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One of my family members is absolutely convinced that they can time the market and it kinda drives me up the wall every time it comes up. They will use all thes

One of my family members is absolutely convinced that they can time the market and it kinda drives me up the wall every time it comes up. They will use all these “techniques” to draw arbitrary lines on the chart to establish a trend in the market while watching the news like a hawk everyday. Meanwhile I just get on with my day with index funds and get better returns.

Der_Einzige 3y ago
Actual “timing the market” does exist but it’s illegal. We call it insider trading.
ignoramous 3y ago
> Buffett's ultimately successful contention was that, including fees, costs and expenses, an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over 10 years. The bet pit two basic investing philosophies against each other: passive and active investing. https://www.investopedia.com/articles/investing/030916/buffetts-bet-hedge-funds-year-eight-brka-brkb.asp https://www.investopedia.com/articles/investing/030916/buffe...
- bumby 3y ago
  Isn’t a large part of the underperformance of the hedge funds due to their fee structure? Investors lose 20%+ of the profits just in fees. While I don’t think stock picking is a great idea for the layman, that fee structure isn’t generalizable to the average Joe picking stocks. I believe there’s some evidence that low-volatility trading has been shown to beat the market over long periods of time. Although, “picking stocks for volatility” may be different than “timing stock picks”
  - lotsofpulp 3y ago
    No, fund expenses are typically not included when comparing returns.
    - bumby 3y ago
      From the linked article in question: “Buffett's ultimately successful contention was that, including fees, costs and expenses…” Most good research that I’m aware of includes fees in the comparison because they can significantly erode returns. (Maybe somewhat less of an issue now that most brokerage now offer no-fee ETF trading). Not including fees and expenses is just a marketing tactic.
- envsubst 3y ago
  Buffett says this kind of stuff publicly. But his own fund moves in and out of investments all the time.
  - tim333 3y ago
    He also said >But it's true. I could name half a dozen people that I think can compound $1 million at 50% per year -- at least they'd have that return expectation -- if they needed it. They'd have to give that $1 million their full attention. But they couldn't compound $100 million or $1 billion at anything remotely like that rate. A lot depends on the details of who's doing what.
    - envsubst 3y ago
      Yep, you also wouldn't give the same computer/software advice to your grandma as you would a peer at work. Buffet is telling us to leave trading to the pros, but he absolutely trades.
  - the_gastropod 3y ago
    Buffet is arguably the best who’s ever done it. He can do things your layperson shouldn’t try. Just because Bruce Lee could do an impressive spin kick, it doesn’t make spin kicks a good idea for 99% of people to try in a self defense situation.
    - envsubst 3y ago
      I completely agree. This is true of most fields, which is why you can pay a professional for their special skills.
  - zie 3y ago
    Sort of, not really? Most of BRK is invested in 100% wholly owned companies. They do have a "small"[0] public equity portfolio, that does change investments periodically, but most of those investments are also pretty long term, if you go look. Wholly owned companies list: https://berkshirehathaway.com/subs/sublinks.html https://berkshirehathaway.com/subs/sublinks.html 0: In terms of BRK's overall wealth, it's still in the many billions of dollars.
envsubst 3y ago
Why do you feel so convinced they can't?
- andsoitis 3y ago
  because you can't know the future
  - HarryHirsch 3y ago
    Politically connected people can shape the future. Nancy Pelosi's stockpicking skills are legendary.
    - the_sleaze9 3y ago
      Not even close to being a single-party problem. I know it's almost Halloween but you can do better than jumping out from around the corner yelling "Nancy Pelosi!" > https://www.nytimes.com/interactive/2022/09/13/us/politics/congress-stock-trading-investigation.html https://www.nytimes.com/interactive/2022/09/13/us/politics/c...
  - envsubst 3y ago
    Every scientific endeavor is about predicting the future. Imagine your 3 closest friends wanted you to invest in your business. Could you predict which of them would likely do better than the others?
  - llelouch 3y ago
    Trading isn't about knowing the future. It's about having a positive expected value.
- creakingstairs 3y ago
  1. Their reasoning is arbitrary. They pick and choose factors to justify their analysis. 2. They would be much richer if they could.
llelouch 3y ago
The real techniques that give you an edge are behind NDA's. I know someone who makes 100k a day, trading with very low risk. (0.5% risk per trade).
- creakingstairs 3y ago
  Yeah, I don't doubt that there are real people timing the market successfully. But as you said, those methods are under NDAs, not given by random gurus on YouTubes!

Der_Einzige 3y ago

Actual “timing the market” does exist but it’s illegal. We call it insider trading.

ignoramous 3y ago

> Buffett's ultimately successful contention was that, including fees, costs and expenses, an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over 10 years. The bet pit two basic investing philosophies against each other: passive and active investing. https://www.investopedia.com/articles/investing/030916/buffetts-bet-hedge-funds-year-eight-brka-brkb.asp https://www.investopedia.com/articles/investing/030916/buffe...

bumby 3y ago
Isn’t a large part of the underperformance of the hedge funds due to their fee structure? Investors lose 20%+ of the profits just in fees. While I don’t think stock picking is a great idea for the layman, that fee structure isn’t generalizable to the average Joe picking stocks. I believe there’s some evidence that low-volatility trading has been shown to beat the market over long periods of time. Although, “picking stocks for volatility” may be different than “timing stock picks”
- lotsofpulp 3y ago
  No, fund expenses are typically not included when comparing returns.
  - bumby 3y ago
    From the linked article in question: “Buffett's ultimately successful contention was that, including fees, costs and expenses…” Most good research that I’m aware of includes fees in the comparison because they can significantly erode returns. (Maybe somewhat less of an issue now that most brokerage now offer no-fee ETF trading). Not including fees and expenses is just a marketing tactic.
envsubst 3y ago
Buffett says this kind of stuff publicly. But his own fund moves in and out of investments all the time.
- tim333 3y ago
  He also said >But it's true. I could name half a dozen people that I think can compound $1 million at 50% per year -- at least they'd have that return expectation -- if they needed it. They'd have to give that $1 million their full attention. But they couldn't compound $100 million or $1 billion at anything remotely like that rate. A lot depends on the details of who's doing what.
  - envsubst 3y ago
    Yep, you also wouldn't give the same computer/software advice to your grandma as you would a peer at work. Buffet is telling us to leave trading to the pros, but he absolutely trades.
- the_gastropod 3y ago
  Buffet is arguably the best who’s ever done it. He can do things your layperson shouldn’t try. Just because Bruce Lee could do an impressive spin kick, it doesn’t make spin kicks a good idea for 99% of people to try in a self defense situation.
  - envsubst 3y ago
    I completely agree. This is true of most fields, which is why you can pay a professional for their special skills.
- zie 3y ago
  Sort of, not really? Most of BRK is invested in 100% wholly owned companies. They do have a "small"[0] public equity portfolio, that does change investments periodically, but most of those investments are also pretty long term, if you go look. Wholly owned companies list: https://berkshirehathaway.com/subs/sublinks.html https://berkshirehathaway.com/subs/sublinks.html 0: In terms of BRK's overall wealth, it's still in the many billions of dollars.

envsubst 3y ago

Why do you feel so convinced they can't?

andsoitis 3y ago
because you can't know the future
- HarryHirsch 3y ago
  Politically connected people can shape the future. Nancy Pelosi's stockpicking skills are legendary.
  - the_sleaze9 3y ago
    Not even close to being a single-party problem. I know it's almost Halloween but you can do better than jumping out from around the corner yelling "Nancy Pelosi!" > https://www.nytimes.com/interactive/2022/09/13/us/politics/congress-stock-trading-investigation.html https://www.nytimes.com/interactive/2022/09/13/us/politics/c...
- envsubst 3y ago
  Every scientific endeavor is about predicting the future. Imagine your 3 closest friends wanted you to invest in your business. Could you predict which of them would likely do better than the others?
- llelouch 3y ago
  Trading isn't about knowing the future. It's about having a positive expected value.
creakingstairs 3y ago
1. Their reasoning is arbitrary. They pick and choose factors to justify their analysis. 2. They would be much richer if they could.

llelouch 3y ago

The real techniques that give you an edge are behind NDA's. I know someone who makes 100k a day, trading with very low risk. (0.5% risk per trade).

creakingstairs 3y ago
Yeah, I don't doubt that there are real people timing the market successfully. But as you said, those methods are under NDAs, not given by random gurus on YouTubes!