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That's interesting. I was contacted by a personal money manager looking for clients and he explained his philosophy as sampling 30-50 stocks from the top end of
by jackcosgrove 4y ago
That's interesting. I was contacted by a personal money manager looking for clients and he explained his philosophy as sampling 30-50 stocks from the top end of the S&P 500. He had outperformed the market during a bull run, which I attributed to the increased risk of a smaller portfolio. I didn't invest because I figured his fund would underperform the index during the next bear run for that same reason, canceling out the gains and moreso with fees. Maybe there actually was something to his strategy; I haven't followed up on his performance.
- robocat 4y agoOwning a handful of shares does capture a significant amount of the beta for a market. However with very significant profitability outliers, such as power law distributions, then you have to own all the shares to ensure you don’t miss out on the one or two shares that make up most of the gains. Venture capitalists talk about this a lot. Historically the same issue occurred with market timing: most market gains are made during only a few relatively short unpredictable periods. You need to own shares for a long time to ensure you are in the market when those few unpredictable ups occur.
- bombcar 4y agoIIRC many active managers beat the market/S&P 500/benchmark before fees. It's almost impossible to beat after fees because the fees are too much of a drag.