TW https://www.amazon.com/Four-Pillars-Investing-Building-Portf...

danielmarkbruce 4y ago

Fees make this wrong, and then no one is talking about "stock market capital". They are talking about funds or people. As such, it's correct that few people beat the market.

reducesuffering 4y ago
50% of funds and people absolutely beat the avg. index. Again, assuming efficient market hypothesis, it's by definition. As I've said, after fees, which is returned to the investor in the fund ~ -1%, of course it's not worth it. But the funds are throwing darts, the people are throwing darts, and 50% are beating the index. Only if you disbelieve the efficient market hypothesis, and think a few funds are disproportionately profiting ~100%/yr (you could maybe make the case for Rentech $10m medallion), would that be untrue.
- danielmarkbruce 4y ago
  Brokerage fees. Even without that, still no. There is an implicit assumption in your math that bad and good investors aggregate funds in the same amount. They don't. And, depending on exactly how strictly you are defining EMH - I mean, does anyone believe it in it's strictest form? It's a crazy idea.

WkndTriathlete 4y ago

No, this is definitely wrong. You're comparing an apple (average returns by investors) against an orange (average annual index returns). 50% of of returns, over all investors, beats the median (not average) returns over all investors, by definition, but the annual median returns over all investors is much smaller than the average annual index return. A very small number of people/investors (1) have beaten the average annual S&P returns over the long term. (1) https://www.amazon.com/Four-Pillars-Investing-Building-Portfolio-ebook/dp/B0041842TW https://www.amazon.com/Four-Pillars-Investing-Building-Portf...