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Why it's the best for most people? Because study after study shows that generating alpha (excess returns that are not attributable to buying stuff with debt, ba
by aristidb 14y ago
Why it's the best for most people? Because study after study shows that generating alpha (excess returns that are not attributable to buying stuff with debt, basically) is _hard_. And if the risk is too high, just buy more US treasuries and less stocks.
Just a few days ago I read that Bain Capital's nice 20-30% returns were mostly based on leverage in a favorable market environment... I think there are a few people who really are good at choosing market segments or individual stocks, but you or your advisor-for-hire are not likely to be them.
- wtvanhest 14y agoAnd if the risk is too high, just buy more US treasuries and less stocks. US treasuries can carry high levels of interest rate risk if their duration is long. In otherwords if the maturity is really long, 10 years+, and interest rates go up, the principal value of your treasuries will fall dramatically. Now, you can wait it out, but that won't help you in the long term when the market is paying out 10% and you are getting 0.25%. Just a few days ago I read that Bain Capital's nice 20-30% returns were mostly based on leverage in a favorable market environment... I think there are a few people who really are good at choosing market segments or individual stocks, but you or your advisor-for-hire are not likely to be them. Bain did this by taking companies private, then re-IPOing them. They are a private equity company and to my knowledge do not choose stocks and market segments like mutual funds do.