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The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No pub

The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn't easy, but it has been clearly shown to be possible.

zer0tonin 3y ago
The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.
- Aunche 3y ago
  It doesn't count as beating the market unless if you're doing so due to skill. It's not particularly unusual to beat the market and come out of a casino positive. On the other hand, bragging about how good you are at slots, is what will get you "weird dogmatism."
  - zer0tonin 3y ago
    Dang, I guess I will go tell my quant friends their knowledge of probabilities doesn't count actually, they should try having "skill".
    - the_sleaze9 3y ago
      Exactly. That's why I only play the `Skill Games` at the back of the gas station with my savings.
- deleted 3y ago
  [deleted]
- throw0101c 3y ago
  > If the markets were truly efficient […] And who is arguing that they are perfectly efficient? Markets work on information, which is not (initially) evenly distributed and because of the physics can only spread at the speed of light once it is known. The latter was used to detect insider trading: * https://www.npr.org/sections/alltechconsidered/2013/09/24/225824387/the-mystery-of-600-million-traded-in-the-blink-of-an-eye https://www.npr.org/sections/alltechconsidered/2013/09/24/22... For the former, people are renting satellite time to get to information that no one else has to determine trades: * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satellite-images-to-beat-wall-street-and-main-street/ https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel... > Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. Two of the proponents efficient markets explain why (and shared a Nobel for the work): * https://en.wikipedia.org/wiki/Fama–French_three-factor_model https://en.wikipedia.org/wiki/Fama–French_three-factor_model The two are not mutually exclusive, and there is published literature on it. Good interview with Fama (audio, video, transcript): * https://rationalreminder.ca/podcast/200 https://rationalreminder.ca/podcast/200
  - zer0tonin 3y ago
    Yes, that was basically my point. Thanks for providing the sources.
- kajaktum 3y ago
  I think the reason why "you can't beat the market" is the simple fact that you are part of the market. If you are very, very good, such that any trade you make will always win, then the market just don't want to play any more. The feedback response from the market is extremely precise; do you make money or not? If you don't, you will change your strategy until you start making money or you just stop playing. The moment you start benefiting from some exploit, the market will immediately response to their loss by changing their strategy. This is of course assuming that we are at a level playing field. I don't believe for one second that insider trading is not prevalent.
- auxym 3y ago
  > If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. This assumes that the expected return of a single, randomly-picked stock is symmetrically-distributed. It is not, single stock returns are highly skewed and "lottery like". Index returns come from the fact that a small number of stocks do exceptionally well, while most of them do poorly. This becomes even worse if we talk about timing: stock returns come from relatively short periods of doing really well, if you miss that because you are out of the market for some reason, you lose out on the vast majority of the index return. Sorry, I don't have specific sources to cite. This comes from stuff I've picked up listening to the Rational Reminder podcast (https://rationalreminder.ca/podcast-directory https://rationalreminder.ca/podcast-directory), which have very well researched episodes as well as guest interviews with leading academic finance researchers. I'll try to dig up the relevant episodes, which do cite sources. Edit: here is some sources: 1. https://www.dimensional.com/us-en/insights/singled-out-historical-performance-of-individual-stocks https://www.dimensional.com/us-en/insights/singled-out-histo... 2. https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/agony-ecstasy-2021.pdf https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/glo... Quote from this last one: "[...] around 40% of the time a concentrated position in a single stock experienced negative absolute returns, in which case it would have underperformed a simple position in cash. And around 2/3 of the time, a concentrated position in a single stock would have underperformed a diversified position in the Russell 3000 Index. While the most successful companies generated massive wealth over the long run, only around 10% of all stocks since 1980 met the definition of “megawinners”."
  - RivieraKid 3y ago
    I've watched all of the videos on Ben Felix's channel and generally share his worldview. But I've been having some doubts about market efficiency and active investing being extremely hard. There were 4 moments when I thought - I should buy this stock for some reason, e.g. after ChatGPT I thought about buying NVidia. But I decided to continue being a purely passive investor. Now I regret that decision because all of those stocks overperformed. I also correctly guessed that 3 out of 4 stocks would underperform (TSLA was the wrong call). It seemed obvious that the market was dumb about GME, AMC and TLRY. Sure, many active investors are extremely sophisticated but what if the average invested dollar is kind of stupid? Also, one minor nitpick about Ben Felix's content is focus on historical statistics. I think this gives you a false sense of confidence and security.
- TacticalCoder 3y ago
  > The dogma that it's impossible to beat the market is frankly weird at this point. I agree. Meta was literally priced below $90 not even a year ago (I entered at about $100 FWIW, which was my nice and round number). Now at $315. Anybody who believes the market is efficient is on some serious drugs. The market correctly valued Meta a $380 or so before the crash (because "TINA" I'm supposed to believe), then correctly valued it a few months later at $100, then now is again correctly valuing it at $315? Please. Just please. I'll go much further: none of these valuation are correct. The market is highly inefficient.
  - auxym 3y ago
    The EMH is a model, and like all models: none are correct, but some are useful (to understand some phenomena).
  - crazygringo 3y ago
    You've provided zero evidence for them being incorrect, though. There's nothing wrong with 3x changes. A lot can happen in a year to diminish or improve a company's outlook -- even a large company. And yes, by 3x -- or even much more. The onus of proof here is on you to explain why those don't reflect largely realistic estimations of NPV of future profits, and to explain why you think you have better information, experience and judgment than the market.
  - matwood 3y ago
    Usually what's meant is that it's impossible to beat the market over time. I also saw Meta completely oversold and bought in. As someone who follows tech, it seemed obvious to me that Meta's impending death was greatly exaggerated. The problem is, can I do that over and over across the entire market? Nope.
  - blitzar 3y ago
    The market correctly valued Meta a $380. Then Meta announced they were going all in on the Metaverse, had set fire to $100bn so far and were going to continue to throw ~$20bn a year into the Metaverse - the market correctly valued Meta a $100. Meta announded they were going all in on the Ai - the market correctly valued Meta at $315. You have picked a poor example; the moves in the stock, are primarily the fault of themselves. Those that saw the emergence of Ai and Zuckerberg as one of the leaders in the space got a nice 3x. If it didnt happen, Meta stock would probably be worth about as much as MySpace. fwiw I said they were going to zero when they rebranded to Meta. Turns out I was wrong.
- overtomanu 3y ago
  SPX index is also weighted (I think by companies market cap), which means some of the stocks have greater effect on the returns of the index. Also companies are periodically added/removed from the index as per their market cap which I think weeds out low performers without any bias that active fund managers/humans tend to have.
blitzar 3y ago
Many public strategies beat the market by a reasonable amount; the consistent and disciplined application of them, however, is rare. There is also a lack of consistency about what it is to "beat the market", in the world of clickbait headlines and armchair twitter dd - the benchmark each year (with hindsight) is the highest performing asset.
- user_named 3y ago
  Ok which strategies.

zer0tonin 3y ago

The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.

Aunche 3y ago
It doesn't count as beating the market unless if you're doing so due to skill. It's not particularly unusual to beat the market and come out of a casino positive. On the other hand, bragging about how good you are at slots, is what will get you "weird dogmatism."
- zer0tonin 3y ago
  Dang, I guess I will go tell my quant friends their knowledge of probabilities doesn't count actually, they should try having "skill".
  - the_sleaze9 3y ago
    Exactly. That's why I only play the `Skill Games` at the back of the gas station with my savings.
deleted 3y ago
[deleted]
throw0101c 3y ago
> If the markets were truly efficient […] And who is arguing that they are perfectly efficient? Markets work on information, which is not (initially) evenly distributed and because of the physics can only spread at the speed of light once it is known. The latter was used to detect insider trading: * https://www.npr.org/sections/alltechconsidered/2013/09/24/225824387/the-mystery-of-600-million-traded-in-the-blink-of-an-eye https://www.npr.org/sections/alltechconsidered/2013/09/24/22... For the former, people are renting satellite time to get to information that no one else has to determine trades: * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satellite-images-to-beat-wall-street-and-main-street/ https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel... > Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. Two of the proponents efficient markets explain why (and shared a Nobel for the work): * https://en.wikipedia.org/wiki/Fama–French_three-factor_model https://en.wikipedia.org/wiki/Fama–French_three-factor_model The two are not mutually exclusive, and there is published literature on it. Good interview with Fama (audio, video, transcript): * https://rationalreminder.ca/podcast/200 https://rationalreminder.ca/podcast/200
- zer0tonin 3y ago
  Yes, that was basically my point. Thanks for providing the sources.
kajaktum 3y ago
I think the reason why "you can't beat the market" is the simple fact that you are part of the market. If you are very, very good, such that any trade you make will always win, then the market just don't want to play any more. The feedback response from the market is extremely precise; do you make money or not? If you don't, you will change your strategy until you start making money or you just stop playing. The moment you start benefiting from some exploit, the market will immediately response to their loss by changing their strategy. This is of course assuming that we are at a level playing field. I don't believe for one second that insider trading is not prevalent.
auxym 3y ago
> If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. This assumes that the expected return of a single, randomly-picked stock is symmetrically-distributed. It is not, single stock returns are highly skewed and "lottery like". Index returns come from the fact that a small number of stocks do exceptionally well, while most of them do poorly. This becomes even worse if we talk about timing: stock returns come from relatively short periods of doing really well, if you miss that because you are out of the market for some reason, you lose out on the vast majority of the index return. Sorry, I don't have specific sources to cite. This comes from stuff I've picked up listening to the Rational Reminder podcast (https://rationalreminder.ca/podcast-directory https://rationalreminder.ca/podcast-directory), which have very well researched episodes as well as guest interviews with leading academic finance researchers. I'll try to dig up the relevant episodes, which do cite sources. Edit: here is some sources: 1. https://www.dimensional.com/us-en/insights/singled-out-historical-performance-of-individual-stocks https://www.dimensional.com/us-en/insights/singled-out-histo... 2. https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/agony-ecstasy-2021.pdf https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/glo... Quote from this last one: "[...] around 40% of the time a concentrated position in a single stock experienced negative absolute returns, in which case it would have underperformed a simple position in cash. And around 2/3 of the time, a concentrated position in a single stock would have underperformed a diversified position in the Russell 3000 Index. While the most successful companies generated massive wealth over the long run, only around 10% of all stocks since 1980 met the definition of “megawinners”."
- RivieraKid 3y ago
  I've watched all of the videos on Ben Felix's channel and generally share his worldview. But I've been having some doubts about market efficiency and active investing being extremely hard. There were 4 moments when I thought - I should buy this stock for some reason, e.g. after ChatGPT I thought about buying NVidia. But I decided to continue being a purely passive investor. Now I regret that decision because all of those stocks overperformed. I also correctly guessed that 3 out of 4 stocks would underperform (TSLA was the wrong call). It seemed obvious that the market was dumb about GME, AMC and TLRY. Sure, many active investors are extremely sophisticated but what if the average invested dollar is kind of stupid? Also, one minor nitpick about Ben Felix's content is focus on historical statistics. I think this gives you a false sense of confidence and security.
TacticalCoder 3y ago
> The dogma that it's impossible to beat the market is frankly weird at this point. I agree. Meta was literally priced below $90 not even a year ago (I entered at about $100 FWIW, which was my nice and round number). Now at $315. Anybody who believes the market is efficient is on some serious drugs. The market correctly valued Meta a $380 or so before the crash (because "TINA" I'm supposed to believe), then correctly valued it a few months later at $100, then now is again correctly valuing it at $315? Please. Just please. I'll go much further: none of these valuation are correct. The market is highly inefficient.
- auxym 3y ago
  The EMH is a model, and like all models: none are correct, but some are useful (to understand some phenomena).
- crazygringo 3y ago
  You've provided zero evidence for them being incorrect, though. There's nothing wrong with 3x changes. A lot can happen in a year to diminish or improve a company's outlook -- even a large company. And yes, by 3x -- or even much more. The onus of proof here is on you to explain why those don't reflect largely realistic estimations of NPV of future profits, and to explain why you think you have better information, experience and judgment than the market.
- matwood 3y ago
  Usually what's meant is that it's impossible to beat the market over time. I also saw Meta completely oversold and bought in. As someone who follows tech, it seemed obvious to me that Meta's impending death was greatly exaggerated. The problem is, can I do that over and over across the entire market? Nope.
- blitzar 3y ago
  The market correctly valued Meta a $380. Then Meta announced they were going all in on the Metaverse, had set fire to $100bn so far and were going to continue to throw ~$20bn a year into the Metaverse - the market correctly valued Meta a $100. Meta announded they were going all in on the Ai - the market correctly valued Meta at $315. You have picked a poor example; the moves in the stock, are primarily the fault of themselves. Those that saw the emergence of Ai and Zuckerberg as one of the leaders in the space got a nice 3x. If it didnt happen, Meta stock would probably be worth about as much as MySpace. fwiw I said they were going to zero when they rebranded to Meta. Turns out I was wrong.
overtomanu 3y ago
SPX index is also weighted (I think by companies market cap), which means some of the stocks have greater effect on the returns of the index. Also companies are periodically added/removed from the index as per their market cap which I think weeds out low performers without any bias that active fund managers/humans tend to have.

blitzar 3y ago

Many public strategies beat the market by a reasonable amount; the consistent and disciplined application of them, however, is rare. There is also a lack of consistency about what it is to "beat the market", in the world of clickbait headlines and armchair twitter dd - the benchmark each year (with hindsight) is the highest performing asset.

user_named 3y ago
Ok which strategies.